The Tories are planning a draconian extension of welfare sanctions that will affect millions of working families currently claiming tax credits. The 2011 welfare reform bill, now in grand committee stage in the House of Lords, will replace existing out-of-work benefits and tax credits with a single universal credit. But Lord Freud, minister for welfare reform, fears the new system will pay “benefit to claimants who are clearly capable of working or earning more“. He wants to apply conditionality to in-work claimants.
People who work hard and feel they are contributing to society will be told they must earn more or face a sliding scale of cuts to their income. In-work conditionality will be defined by an earnings threshold, the equivalent of a 35-hour week on the national minimum wage (currently £212.80). Workers who fall below this threshold must increase their work with their current employer, or look for an additional job or for a new one. The threshold for single parents with a child under 13 will be about 20 hours with gross pay of £120. With children over 12 they will be expected to work full time within 90 minutes of their home.
Conditionality will be personalised. Mothers and fathers will be treated as separate individuals rather than as a family. With a child under 13, one must be designated as the carer who will be under the same conditionality as a single parent. The other will be treated as a single worker. A couple with children over 12 will both be expected to work 35 hours.
Women, the disabled and ethnic minorities, who all experience inequalities in pay and face discrimination in the jobs market, will have to work longer and harder to free themselves from the threat of sanctions. They will have to search for opportunities to increase their earnings for a time period equivalent to the number of hours they are expected to be available for employment. Each must create and update an online profile, and do so “in an effective manner” or face sanctions.
For all working parents the crucial factor is a system of trustworthy and affordable childcare. Britain does not possess such a system. Despite the extra pressure the welfare reform bill will place on working parents, the government has no plans to create one. Hardest hit will be single parents of young teenagers who will face absences from home of up to 11 hours a day, creating a generation of latch-key children.
Unemployment is close to 2.5 million. Five people are chasing each job vacancy. Thousands of women’s jobs are disappearing in public sector cuts, and the economy is tipping back into recession. The answer to the problem of underemployment for the government is to harry the low paid into earning more. But low pay is not caused by the low-paid failing to grasp opportunities to improve their lives. It has been caused by Tory economic policies in the 1980s, by the growing wage inequality in all economic sectors, and by the shift from manufacturing to finance.
In the last three decades GDP has almost doubled but research by the Resolution Foundation has found that only 8% of this growth was accounted for by the wages of workers in the bottom half of earnings distribution. In 1977, for every £100 of value generated in the UK economy only £16 was distributed to members of the bottom half in the form of wages. By 2010 this sum had fallen to £12. Include bonus payments and the share drops to £10.
This dramatic collapse in the wage share of half the working population is a consequence of the chronic failure of investment in productive wealth creation. In 2007 the banks invested around £50bn in manufacturing. In the same year they invested close to £800bn on a variety of financial transactions of mostly complex products many of dubious value. Labour’s tax credits were a vital boost to the living standards of millions but in effect they were also a subsidy propping up an anaemic private sector that was unable and unwilling to create decent, properly paid jobs.
The government believes that welfare reform is the one certainty in the treacherous, shifting sands of economic crisis. The public are as angry with welfare scroungers as they are with bankers. They want a reciprocal welfare system in which people get out what they put in. But it is one governed by the ethic of don’t do to others what you wouldn’t have done to you. Unlike the unfolding social catastrophe caused by the work capability assessment, the public might be quicker to notice the unfairness of micromanaging and stigmatising working people who live on the breadline. People who believe they are making a contribution, but through no fault of their own cannot earn more, need training, a living wage and access to good quality childcare, not the state threatening to impoverish them further. In-work conditionality may prove to be the bridge too far for Tory welfare “reform”.
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