Time for Time Limits

A new ASI report, Time for Time Limits: Why we should end permanent welfare, finds that a 5-year limit on Jobseekers’ Allowance (JSA) across workers’ lifetimes could save the Treasury £300-350m per year, as well as boosting labour markets and putting a break on self-fulfilling cycles of dependency.

The paper, authored by Peter Hill, a lecturer at the University of Roehampton, reviews President Bill Clinton’s ‘Personal Responsibility and Work Opportunity Reconciliation Act’ (PRWORA) which coincided with a massive decline in welfare rolls from 5 million to less than 2 million families by 2006. The act is credited for saving the US government over $50bn between 1996 and 2002.

In some states, there was a decrease in benefits caseloads of 96%, as well as an unprecedented drop in female unemployment and improvement in their financial status even in low paying jobs, and a drop in child poverty. Furthermore, comprehensive econometric analyses suggest that 6-7% of decreases in unemployment counts (and 12–13% of those in female-headed families) are as a result of the introduction of time limits. Although difficult to estimate the exact impact on the UK labour market ex ante, a similar effect on Claimant Count Unemployment could be expected; this translates to an estimated reduction in the benefit bill of £300–350 million based on current spending.

Though Universal Credit is innovative in tackling benefit withdrawal cliffs that make working very unattractive to some households, it does not put any limits on its unemployment insurance provisions. More radical reform like time limits has potential beyond the government’s current schemes.

Just as the US ended welfare as an entitlement programme, the paper argues that the UK should also take the radical step of ending JSA being funded from general taxation and instead return to a form of ‘Unemployment Insurance’ funding from NICs. This would mean operating the welfare system as a genuine self-funding insurance scheme managed through the UK Government Actuary’s Department.

Click here for the full press release.

Why do rich parents give birth to rich kids?

The kids and grandkids of the wealthy tend to be wealthy.

Well: that’s not quite true. Kids of American football players and lottery winners and those who get wealthy through luck often squander their inheritance. And while giving your kids money makes them richer, it doesn’t tend to make their kids (i.e. your grandkids) richer.

This little paradox has driven researchers to wonder why wealth is persistent, if it’s not purely handing down the cash. Traditionally, scholars have divided into two camps: nature and nurture.

Families stay rich because they have prudent genes that stop their ancestors from squandering their fortunes, and because they have genes that make them good at earning more money. Or families stay rich because they give their kids skills through schooling, speaking lots of words at home, having books around for them to read, pushing them into high prestige careers, and linking them up with connections.

Lots of research points in the direction of genetics, finding that genetics explains about 50% of every important human trait, while the other 50% is largely down to ‘nonshared environment’—rather than ‘shared environment’ (i.e. family upbringing).

For example, the gold standard meta-analysis, recently published in Nature, one of the three premier journals in the science world, looked at 17,804 traits over 2,784 publications studying 14,558,903 twin pairs, and found that the average genetic contribution to a trait was 49%.

This extends to complex facts about a person, like lifetime income and wealth. For example, among Swedish twins wealth was found to be about 20-40% heritable (i.e. down to genetic factors), while 20-year average income in men was about 60% heritable.

But comparing identical and non-identical twins isn’t the only valid study design for dissecting the differing impacts of nurture and nature (though it is valid). You can also look at twins reared apart and you can look what happens when a child is adopted into another family—do they end up looking like their biological or adoptive parents?

We know that adoption can temporarily boost IQ but other evidence suggests this may be driven by non-randomness in the study design or peter out once the child leaves the family environment. What’s more the gains might boost measured IQ but not intelligence.

But a new study suggests that adoptive parents are the main drivers of children’s wealth, with biological parents unimportant by comparison. However, this new study finds that the result is not through transmitting human capital down the line or even through children earning higher income, but simply through transferring cash or learned prudence—i.e. kids investing better.

The paper (pdf), from Sandra E. Black, Paul J. Devereux, Petter Lundborg, Kaveh Majlesi, looks at a sample of 2,519 Swedish adoptees born between 1950 and 1970, and finds that the rank of a child’s wealth is correlated 0.23 with their adoptive parents’ wealth (and 0.65 when bequests are taken into account). By contrast it correlates only 0.12 with the rank of their biological parents. The results for levels of wealth, rather than ranks in the wealth distribution, are very similar.

So does this tell us that the rich buy private school, tutor their kids, make them learn violin, and help them with connections and so on? No! The authors rule out this possibility, and suggest only two possible options: financial gifts (which they cannot track) and learned prudence (which they provide evidence for in another paper).

I work for a think tank so I think about policy conclusions and I think this fits pretty nicely with Adam Smith Institute ideas. What can you do to raise people’s wealth? None of the things that pushy parents do seem to help their kids be rich except two: give them cash, and teach them to save more and save better.

The latter seems a bit more politically practicable, but the problem is that most financial education schemes seem to have no impact. Maybe the only way you can teach this stuff is something as long-lasting and comprehensive as being adopted. (I’m open to being wrong here—it would be great if there were doable financial literacy interventions that had lasting impacts.)

But we can give people cash. And funnily enough that is ASI house policy.

A certain disconnect from reality here

The idea that prisoners should be banned from smoking in their cells has reared its ugly head again. The true reason that such a ban is not in place is that, for the time of their sentence, their cell is their home. We do not ban people smoking in their own homes: we therefore do not ban prisoners smoking in their cells. We also do not want to give the government, any government, the power to ban people doing something entirely legal in their own homes: thus we do not want to grant this power to ban prisoners smoking in their cells.

However, even given all of that, this does show a certain disconnect from reality, doesn’t it?

Deborah Arnott, chief executive of charity Action on Smoking and Health, said there was no evidence to support claims that depriving prisoners of tobacco could lead to riots.

“Prisons all around the world have gone smoke-free with few problems and, in the UK, all high-security psychiatric facilities have already gone smoke-free, as have prisons in the Isle of Man and Guernsey, without any trouble,” she said.

Not paying much attention to the news, is she?

On Tuesday, hundreds of prisoners lit fires, broke walls and smashed windows in a 15-hour riot at a Melbourne prison in what authorities believe may have been a reaction to a smoking ban at the remand facility.
It was one of the worst prison riots in recent memory and authorities and commentators moved quickly to either condemn or support the state-wide prison smoking ban.

No, she’s not:

Police armed with tear gas and water cannons were on Tuesday evening still attempting to contain a riot that broke out at a maximum security prison in Victoria earlier in the day, after prisoners became angered by the introduction of a smoking ban.

All staff were evacuated from the prison in Ravenhall, Victoria, after several hundred prisoners rioted.

This happened only a few weeks ago…..at the end of June.

This will put the cat among the pigeons

Disturbing findings for a central tenet of the prevailing left wing educational ideology:

Teenagers facing the ire of parents over their exam results may have found the perfect excuse after a new study concluded that exam success is largely inherited.
Scientists at King’s College London discovered that up to 65 per cent of the difference in pupil’s GCSEs grades was down to genetics.
Previous research found that genetics could influence core subjects like English, mathematics and science but it now appears that they also play the same role in humanities, languages and art.
It suggests that if parents have struggled to draw, learn a second language or understand algebra, their children are also likely to find those subjects difficult.

For that prevailing ideology is that it is entirely the environment and education itself which determine such things. Danny Dorling once put it as anyone could grow up to be professor of social geography at Sheffield University: something which prompted us to comment that obviously anyone had. The implications of this blank slate idea being that differences in outcome must be due to differences in access to resources. Thus poor people do badly because they are poor, deprived even simply be inequality.

That 65% of academic success (to the point that passing exams is that success) blows rather a hole in this idea.

We should not, of course, immediately lurch over into the errors of social darwinism though. For this is just a restatement of what should be blindingly obvious about a mammalian species. There are indeed mutations, there’s a shuffling of the genes in every generation. We should therefore be assuming that there will be variance other than simple and direct inheritance of intelligence, just as with any other genetically determined characteristic. Thus all should have access to the same opportunities but we just shouldn’t be surprised when outcomes are not equal.

Let’s call a thing what it is shall we, a spade is a spade after all

It’s not so much the pettifogging that annoys, although there is a tinge of that, it’s the hijacking of an honourable description that really irks:

A typical household has 40 plastic carrier bags stashed away at home, ministers have claimed, as new figures showed the number of bags used by shoppers rose for the fifth year running.
British shoppers took home more than 8.5 billion single-use carrier bags from supermarkets in 2014, 200 million more than in the previous year, figures from charity WRAP show.

Charity: the giving of money to aid mariners in peril on the seas perhaps. Or alms to house the destitute. But the most important part of the description is voluntary.

Following the review we worked closely with Defra to develop a programme of work, in line with sharpening our
strategic focus, that will make a significant contribution to helping the UK achieve its environmental objectives
and obligations, such as achieving the 50% household recycling rates by 2020, but at less cost. As a result grant
funding from Defra for 2014/15 has been confirmed at £17.6m (2013/14: £25.7m), expected to reduce to £15.5m
in 2015/16.

Financial Results for 2013/14

WRAP‟s total income for 2013/14 was £65.4m (2012/13: £63.2m) of which the majority (98.9%) was grant
funding from government and EU sources. Although the underlying grant funding from Defra reduced compared
to the previous year, the addition of the Resource Efficient Scotland programme and the timing of activity in EU
funded grant schemes, notably the ARID capital grant scheme in Wales, resulted in a marginal increase in total
income.

This is not a charity. This is a tax funded arm of the central bureaucracy. As such it most certainly isn’t voluntary.

It has to be said that a caring society would indeed have a place in it for those who get their kicks counting plastic bag hoarding by household. But it’s not entirely obvious that those working hard on the minimum wage should be charged tax to pay for it. Perhaps it should be paid for, voluntarily, in a charitable manner, by those who share this minority taste?

At which point we are going to revert to calling a spade a spade. WRAP is not a charity, it is a collection of tax leeches.