Social Welfare too high - discouraging people from taking up jobs?

[Purple]

The title of this thread does not suggest that poverty traps are discouraging people from taking up jobs. The level of social welfare is not, in itself, a poverty trap. The poverty traps occur when a whole raft of services (e.g. medical card, school transport) are suddenly removed when a person starts earning a low wage.

Do you think that these services should be left in place and if so at what income level do you think they should be removed at? Can you then tell the class how this will be paid for (and please don’t bring in any wishful thinking about “closing tax breaks for the rich”).

Strange how it is OK to bring in policy that will be 'extremely tough for certain people' but if there is any mention of increased taxation or reduced tax breaks, the lambs start bleating about how tough life is for landlords or employers. So in summary, it is OK to bring in policies that are 'extremely tough' on those who are most in need, but not tough on those who are least in need -right?

There he goes again with the tax breaks.

The choice is not between decent levels of social welfare and SNAs.

I agree, the choice was between yet another pay rise for teachers and SNA’s and the teachers took the money and said screw the kids.

Orka pointed out that "we can all agree that benefits benefit the PARTICULAR shops/services where they are spent as it’s unlikely that the recipients spent in the exact same shops/services that the money would have been spent in if it had stayed in someone else’s pocket and not been extracted as tax.". This is what I've been saying ad nauseum on this thread - no more, and no less. You have spent several days trying to argue with me on some broader point about the welfare system on which I have made no comment - good, bad or indifferent. Why do you choose to argue with me, and not Orka, when we both say the same thing?

OK, so he now accepts that there is no general net economic benefit from welfare payments.
Who wants to spend a week getting him to admit that there is actually a net economic negative impact (though in my opinion that is outweighed by the positive social benefit).

You accused me of 'economic ineptitude and ignorance. That is a personal attack. You played the man, not the ball.

No, that was a statement of fact.

I simply pointed the flaws in your blanket assumption that untaxed money suddently becomes productive in our economy. It doesn't, or certainly some if it doesn't. Some of it goes overseas. Some of it will be absorbed into the black hole of our banking system.

Thin, very thin.

You seem to be very quick to make blanket assumptions about what happens to untaxed money, and very slow to recognise the reality (as Orka & others have recognised) that welfare spend has benefits for people other than the welfare recipient.

Who wants to spend a week getting him to admit that the collection of taxes to spend on welfare has a negative economic impact?

 

[Chris]

Orka pointed out that "we can all agree that benefits benefit the PARTICULAR shops/services where they are spent as it’s unlikely that the recipients spent in the exact same shops/services that the money would have been spent in if it had stayed in someone else’s pocket and not been extracted as tax.". This is what I've been saying ad nauseum on this thread - no more, and no less. You have spent several days trying to argue with me on some broader point about the welfare system on which I have made no comment - good, bad or indifferent.

Orka made a post where a summary was made of your posts. The most telling ones are:
1) "The primary beneficiaries of welfare are of course the welfare recipients. But unless they are sticking it all under the mattress, there will be, as a matter of fact, downstream economic benefits from that spend."
2) "Spending from benefits has knock-on economic effects."
This strongly suggests that there is a benefit to the economy from the welfare system.

Anyway, maybe we are getting somewhere here. Could you tell us whether you acknowledge the fact that a welfare system does not provide a net benefit to the economy?

Why do you choose to argue with me, and not Orka, when we both say the same thing?

I made a statement on Orka's post here: http://www.askaboutmoney.com/showpost.php?p=1151066&postcount=117

You accused me of 'economic ineptitude and ignorance. That is a personal attack. You played the man, not the ball.

It is not a personal attack, but simply the truth. Anybody can correctly say that I am ignorant and inept in all matters synchronised swimming; that would not be a personal attack but simply the truth. And just to make sure I am not misunderstood, I used ignorant and inept in the true meaning of the words, i.e. ignorance meaning lack of knowledge or training and inept meaning the lack of skill or aptitude. Absolutely nothing personal in my comment.

I simply pointed the flaws in your blanket assumption that untaxed money suddently becomes productive in our economy. It doesn't, or certainly some if it doesn't. Some of it goes overseas. Some of it will be absorbed into the black hole of our banking system.

There is no flaw in the assessment that money that is not taxed is somehow used in the economy. But again we are getting somewhere here as you have dropped the non-productive property investment and savings are bad idea. As I mentioned before, money leaving the country is an indication of a bad investment environment and increased taxation only perpetuates that problem. If taxation on saving and investment were reduced then more money would be saved and invested which is the basis of economic growth.
Our banking system being a black hole is something we can agree on, but if said banks did not get savings from people they would be making even less loans than they are now.

You seem to be very quick to make blanket assumptions about what happens to untaxed money, and very slow to recognise the reality (as Orka & others have recognised) that welfare spend has benefits for people other than the welfare recipient.

OK, let me give you this much. If, and this is a big if, there are businesses that only exist because only welfare recipients frequent them, then those businesses also benefit. However, in order to ensure that those businesses stay in businesses an increase in welfare recipients would have to be deemed a good thing, which of course it is not. But these businesses would then also only exist at the expense of the rest of the productive economy.
Closer to the truth is that there are businesses that have some customers who are on welfare, but if those people were not in receipt of welfare payments then all other customers would have more money to spend, the businesses would have less of a tax burden, as would other businesses, which would allow businesses to expand and provide employment.

Who wants to spend a week getting him to admit that the collection of taxes to spend on welfare has a negative economic impact?

Maybe another week and a separate thread. At first I thought you were exaggerating about being ignored by Complainer, but I it truly is amazing.

 

[Purple]

Maybe another week and a separate thread. At first I thought you were exaggerating about being ignored by Complainer, but I it truly is amazing.

Careful now or you'll be blacklisted as well.

 

[Complainer]

Orka made a post where a summary was made of your posts. The most telling ones are:
1) "The primary beneficiaries of welfare are of course the welfare recipients. But unless they are sticking it all under the mattress, there will be, as a matter of fact, downstream economic benefits from that spend."
2) "Spending from benefits has knock-on economic effects."
This strongly suggests that there is a benefit to the economy from the welfare system.

There you go again with that big leap. I made no suggestion, strong or otherwise, that there is a benefit to the economy from the welfare system. I simply pointed out that there is a benefit to those businesses where welfare recipients spend their welfare. I made no statement or suggestion that the welfare system was good, bad or indifferent for the economy. You've spent a week arguing with me over a point I didn't make, and now you're trying to gloss over your error by talking about 'strong suggestions'. I made no suggestions.

Could you tell us whether you acknowledge the fact that a welfare system does not provide a net benefit to the economy?

As I've already stated above, No. I won't feel obliged to comment on AAM to suit the agenda of the usual suspects. Like every other user on AAM, I will post where/when I see fit, and I won't answer to you or anyone else for it. If you want to bring in some posting guideline that every post has to be accompanied by a complete analysis of all related areas, then go have a chat with Brendan. In the absence of such a guideline, the answer remains No.

I made a statement on Orka's post here: http://www.askaboutmoney.com/showpost.php?p=1151066&postcount=117

You response to Orka who made exactly the same point as I did is remarkably different to your repeated and ongoing response to me. Now why would that be, I wonder.

It is not a personal attack, but simply the truth. Anybody can correctly say that I am ignorant and inept in all matters synchronised swimming; that would not be a personal attack but simply the truth. And just to make sure I am not misunderstood, I used ignorant and inept in the true meaning of the words, i.e. ignorance meaning lack of knowledge or training and inept meaning the lack of skill or aptitude. Absolutely nothing personal in my comment.

Your comment was about me, not about my post. It was personal and it was an attack. It was a personal attack.

There is no flaw in the assessment that money that is not taxed is somehow used in the economy. But again we are getting somewhere here as you have dropped the non-productive property investment and savings are bad idea. As I mentioned before, money leaving the country is an indication of a bad investment environment and increased taxation only perpetuates that problem. If taxation on saving and investment were reduced then more money would be saved and invested which is the basis of economic growth.
Our banking system being a black hole is something we can agree on, but if said banks did not get savings from people they would be making even less loans than they are now.

Your ability to ignore the facts that don't suit you is stunning. You ignore the issue of money going overseas because, in your opinion, is an indication of a bad investment environment. It really doesn't matter wny money is going overseas. The fact is that some money goes overseas. The fact remains that high earners are far more likely to send money overseas, whether through international share investments, or unit linked funds with regional spreads, or foreign property or just plain old-fashioned foreign holidays than welfare recipients. But this doesn't suit your argument, so you pretend it doesn't happen.

OK, let me give you this much. If, and this is a big if, there are businesses that only exist because only welfare recipients frequent them, then those businesses also benefit. However, in order to ensure that those businesses stay in businesses an increase in welfare recipients would have to be deemed a good thing, which of course it is not.

Many more big leaps here. Why would apply to businesses that only welfare recipients frequent? Why not those businesses that mostly welfare recipients frequent, and those businesses that some welfare recipients frequent? Those businesses also benefit, though obviously to lesser degrees. And why to “ensure that those businesses stay in businesses an increase in welfare recipients would have to be deemed a good thing”? Why is an increase required? Why won’t those businesses continue to survive with welfare at the same level it is now? This is your usual ‘big leap’ tactic of coming up with exaggerated positions that bear no relation to the other posters point, and then arguing against them.
Should I take some solace from the fact that you have finally admitted that some businesses do benefit from welfare spending?

Closer to the truth is that there are businesses that have some customers who are on welfare, but if those people were not in receipt of welfare payments then all other customers would have more money to spend, the businesses would have less of a tax burden, as would other businesses, which would allow businesses to expand and provide employment.

And again, you continue to ignore the facts (as accepted by other posters) that don’t suit your argument. You continue to assume that all money if untaxed would be spent or invested productively and locally, which of course, is nonsense again.

 

[Chris]

There you go again with that big leap. I made no suggestion, strong or otherwise, that there is a benefit to the economy from the welfare system. I simply pointed out that there is a benefit to those businesses where welfare recipients spend their welfare. I made no statement or suggestion that the welfare system was good, bad or indifferent for the economy. You've spent a week arguing with me over a point I didn't make, and now you're trying to gloss over your error by talking about 'strong suggestions'. I made no suggestions.

But you are still ignoring the fact that any benefit comes at a cost to someone including the businesses that has welfare recipients as customers. You are only looking at one side of the transaction.

As I've already stated above, No. I won't feel obliged to comment on AAM to suit the agenda of the usual suspects. Like every other user on AAM, I will post where/when I see fit, and I won't answer to you or anyone else for it. If you want to bring in some posting guideline that every post has to be accompanied by a complete analysis of all related areas, then go have a chat with Brendan. In the absence of such a guideline, the answer remains No.

In the above quote you claim that I made an error about your posts and now you are unwilling to verify whether I actually made an error or not! I had a discussion with a Labour candidate during the election and even he admitted that there was no net gain to an economy from a welfare system and our discussion moved on to what gains and losses there were at a social and societal level. Is it really that difficult for you to clarify the issue at hand?

You response to Orka who made exactly the same point as I did is remarkably different to your repeated and ongoing response to me. Now why would that be, I wonder.

Orka has not repeatedly made economically fallacious statements which you are doing.

Your comment was about me, not about my post. It was personal and it was an attack. It was a personal attack.

My comment was about your understanding of economics portrayed in your posts. I do not know you so I couldn't possible make a personal judgment about you.

Your ability to ignore the facts that don't suit you is stunning. You ignore the issue of money going overseas because, in your opinion, is an indication of a bad investment environment. It really doesn't matter wny money is going overseas. The fact is that some money goes overseas. The fact remains that high earners are far more likely to send money overseas, whether through international share investments, or unit linked funds with regional spreads, or foreign property or just plain old-fashioned foreign holidays than welfare recipients. But this doesn't suit your argument, so you pretend it doesn't happen.

At no stage have I ignored any facts; I have confronted the situation of money leaving the country on two occasions. But here it is again, if greedy rich capitalists and entrepreneurs are investing or spending abroad then it is because they see more profit to be had there. This is a hugely important fact that you choose to completely discount. Fact is that those people with money to invest will invest it where they are able to achieve the highest possible return. Fact is that that place is currently not Ireland, and that additional taxation, in order to keep the money here, would only result in more money invested abroad.

Many more big leaps here. Why would apply to businesses that only welfare recipients frequent? Why not those businesses that mostly welfare recipients frequent, and those businesses that some welfare recipients frequent? Those businesses also benefit, though obviously to lesser degrees.

Because the more customers, other than welfare recipients, a company has, the more those customers would have to spend if they didn't have to finance welfare. I have repeatedly stated that you are making the fundamental economic flaw of only looking at what is seen, i.e. the money spent by welfare recipients in certain businesses, and ignore the damage done to the very same businesses and their other customers through financing the welfare system.

And why to “ensure that those businesses stay in businesses an increase in welfare recipients would have to be deemed a good thing”? Why is an increase required? Why won’t those businesses continue to survive with welfare at the same level it is now? This is your usual ‘big leap’ tactic of coming up with exaggerated positions that bear no relation to the other posters point, and then arguing against them.
Should I take some solace from the fact that you have finally admitted that some businesses do benefit from welfare spending?

What I mean by this is that a business environment highly or solely dependent on welfare customers would benefit from an increase in welfare recipients and would suffer if the number of welfare recipients declined due to increased employment. But of course it is the latter situation that we want, whether it renders certain businesses obsolete or not.
You can take solace in the fact that I stated that some businesses may have a net benefit from welfare spending only at the expense of their other customers and other businesses and taxpayers suffering.

And again, you continue to ignore the facts (as accepted by other posters) that don’t suit your argument. You continue to assume that all money if untaxed would be spent or invested productively and locally, which of course, is nonsense again.

What facts am I ignoring here. The comment you are referring to is basic text book economics. Fact is that the more money that is left in the productive economy, the more that part of the economy can grow.
Maybe you could argue against your perceived flaw in my comment rather than coming up with an arbitrary statement that I am ignoring some illusory facts.

 

[Complainer]

But you are still ignoring the fact that any benefit comes at a cost to someone including the businesses that has welfare recipients as customers. You are only looking at one side of the transaction.

Woohoo - it has taken exactly a week for you to realise that in fact, you've no argument with what I said. You may have an argument with what I haven't said, but there is nothing that I've said here that you can argue with. Now why did it take you a week to work that out?

In the above quote you claim that I made an error about your posts and now you are unwilling to verify whether I actually made an error or not! I had a discussion with a Labour candidate during the election and even he admitted that there was no net gain to an economy from a welfare system and our discussion moved on to what gains and losses there were at a social and societal level. Is it really that difficult for you to clarify the issue at hand?

It is nothing to do with how difficult it is or isn't. It is to do with me (like every other AAM user) choosing to post as suits me, not to post as suits you.

Orka has not repeatedly made economically fallacious statements which you are doing.

Orka made exactly the same point that I did - that some businesses benefit from spending by welfare recipients.

My comment was about your understanding of economics portrayed in your posts. I do not know you so I couldn't possible make a personal judgment about you.

Your comment was about me, not about my posts. It was personal, and it was an attack. It was a personal attack.

At no stage have I ignored any facts; I have confronted the situation of money leaving the country on two occasions. But here it is again, if greedy rich capitalists and entrepreneurs are investing or spending abroad then it is because they see more profit to be had there. This is a hugely important fact that you choose to completely discount. Fact is that those people with money to invest will invest it where they are able to achieve the highest possible return. Fact is that that place is currently not Ireland, and that additional taxation, in order to keep the money here, would only result in more money invested abroad.

And there you go again with the diversionary opinions about the reasons why money might or might not get invested offshore. You keep repeating that untaxed money gets spent in the economy, which means you are ignoring the fact that some money gets invested abroad.

 

[Protocol]

If you charge one person 100 in tax and transfer 100 to another family, it appears that economic activity is unaffected.

The next stage is to say that the richer individual was saving that 100, i.e. they have a lower Marginal Propensity to Consume (MPC) out of extra income. Whereas the poorer family may have an MPC of 0.90 or even 1.00.

So consumption might change by (-20) + (90) = +70

So, yes, consumer spending may rise due to increasing transfer benefit payments.

This is an argument that is often made by SF, Labour, socialists, etc.


However, as pointed out, the 100 that was being saved and turned into investment, is no longer being saved.

So investment spending may fall.

 

[Firefly]

The title of this thread does not suggest that poverty traps are discouraging people from taking up jobs. The level of social welfare is not, in itself, a poverty trap. The poverty traps occur when a whole raft of services (e.g. medical card, school transport) are suddenly removed when a person starts earning a low wage.

I have argued that a poverty trap is in existence and is "discouraging people from going back to work" as per the title of this thread.

Rather than focusing on the impact of this you chose to dispute the Proverty Trap definition by saying

"The level of social welfare is not, in itself, a poverty trap. The poverty traps occur when a whole raft of services (e.g. medical card, school transport) are suddenly removed when a person starts earning a low wage."

I responded with the letter in question from the Irish Times "....offered the job to two people, both of whom had been out of work for more than two years. Both said they would take the job but then turned it down saying they were better off on social welfare with rent allowance etc. - even taking account of the back to work allowance."

and by saying

"Looks like a poverty trap to me...but even if it doesn't meet your strict definition, the effect is the same...discouraging people from going back to work."

Can I take it that you agree that a Poverty Trap is in play here and/or that the removal of benefits are discouraging people from going back to work?

 

[Brendan Burgess]

Thats all folks.