Britain could slash unemployment by time-limiting benefits - Sam Bowman writes for City AM

Deputy Director Sam Bowman discusses new ASI report "Time for Time Limits: Why we should end permanent welfare" in a comment piece for City AM:

Most talk of welfare is about how much we spend. Far too little is about how we actually spend it, but this is what really determines whether it does what we want or not.

Jobseeker’s Allowance (JSA) is a very small part of the £217bn per year we spend on welfare, costing around £5bn annually. But in interaction with in-work benefits like Working Tax Credits, it can be one of the crucial factors in a person’s decision whether to take a job or keep looking for something better.

The difficulty is that we can only cut JSA so far before it stops being capable of giving people a short-term safety net in between unexpected periods of unemployment. And as a new paper from the Adam Smith Institute (“Time for Time Limits”) argues today, this is where we can learn quite a lot from reforms abroad.

Read the full article here.

Report: 5-year limit on JSA will boost employment and cut welfare spending

For further comments or to arrange an interview, contact Head of Communications Kate Andrews: | 07584 778207.

  • With £12bn to cut from welfare, the Chancellor should put a 5-year limit on jobseekers' allowance (JSA) to boost employment and cut welfare spending.
  • Similar welfare reforms in the United States in the 1990s reduced unemployment by 6-7%, reducing benefits caseloads by as much as 96% in some places. Such a change could translate into an estimated reduction in the benefit bill of £300–350 million, based on current spending.

The UK should consider US-style time limits on out-of-work benefits as part of the cuts to benefits spending, according to a new paper from the Adam Smith Institute.

A new 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.

Author of the report, Peter Hill, said:

Now more than ever we have to brave new public policy. Money does not grow on trees; policy makers are spending taxpayers’ money - as well as borrowing it in their name - and taxpayers expect it to be well spent. Therefore, tough decisions have to be made to reduce the costs of welfare.

Time for Time Limits encourages readers to turn their eyes across the Atlantic to the radical welfare reform of the 1990s which saw dramatic shifts in unemployment numbers and the associated costs to taxpayers.

If the Chancellor is serious about tackling the deficit, reducing the national debt and returning to strong growth, there is little scope but to follow the path of successful welfare reform pioneered in the United States. Time limits will re-empower the unemployed to take control of their own lives.

Deputy Director of the Adam Smith Institute, Sam Bowman, added:

Getting people into work is the best way of fighting poverty that we have. But the government’s welfare reforms are doing exactly the wrong thing: cutting in-work benefits that entice people into jobs, and raising the minimum wage to make it harder for people to get their first step onto the ladder.

The reforms discussed in this report worked, and may work in Britain, because they made out-of-work benefits a temporary safety net, and made sure that it always made sense for the unemployed to find a job.

Notes to editors:

For further comments or to arrange an interview, contact Head of Communications Kate Andrews: | 07584 778207.

To access the full report Time for Time Limits: Why we should end permanent welfare, click here.

The Adam Smith Institute is a free market, libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.

EU Treaty Changes - Senior Fellow Tim Ambler's letter in the Daily Telegraph

Senior Fellow at the Adam Smith Institute Tim Ambler published a letter with the Daily Telegraph on bilateral treaties within the EU:

SIR – It takes at least four years to set up an intergovernmental meeting to make EU treaty changes, by which time the referendum will be long gone.

The only way agreements can be made binding is through bilateral treaties between EU members undertaking to include the agreements in the next round of treaty changes. Such bilateral agreements are allowed by EU protocols but have not yet been used for this purpose.

In addition to being both precise and binding, Brussels would not be able to frustrate the process.

Tim Ambler Senior Fellow, Adam Smith Institute London SW1

Read the letter online here.

Dr Madsen Pirie's comments on the greenbelt feature in the IBTimes

Dr Madsen Pirie's comments on the greenbelt feature in the International Business Times UK:

"The first step in re-evaluation might be to classify greenbelt land into the different types that comprise it," wrote Dr Madsen Pirie of the Adam Smith Institute think tank back in March.

"There is genuinely green land, the fields and woods that everyone likes. There is damaged or brownfield land, partly made up of abandoned buildings, gravel pits and the like. And there is farmland, much of which is not environmentally friendly."

An earlier report by the Adam Smith Institute said that one million homes could be built within walking distance from a station on just 3.7% of the green belt land surrounding the city.

Read the full article here.

Kate Andrews's comments on the gender pay gap feature in The Daily Telegraph and The Daily Caller

Head of Communications Kate Andrews’s comments on the Prime Minister’s pay gap pledge have featured in The Daily Telegraph and The Daily Caller. From The Daily Telegraph:

Of course, there are many variables at play in determining any individual’s pay. Kate Andrews from The Adam Smith Institute has called the pay gap “a myth”, adding: “Education, previous experiences, negotiating tactics and unique abilities all contribute to one’s salary, none of which can be known by comparing John and Jane’s annual take-home pay on a spreadsheet.”

Read the full article here.

From The Daily Caller:

Since Hillary’s speech Monday, analysts have warned of the potential unintended consequences of using policy tools to hike the female labor participation rate. “Once again, we find examples of government overreach into wages and labor markets backfiring on the very people it is trying to protect,” Adam Smith Institute Research Associate Kate Andrews told TheDCNF.

“The gender pay gap has been debunked for the myth that it is; women are not earning less than their male counterparts on the whole because of employer discrimination, but rather because many women make different lifestyle choices that do not value a high salary above all else,” she added.

Read the full article here

Why the gender pay gap is a myth - Kate Andrews writes for Spectator Coffee House

Head of Communications explains why the gender pay gap is based more on political agenda than truth on the Spectator's Coffee House blog.

Today the Prime Minister has set out to ‘end the gender pay gap in a generation’. It would be an ambitious goal, if a wage gap actually existed. According to the latest ONS figures, women between the ages of 22 – 29 earn 1.1 per cent more on average than their male counterparts and women between the ages of 30-39 are also earning more.

And it doesn’t stop there. There’s evidence that when men and women follow the same career path in the UK, women tend to out-earn and out-perform men. There is growing evidence that if you control for similar backgrounds, women actually tend to get more aggressively promoted than men by their employers.

This alleged gap that the Prime Minister refers to is actually indicative of personal lifestyle decisions, not employer discrimination. While women who choose to stay on rigorous career paths usually find themselves rewarded, many women choose to take more flexible jobs and/or years out of work to focus on different – but equally important – parts of life, like raising a family. Naturally a drastic change in working hours, work-place responsibilities and shift of focus will have an impact on one’s salary.

Read the full article here.