The Poor Are a Gold Mine

A scheme by the British government to reduce unemployment benefits of those who refuse to take jobs at a rate of pay equal to their full benefits has been overturned by the courts. The judges did not deny the right of the government to institute such a scheme; the problem with the current one, they said, was that it was instituted by ministerial fiat rather than by direction of parliament and was therefore an exercise of arbitrary power. In this, I think, they were right: a minister should not be able to alter the conditions of life of large numbers of people by the stroke of his pen and without any oversight. But those who seek the unlimited extension of trade union and government power over society regarded the ruling as an absolute triumph: they think that the more people who are dependent on government handouts the better, and this ruling went some way to maintaining, at least temporarily, such dependence.

The case was brought by a 24 year-old graduate in geology. She had arranged for herself an unpaid placement at a local museum, work which she enjoyed and which she had hoped would lead eventually to paid work in the museum world; but then she was told that she would have to accept a position in a store called Poundland, a very down-market company specializing in selling cheap goods for a single pound ($1.60), which in the recession has become increasingly successful, or face a reduction in her unemployment benefit. She refused to do so and duly had her unemployment benefits reduced; then she brought the case.

It seems now that thousands of people who have had their benefits cut for the same reason will have to be paid the difference, backdated of course. No doubt there will be further legal cases brought, which bears out the dictum of the sixteenth century German bishop, that the poor are a goldmine, though with this addendum in the Welfare State: they are a goldmine for the lawyers, who themselves (in Britain) are largely pensioners of the state. Thus in the welfare state all roads lead to rent-seeking.

The poor are a goldmine for the bureaucrats as well, of course. Just think of the work involved in calculating what is due to thousands of people whose benefits have been reduced at different times and perhaps by different amounts! There will be false claimants as well as true, so vigilance will have to be exercised. No doubt extra bureaucrats will have to be taken on to cope with all this the extra work; and when they have finished it, they will have to be found – thanks to labor law – other employment within the bureaucratic apparatus. In any case, the lawyers will soon enough find ways of providing them with tasks to perform. In a way it is all a beautiful, smooth-functioning machine, rather like those mediaeval clocks in ancient English cathedrals that still work after hundreds of years.

The trade unions were jubilant at the ruling, seeing it as a triumph for the low-paid and the unskilled. What is the point, they asked, in making unemployed people on benefits do unskilled jobs for no extra pay? It just removes a potential job from the labor market and therefore hinders people from becoming properly employed.

What they seem not to understand is that the whole situation has been brought about because payroll taxes, that in large part fund people to receive unemployment benefits, have so driven up the cost of unskilled labor that it is uneconomic for anyone to employ it. If Poundland (and other employers) had to pay a sufficient premium over the unemployment benefit to attract labor, especially that of graduates in geology, jobs such as the one that the graduate was instructed to do or lose her benefits would simply not exist.

But distortions of the labor market are needed by those whose purpose is to turn labor into cartels, to the advantage of those within the cartel and the disadvantage of those without it, as well as by all those hangers-on whose job is the adjudication of disputes that arise as a result (by now one might almost say the purpose) of distortions.

It is not only the labor market that is distorted, but good minds also. An editorial in The Guardian, the preferred newspaper of British intellectuals and bureaucrats (nowhere has the alliance between these two strata ever been stronger) said that the graduate who brought the case had been ‘packed off to Poundland to graft for free.’

This could only be partially true if Poundland did not have to pay her wages, if the government did not recover the cost of her benefits from the company: as I sincerely hope it did, for otherwise (and very wrongly) the company would have been in receipt of government subsidies, that is to say from the taxpayer. The information in the newspaper did not inform the reader whether on not this was the case.

But the graduate was most definitely not grafting for free. She was grafting – if that is not an exaggerated description of the work she was asked to do, again information is lacking – for her unemployment benefit or, more accurately, the difference in what she actually received and what she would have received had she not accepted to work. This might have been very little for someone like you and me, but it must have been enough to make it worthwhile for her to work, otherwise she would not have worked; ergo she did not ‘graft for free.’

Interestingly, in the same edition of the newspaper there was another delightful and inspiring story of the way in which our particular welfare state – one of the clumsiest and most stupid in the world – distorts things other than the labor market. It was the story of one Michael Philpott who was accused of burning down his house, in the process killing six of his own children by his wife, twenty-five years younger than he, who is also accused. Living in the same house were three of Philpott’s other children by a live-in concubine, twenty-eight years younger than he, with whom he was having a custody battle over those children now that she had decided to leave him, and two others of his concubine’s by other men – or as we now say, ‘partners.’

Philpott’s ‘idea’ was to set fire to the house, rescue the children, and then claim that it was the concubine who set the fire, thus proving she was unfit to look after her own children and that they should stay with their heroic stepfather. Philpott was described as a jealous and possessive man.

But I think one may espy a motive other than unadulterated love of children here. There are no prizes for guessing who would have borne the financial burden of these children, and it was not their progenitors. It was not a question of tax-deductions for dependent children: rather it was one of positive payments, actual cash subsidies for each child, control of five of which Philpott stood to lose if his concubine moved out. To put it bluntly, he used children to blackmail money from the state, from taxpayers. In this case, at least, one might describe it as state-subsidized baby-farming. Needless to say, there was no reference to this, even as a possibility, in the report in The Guardian, for it would suggest the corrupting power of the state in the modern world.

Theodore Dalrymple

Theodore Dalrymple is a retired prison doctor and psychiatrist, contributing editor of the City Journal and Dietrich Weissman Fellow of the Manhattan Institute.

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  1. says

    ‘Interestingly, in the same edition of the newspaper there was another delightful and inspiring story of the way in which our particular welfare state – one of the clumsiest and most stupid in the world’

    And your basis for comparison is?

  2. libertarian jerry says

    It is amazing how far down the road to serfdom the Western World has come. Whatever happened to self reliance,independence and property rights? Many decades ago,when I was a young man, the idea of “going on unemployment” or “going on welfare” was shameful. Doing those things,if done at all,was done in desperation. Something to keep you going until you could find meaningful employment. It wasn’t a way of life. Today,many people have traded their liberty for security. Looking back,it was the onslaught of Cultural Marxism that changed the attitudes of the majority of people. The idea that self reliance,self responsibility and independence were virtues has been replaced by the hive mentality. Taught in Public Schools,Academia and the Main Stream Media the collectivist idea that all wealth is owned in “common” and that the proper role and function of government is to solve social/economic problems by redistributing wealth (other people’s fruits of labor) by force,if necessary. In the end Welfare states always collapse because of fiscal reasons. When this occurs the Welfare State always degenerates into a police state. This is the fate of the Western World.

    • says

      This may sound rude so please forgive me but how old are you? I ask so I can place your experience in context.

      ‘Under President Franklin D. Roosevelt, the Social Security Act was enacted in 1935.’

  3. says

    ‘This could only be partially true if Poundland did not have to pay her wages, if the government did not recover the cost of her benefits from the company: as I sincerely hope it did, for otherwise (and very wrongly) the company would have been in receipt of government subsidies, that is to say from the taxpayer. ‘

    This is exactly what was happening.

    • Cockaigne says

      My understanding is that there is a subsidy for finding a placement – so the govt is actually paying a supplement (on top of the claimant’s benefit payment) in order to place that person in an unpaid job. I don’t know if Poundland receives that extra subsidy, or some Work Program ‘provider’ (Quite possibly both).
      The point being it costs govt to put her through the scheme, Poundland gets free labour (and possibly a bonus on top), and just to provide extra irritation this scheme is officially labelled as ‘the sector based work academy’ …..
      I agree totally with the sentiment that all of this shows the poor to be a valuable source of income.

      Shockingly, rather than accept the court ruling, the govt has decided to pass through emergency legislation on 19 March retrospectively defining the rules of the flawed schemes as lawful — this avoids the need to compensate people sanctioned under flawed scheme, but only reinforces the unhappy principle of ministerial fiat trumping both parliament and the courts. Very unsatisfactory.

  4. Richard says

    As the people of Greece can attest, the “security” that welfare states provide is illusory. It is based on the transfer of risk from the individual to the group, a process which cannot help but create moral hazards and lead inevitably to a less productive group. When enough people – through the operation of demographics or marginal changes in behavior due to the altered incentives to produce – accept the “security” offered by the group that the group can no longer provide it, then will the folly of the risk transfer be clear to one and all.

    • says

      ‘The Greek welfare state is relatively new and is based on concepts found in other European countries.’

      Should we emulate the US instead?

      Security itself is ‘illusory’.

  5. libertarian jerry says

    …………….Louise, I am 70 years old. I have never been on Welfare,Food Stamps.Unemployment Compensation or any other government “benefits” programs. I am still working,albeit part time, and don’t receive or have applied for Social Security. I am not a hypocrite. Incidentally President Franklin D.Roosevelt was a criminal,a traitor and next to Woodrow Wilson did more damage to our Constitutional Republic,Liberty and Rights then any other President in American History. His corpse should be dug up and hanged for treason and then thrown out in the middle of the Atlantic Ocean.

    • says

      Then, as a libertarian, you’ll know that the government work programme depicted in the article is antithetical to the fundamental principles of Laissez-Faire economics.

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