Earlier this week I made my first foray into writing for Coffee House about the interactions between the tax and welfare systems in the UK. Engaging with some of the respondents on Twitter and in the comments section gave me cause to reflect.
First, language matters. At one point, I highlighted that 'increasing gross earnings from £20k to £60k only increases net income by £7k – only £130 extra per week despite trebling your gross salary.' A quite common response was to criticise the use of 'only' in that sentence. Many people (rightly) pointed out that £130pw is a lot of money to some and that 'only a Tory would think that it wasn’t'.
Maybe they have a point – £130 in gross earnings would be another 18 hours’ work at minimum wage. However, if the earner on £20k did work those extra hours and raised their annual salary to £27k then they would have just £700 to show for it per year; 18 hours more to see an additional £14 per week. So, let’s change the emphasis; to actually receive an extra £130 per week, the earner would have to find a way to raise their salary from £20k to £60k.
There were more than a few accusations of cherry-picking to order to create the most outrageous examples and plenty about the piece being just another 'London-centric' article. Well, I’ll plead partially guilty to that one – Hackney is at the top end of the Local Housing Allowance scale at £354 per week and much of the flattening across income levels results from that. For comparison, the weekly allowance for a three-bed house in Doncaster is £103, Sheffield is £116, Cardiff is £150, Bristol is around £180, Oxford is £230, and London ranges from £242 upwards.
So, due to overwhelming popular demand, here’s a chart showing estimates for some of those areas:
Now, it is absolutely fair to say that an earner on £70k in most parts of England is far better off than someone on minimum wage. However, it’s also worth pointing out that it’s far less likely that someone will be earning £70k in most of these places. For example, the proportion of people in London that earn over £70k is three times higher than in the North East. The most frequent counter to this argument was 'not if you’re a doctor or head-teacher'.
This reveals another stark divide. In many of the regions, national pay scales mean that public sector workers are among the best paid in a community. If you are bright and ambitious, the chances are you that can make a much better standard of living working for the state than for a private company. Could this be a partial reason for different levels of wealth creation across the country? On the other hand, it’s also worth considering the effect that the public sector pay cap might have on depressing consumer spending in these regions.
However, wherever you live, the key point remains – it is difficult for workers at the lower end of the scale to make a meaningful difference to their net income. In Sheffield, moving from an annual income of £20k to £30k yields a grand total of just £20 extra per week.
Finally, as is often the case in politics, you must be as wary of those who loudly agree with you as those who don’t. An awful lot of people took the opportunity on Twitter to criticise low-earners who received high welfare payments; I disagree profoundly with this sentiment. I doubt many people work long hours in minimum wage jobs if they have good alternatives and neither do I believe that a job that pays £70k is necessarily more stressful or worthwhile than one that pays £14k.
The aphorism 'Never attribute to malice that which can be adequately explained by neglect' is often quoted in politics but the management guru Douglas Hubbard coined a more useful version: 'Never attribute to malice or stupidity that which can be explained by moderately rational individuals following incentives in a complex system of interactions.'
The fact is that too many people are stuck in a system that is not of their making and is virtually beyond comprehension. Most people are intelligent and rational individuals trying to do what’s best for themselves and their families. Let’s save our ire for the politicians who created the monster – but also cut some slack to ministers who attempt reform.