Child poverty in Wales: increase employment not benefits
The report identifies long-term economic inactivity of parents as a major risk factor of child poverty, and rightly states the aim of moving people out of worklessness. However, it also calls for a “regular and predictable uprating of benefits […] for families who are out of work“. This overlooks the fact the benefit system already provides huge disincentives for parents, especially single parents, to enter the labour market. For the ‘median single parent’, leaving the workforce is associated with a loss in disposable income of just over one third, even ignoring job-related costs like transport. Worsening these disincentives hardly serves the JRF’s goal of tackling worklessness.
The report also argues that “welfare-to-work policies must recognise the specific circumstances in Wales“. It proposes a transfer of competences in this field from Whitehall to the Welsh Assembly Government, which should then develop local solutions. Very well so far. But what is actually meant by local solutions is that benefit sanctions for those who fail to seek work should be used more reluctantly in Wales then elsewhere, because of structural weaknesses of the local economy. This is, in fact, contrary to the concept of local self-government. Giving local governments free reign in the management of expenditure programmes, but having national government footing the bill, would introduce major moral hazard problems.
The whole theory of federalism is based on the principle of ‘institutional congruence’, which is roughly the notion that the beneficiaries, the paymasters and the decision makers of any policy area should be the same people. The devolution of social policy to local governments is a very sensible proposal, but only if it is accompanied by a shift in fiscal responsibility. This would make a region with structural problems like Wales more, and not less likely to experiment with unorthodox ways to tackle worklessness. Given the longer-term detrimental effects of worklessness, the affected parents’ children could stand to gain most.