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

[Complainer]

Sunny there maybe a counter-argument to this. If a person is paid so much that it exceeds their ability to spend it and they save it instead (or indeed use it abroad), then this money is effectively removed from the real economy and becomes unproductive. If on the other hand the money is redistributed via the tax and welfare systesms all of it is spent because it must be spent by the recipient, then the it re-enters the active economy and contributes to economic activity which entails jobs, more taxes etc. In short, it keeps money circulating.

Good point - indeed, these moves may well take money that would have been invested abroad, either in property or international shares and recycle it within the Irish economy.

I just want to add a new dimension to this thread. My brother who has lived in Australia for over 40yrs has a Plant Hire business there. In the usual run of things he employs a lot of Irish lads.

Recently there were a few employees who decided they were coming home. When he asked why, they said they'd be better off at home on the dole!!

He was absolutely shocked.

I'd be absolutely shocked if the Irish education system is turning out people so dumb as to not realise the short-term nature of Job Seekers Benefit.

 

[Purple]

Good point - indeed, these moves may well take money that would have been invested abroad, either in property or international shares and recycle it within the Irish economy.

This post clearly shows what happens when economic policy is based on dogma rather than logic.

To show what utter nonsense Complainers arguement is just read ontours post;

If welfare spending has such a positive economic impact, then as unemployment rises many businesses must be doing better.

Alternatively we could double the current welfare rates to provide the economy with the boost needed. The businesses would then need more staff and......

Using Complainer logic all we have to do to get out of this recession is increase welfare.

 

[horusd]

If welfare spending has such a positive economic impact, then as unemployment rises many businesses must be doing better.

Alternatively we could double the current welfare rates to provide the economy with the boost needed. The businesses would then need more staff and......

Sorry , don't know how to multiquote. but I want to address Purple's last point too. There may be more to this argument than dogma, it seems to make some economic sense.

1. The productive economy is generally private sector, but not exculsively so. ESB, Coilte etc are both public sector and wealth-generating.

2. Welfare is re-distributive But the underlying assets used by the private sector, whether they be human assets like education or roads, services or raw materials etc are publically owned. So in a real sense, taxes used to pay welfare are simply paid to the population in general for resources that they own already. Thus the private sector is not making a free gratis contribution, simply paying those who own it. So it is wrong to assume that wealth generators whoever they are, have an absolute right to their income.

3. It's not my argument that increasing welfare or it alone increases economic activity, only that it is a valid part of a balanced mixed economy and contributes to the circulation of money which is part of (but not solely) a correctly functioning economy.

4. There should be a premium for work vs benefit. Yet those who have had unearned advantages thro birth (wealthy parents etc) should not be overly advantaged by the state vs those who did not.

 

[Rois]

deleted

 

[Complainer]

THanks for your contribution Rois. Hope things are looking OK for you now.

 

[Purple]

Sorry , don't know how to multiquote. but I want to address Purple's last point too. There may be more to this argument than dogma, it seems to make some economic sense.

It makes sociall sense, but not economic sense.

1. The productive economy is generally private sector, but not exculsively so. ESB, Coilte etc are both public sector and wealth-generating.

OK, but as they are wealth generating they do not need to be supported through taxation. By the way, the ESB is a really bad example.

2. Welfare is re-distributive But the underlying assets used by the private sector, whether they be human assets like education or roads, services or raw materials etc are publically owned. So in a real sense, taxes used to pay welfare are simply paid to the population in general for resources that they own already. Thus the private sector is not making a free gratis contribution, simply paying those who own it. So it is wrong to assume that wealth generators whoever they are, have an absolute right to their income.

Suggesting that the sector of the economy that contributes most to the public finances is in some way indebted to those that pay least is a weak argument. I do agree that people do not have an absolute right to all of their income.

3. It's not my argument that increasing welfare or it alone increases economic activity, only that it is a valid part of a balanced mixed economy and contributes to the circulation of money which is part of (but not solely) a correctly functioning economy.

It’s part of a correctly functioning society and will in my opinion, through social cohesion, offer a longer term economic gain. I don’t for a minute accept that it’s the economics equivalent of a perpetual motion machine.

4. There should be a premium for work vs benefit. Yet those who have had unearned advantages thro birth (wealthy parents etc) should not be overly advantaged by the state vs those who did not.

I agree 100% but we should invest in levelling the playing field before the game starts rather than during the match; i.e. invest far more in targeted education, in particular primary education (which is why I’m against universal free third level education).

 

[Purple]

Rois, I’m very sorry to hear about your troubles.
This discussion is about the economic impact of welfare payments and whether they are above a level which is financially viable for the state. The fact that you are getting welfare payments that are far higher than our EU competitors but still can’t make ends meet is a reflection on just how expensive this country has become over the last 10 years. It is in no way a reflection of you as a person.

It seems from reading your post that your personal circumstances are more to do with our archaic bankruptcy laws than your income levels. You are incapable of paying your debts because you are bankrupt. If this was like most other developed countries your creditors would pick over the financial carcase and you’d be able to start again.

 

[Firefly]

Thanks for the primer, though I note your fairly selective quoting from those articles. Strange that you didn't choose to quote the "The problem is that despite mutterings from the Government, welfare payments are too low and support for children is certainly inadequate" bit.

That may be true, but as per my post 55 I'm saying in relation to welfare payments that "they keep people from going back into the work force" sic and that they do.

 

[Firefly]

There are many businesses that do very well from welfare spenders. There are some businesses in some parts of the cities that depend almost entirely on welfare spending, and would simply fold up without it.

C'mon! Which businesses "depend almost entirely on welfare spending" ?

 

[Complainer]

C'mon! Which businesses "depend almost entirely on welfare spending" ?

Businesses in particular parts of the large cities where most of the population is on welfare. Ask the shop owners in Darndale, Ballymun, parts of Tallaght, and parts of Sallynoggin.

 

[Chris]

I'd really love to see your economic analysis to back this up. There are many businesses that do very well from welfare spenders. There are some businesses in some parts of the cities that depend almost entirely on welfare spending, and would simply fold up without it.

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.

OK, let's break this down to the simplest possible explanation often referred to as a Crusoe example. Imagine an Island with an economy that has annual transactions worth €1000. Now a shipwrecked person arrives with no income or assets. In order to help him out 10% is taxed out of the economy and given to him to spend. His ability to spend €100 is completely dependent on the inability of the rest of the economy to spend that €100. The value of economic transactions has not increased meaning there is precisely zero gain to the economy.
Any company that does well from welfare spenders is doing so at the expense of the rest of the economy that is paying for it.

Sunny there maybe a counter-argument to this. If a person is paid so much that it exceeds their ability to spend it and they save it instead (or indeed use it abroad), then this money is effectively removed from the real economy and becomes unproductive. If on the other hand the money is redistributed via the tax and welfare systesms all of it is spent because it must be spent by the recipient, then the it re-enters the active economy and contributes to economic activity which entails jobs, more taxes etc. In short, it keeps money circulating.

Wealthy people's money does not sit idle adding no benefit to the economy. Not spending, or saving, does not take money out of circulation. When someone saves money, that money is lent out to someone else, which means that saving is simply allowing someone else to do the spending. Alternatively the money that isn't spent is directly invested in businesses which increases employment. Saving and not spending is the life blood of a functioning economy.
And if money is moving abroad then that is an indication of less optimistic or bad economic climate. Appropriating more of that money only makes the problem worse not better.

 

[Complainer]

OK, let's break this down to the simplest possible explanation often referred to as a Crusoe example. Imagine an Island with an economy that has annual transactions worth €1000. Now a shipwrecked person arrives with no income or assets. In order to help him out 10% is taxed out of the economy and given to him to spend. His ability to spend €100 is completely dependent on the inability of the rest of the economy to spend that €100. The value of economic transactions has not increased meaning there is precisely zero gain to the economy.
Any company that does well from welfare spenders is doing so at the expense of the rest of the economy that is paying for it.

So should I take that as a 'No' then to my request for backup to your claim that "The businesses where welfare recipients spend their money would be at least as well off if they were not taxed as highly in order to pay for welfare"?

 

[truthseeker]

Businesses in particular parts of the large cities where most of the population is on welfare. Ask the shop owners in Darndale, Ballymun, parts of Tallaght, and parts of Sallynoggin.

But is that not just saying that businesses in certain areas depend on certains peoples income - regardless of how they get that income? If these people had jobs would they not still patronise the same businesses?

 

[Complainer]

But is that not just saying that businesses in certain areas depend on certains peoples income - regardless of how they get that income? If these people had jobs would they not still patronise the same businesses?

Yes, that's true. But the issue is, as a matter of fact, that those particular businesses benefit substantially from spending by welfare recipients.

 

[Firefly]

Businesses in particular parts of the large cities where most of the population is on welfare. Ask the shop owners in Darndale, Ballymun, parts of Tallaght, and parts of Sallynoggin.

Nice to see you having the interests of some private businesses at heart. I agree that these businesses would be affected though, but that's business...plenty businesses dependant on people earning good incomes have closed down.

 

[Purple]

Yes, that's true. But the issue is, as a matter of fact, that those particular businesses benefit substantially from spending by welfare recipients.

So if the money was not taken from someone else in taxes it would be spent elsewhere in the economy so there is no net gain to the economy.

 

[Firefly]

I agree 100% but we should invest in levelling the playing field before the game starts rather than during the match; i.e. invest far more in targeted education, in particular primary education (which is why I’m against universal free third level education).

How about introducing compulsory parenting classes for all parents? I remember a teacher showing us a break-even graph of average salaries for graduates vs non-graduates when we were in secondary school. Basically, those who didn't go to college earned a lot more than those who went to college in the college years but were over-taken shortly afterward.... at the time I felt that this information was useflu, but I was already going to uni anyway...it would have been better to have been given this info a lot earlier. Perhaps if the parents were better informed - perhaps a yearly refresher, then they could make more informed choices about how to raise their children?

 

[Chris]

So should I take that as a 'No' then to my request for backup to your claim that "The businesses where welfare recipients spend their money would be at least as well off if they were not taxed as highly in order to pay for welfare"?

You really don't get it do you!?!? What you are suggesting, without evidence, is that there are businesses that would not exist if it wasn't for welfare recipients. If it were that simple to create business activity then there would be no economic problems ever, all we would have to do is ramp up welfare payments to everybody.
Let me repeat a simple economic fact: you cannot provide money to one part of the economy without it being at a cost top another part and the top it off by claiming that this is beneficial to the economy. There is no net gain in such an action no matter how hard you try and fabricate one.

 

[Purple]

You really don't get it do you!?!? What you are suggesting, without evidence, is that there are businesses that would not exist if it wasn't for welfare recipients. If it were that simple to create business activity then there would be no economic problems ever, all we would have to do is ramp up welfare payments to everybody.
Let me repeat a simple economic fact: you cannot provide money to one part of the economy without it being at a cost top another part and the top it off by claiming that this is beneficial to the economy. There is no net gain in such an action no matter how hard you try and fabricate one.

Frustrating, isn't it?

 

[Firefly]

You really don't get it do you!?!? What you are suggesting, without evidence, is that there are businesses that would not exist if it wasn't for welfare recipients. If it were that simple to create business activity then there would be no economic problems ever, all we would have to do is ramp up welfare payments to everybody.

As I mentioned on another thread we just need to find that money-doesn't-grow-on-trees tree and we'll be elected.