Are our children safe with Children’s Services?

The great majority of those who work in local authority children’s services do the very best they can in very difficult conditions.  They suffer abuse from the parents with whom they deal and the media, poor management, criticism from Ofsted and, from their perspective, inadequate resources.  What’s more, neither they nor anyone else know how well they are performing.

In 2003, the Laming Report made a huge number of recommendations.  The body of their report made it clear that there was too much process (bureaucracy) and too little time with the problem families.  Performance was assessed by activity (paperwork) and not by outcomes; the body of the report called for that to be reversed.  But outcomes did not feature in the actual recommendations which, ironically, focused on increasing the bureaucracy and made matters worse.

In the eleven years since, government has recognised that performance should be measured by outcomes and some limited progress has been made, e.g. for adoption services.  But where child protection is concerned, we simply get lip service.  No outcome measures have been suggested, nor the specific metrics, nor how they should be gathered.  In short we have no idea what “success” in child protection would look like or which local authorities are doing better than others.

When, last month, I asked the Children’s Department Minister, Edward Timpson MP, about performance measurement in this area, the answer was that they had turned the whole matter over to Ofsted.  The rest of his letter discussed the bureaucracy involved but there was not a word about how performance should be assessed.

This is, of course, a cop out: Ofsted should measure performance against standards set by government, as it does for schools.  Government is responsible for specifying what it wants in return for our money.  How else can they know whether to spend more or less?

Both Ofted’s “Framework and evaluation schedule” (published this June) and Rotherham inspection (published last week) have many references to the importance of measuring outcomes but nothing about what outcomes should be desired, what the metrics should be nor how they could or should be collected.  One has to feel some sympathy for the Rotherham local authority for being chastised for failing to do something that no-one has explained, not even the Department responsible.

Our children may or may not be safe with Children’s Services.  The bigger question is whether they are safe with this government.

The problem with low pay

The Resolution Foundation tells us that there’s some great big problem with low pay in the UK. Looking at their actual statistics though it’s difficult to see what the problem is. Of course, everyone would like more money for whatever it is that they do. But what keeps people in those low pay jobs seems to be that people opt to stay in those low pay jobs.

Only one in four low earners has managed to permanently escape the prison of low pay in the past decade, according to a major study published today.

The Resolution Foundation think tank uncovered the most graphic evidence to date of the scourge of in-work poverty, in which millions working part-time, in sales jobs and the hospitality industry, cannot move up the income ladder. Fewer than one in five people working in restaurants, pubs, takeaways and catering left low pay for good in the past 10 years.

A scourge, eh? Well, that’s what the Independent says. The report itself is a bit more measured.

And what they mention, but don’t emphasise, is the interesting stuff. For example, many on low pay actively decline to take promotions that will earn them more:

Part of the reason that many of these people who are usually in employment do not progress may be to do with the limited appeal of moving into positions of greater responsibility. The limited pay increases received for moving from an entry-level position to a supervisory role were often as little as 30p or 40p extra an hour. When weighed against the additional stress which comes with the role and the hassle of rearranging their work-life balance, for many people progression may not appeal.

They also find that those who stay in low pay over the long term tend to be single mothers and a number of people who are only in the workforce intermittently. And, of course, given that part time pay is generally lower than full time pay per hour the low paid (defined as those on less than two thirds of median hourly wage) are predominantly those working part time.

When we add all of that together, what do we see? The intermittency will at least in part be women leaving the workforce to have children. Single mothers are obviously balancing that work life balance, and the most common, we would think, reason for not taking a promotion that disrupts that work life balance would be the need to take care of children. And, of course, there’s many more women working part time than there are men for exactly the same reason.

It’s entirely true that it’s not in fact necessary for women to do the bulk of the childcare but that is the way our society generally works. So, we find women with children concentrated in those part time areas, not taking promotions, dropping in and out of the workforce as further children arrive. And thus earning low pay as these are the very things that seem to identify those who stay on low pay.

In other words the Resolution folks have simply found the flip side of the gender pay gap in the UK. That there isn’t one but there is a motherhood pay gap. Women with children generally earn less than men or women without children. It’s not a great stretch to move from that to the idea that women with children will be predominant among the low paid. And while they don’t emphasise this this is the rough outline of their finding.

And the point is that, despite everyone wanting more money for their labours, this is a result of the choices of those individuals. There’s a series of trade offs there, responsibility for higher pay, more rigid hours for higher pay, longer hours for higher pay and so on. And people are deciding which they prefer. Which ain’t the higher pay.

And, given that it’s all a result of individual choices there’s really nothing that we should be trying to do about it.

We’ve actually tried negative income taxes, and they seem to work

The latest issue of Chicago magazine has a great piece on the 1970s experiments with the Negative Income Tax (NIT) including in the deprived city of Gary, Indiana (famous for being the birthplace of the Jacksons). Inspired by Milton Friedman, and in an effort to reduce time, effort and effort spent administering welfare as well as stigma in receiving it, some of the poorest residents of Gary and four other poor areas received cash in randomised controlled experiments.

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A lot of research was done into the treatment groups in Gary and across the other NIT experiments.

One study found that kids born to mothers in the treatment group had birth weights 0.3-1.2lb higher. Another found significant and substantial improvements in reading scores for children in treated families. And what’s more, kids whose families had been in the programme for a number of years performed significantly better than those in it for a shorter time. School performance also increased significantly across a wide variety of metrics for early-grade students in a rural experiment in North Carolina, although the effect did not appear in the other major experiment, in rural Iowa.

It’s not clear exactly where this effect came from, but the most plausible source is probably better nutrition and spending the extra money on housing in better areas. Most of the evidence suggests that recipients did not spend their windfall on expensive consumption goods.

There were no overall robust effects on marital stability, but this was misreported, and the mistaken belief that the NIT had led to black families breaking up was a significant factor in killing the proposal as a political possibility under Richard Nixon.

However, as well as the effects seen, the experiments seemed to find that the income effect—having more money overall—outweighed the substitution effect—lower and more predictable effective marginal tax rates making it more attractive to work—especially when it came to women. A glance at the table below makes this clear.

But it’s possible to conclude that the fall in the amount of labour those getting the NIT supply (something like 5% for the poor groups studied, and around 2% estimated for the population as a whole) is quite small, and within the bounds of what we’d be willing to accept to substantially reduce poverty.

What’s more, there are countervailing factors. One issue is the level of the guaranteed income. Some of the families received were guaranteed an income 150% of the poverty line. With a benefit level closer to the existing system, merely structured more clearly and predictably, we might expect a weaker or even positive response (although we alleviate less poverty).

A second issue is the long-term response. If the negative income can counteract large environmental problems, allowing families to move away from pollution and feed their kids better and achieve more in school, we might see these people enjoy improved long-term life outcomes. Even looking at things from a narrow labour supply perspective, we know that more educated and more intelligent people supply more labour over their lives, so the long-term effect may be neutral.

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(Tables sourced from Widerquist (2005))

Do child benefits benefit society?

Child benefits are not simply philanthropic; they should motivate the parenthood society needs, notably a healthy birthrate for a population aging fast and parents bringing up contributors to society.  Currently 7.9M households receive child benefits, and there are, or were at the last count, 13.7M children qualifying.  That’s about £12.6bn child benefits in total  in total, disregarding those earning over £50, 000 who no longer qualify but still have to fill in all the HMRC forms just the same.

Of course, you can also get up to £122.50 p.w. for one child, or £210 p.w. for more, to cover some child care costs for the better off.  So you get £1,066 for being a parent at home looking after the kid but six times as much if you go out and abandon it.  Not much of an incentive for the kind of parenting the country needs.

And if you are really bad parents, which probably also means parents in poverty, the State takes the children away.  “Looked after children” is the new term.  The numbers of children looked after is about 92,000 in England and growing, probably because of the squeeze, since 2008, on low income households.  The cost per looked after child is about £50,000 p.a.  It would be cheaper to send them to Eton – about £30,000 p.a.  The cost of looked after children does not include their disproportionate poor performance in school, absenteeism, low incomes as adults and likelihood of occupying our criminal justice system.

Most people recognise that this is a vicious circle but not only has no government addressed the problem but it seems to be deteriorating.  The system rewards people for poor parenting.  In theory, when a child is taken into care, the parents should inform HMRC that, after eight weeks, child benefit should cease.  There is no requirement of the care worker or the court making the order to do so.  In all the emotion of a child being removed, would you tell HMRC to stop paying you?

On the same basis, child benefits should be withdrawn for parts of the school year for children at boarding school but maybe the fine print covers that.

Child tax credits are a devious means of raising the tax take, from higher earnings, and the government claiming higher employment.  At £20 per week for the first child, parenting is a financial drain. Neither financial inducement is incentivising parents in poverty to perform better. Well-off parents do not need them.

Child benefits should be quadrupled, but only be given for the first two children and to parents earning less that £50,000 p.a.  The responsible official, court or care worker, should advise HMRC about children taken into care.  And child care tax credits should be abolished.

We need a Negative Income Tax, not a Living Wage

The new Living Wage rate was announced today. I’ve written a bit about the Living Wage already. If it’s private, it’s probably not a big deal, although it could still lead to unemployment. I suspect it’s done by big firms that don’t have many low-skilled workers as a PR move but I quite like PR moves that involve paying low skilled people more. And I worry that people will generalize from those big firms to assume that the whole market could bear a mandatory Living Wage, which is almost certainly untrue and would be very harmful to many of the people it’s supposed to help.

What’s more interesting is the problem of low pay in general. Even though unemployment has fallen a lot in recent years in the UK, real wages have barely risen at all. Even as wages do begin to rise on average, it’s possible that wages for low skilled workers may not as jobs for them are outsourced to cheaper countries. The ASI has proposed raising the personal allowance (including National Insurance threshold) to the minimum wage rate, but this doesn’t do much good for part-time workers or currently-unemployed people who would earn below the minimum wage if we scrapped that, as I think we should.

So low pay may be a problem without any clear solution, for which most popular ‘solutions’ don’t actually work.

But there may be a fix that does work – a Negative Income Tax or a Basic Income. As I’ve written before these are actually very similar even though one is almost exclusively supported by right-wingers and the other almost exclusively by left-wingers. As ever in politics, we’re speaking different languages.

A Negative Income Tax is a form of income top-up that only looks at an individual’s income, not whether they are in work or not, and tops that income up automatically if they are earning less than a given amount. The extra money is withdrawn at a tapered rate, so that for every pound you earn from work, you lose (say) fifty pence in top-up, ensuring that workers always have a clear incentive to demand higher wages, and that work always pays more than joblessness for unemployed people.

This would replace lots of existing working age benefits, including Jobseekers’ Allowance, council tax relief, the Employment and Support Allowance and tax credits. You could probably implement a decent one without increasing total expenditure. The exact rates can be determined by running trials across the country.

A Negative Income Tax like this would almost certainly be a boon to people on low pay, and would avoid most of the problems that minimum wages and current welfare schemes face.

Indeed the main objection may simply be that it is redistributive. That’s where I break with many of my fellow libertarians – I want free markets because they make poor people’s lives better, and I am OK with redistribution if it’s done in a market-friendly way that makes poor people’s lives better too. If this sounds surprising, remember that this puts me in the same boat as Milton Friedman (who campaigned for a Negative Income Tax) and FA Hayek, and indeed in the same utilitarian philosophical camp as Ludwig von Mises.

I suspect low pay will continue to be a problem for many years, maybe becoming even worse as automation renders some people permanently unemployable. It is necessary but not sufficient to simply rebut other people’s bad ideas.

In the Negative Income Tax we have a policy that can actually go a big way to solving the problem, and hopefully replace some of the harmful policies we have right now. Rhetorically, I think we free marketeers need more positive solutions to policy problems, and if we could get over our squeamishness about endorsing certain forms of ‘good’ redistribution, we may be able to surprise people into listening to and maybe even agreeing with us. If low pay is indeed the long-term problem that it seems to be, the Negative Income Tax’s time may finally have come.