Howard Flight and the unpleasant facts about welfare dependency

The appropriate context for the term “breeding” is surely documentary films about wildlife, not welfare policy debates. Moreover, it is clear that the “return on investment” is not the reason most people have children. Finally, it is advisable to back up potentially offensive claims with very strong supporting evidence. In these terms, there are certainly grounds for criticising Howard Flight’s recent remarks on changes to Child Benefit:

We’re going to have a system where the middle classes are discouraged from breeding because it’s jolly expensive, but for those on benefit there is every incentive. Well, that’s not very sensible.”

Nevertheless, there are a number of unpleasant facts about welfare dependency and child poverty, which too frequently are swept under the carpet. Here’s one of them: to an extent which is unique in Europe, children in the UK are disproportionately concentrated in households relying entirely on benefits. At one glance, this can be seen by comparing the share of working-age adults in workless households with the share of children in workless households. In 16 countries of the EU-27, the latter is below the former, meaning that people are less likely to have children as long as nobody in their household is in paid employment. In another 3 countries, the two shares are about equal. The UK is the only country in Europe where a gap of more than five percentage points lies between these two figures, meaning that adults in workless households are substantially more likely than working adults to have children. It is, by the way, quite bizarre that the legion of child poverty advocacy groups would never even mention this fact, despite its obvious implications for poverty.

Can the tax and benefit system influence childbearing decisions? An empirical study by the IFS says yes – even though the relationship is more complex than Howard Flight’s remarks suggest, and the impact is probably not huge in magnitude. But the relevant insight is that even in intimate decisions, economic incentives are not completely irrelevant.  

So it does make sense to take a look at how the financial implications of having or not having children differ across household types and across the income distribution. Welfare recipients can be significantly better off with a child than without one. This comparison can be made by looking at equivalised income, which is adjusted for family size, instead of face-value income. Middle and higher income earners, in contrast, can be significantly worse off, especially from 2013 onwards when the announced changes to Child Benefit and Child Tax Credit come into effect (see table below). And that is only looking at cash income.

 

Workless single adult vs. workless single parent

 

Childless high-earning couple vs. high-earning parents

Childless single

Single parent,

1 child

Childless couple

Parent couple,

1 child

Market income

£0

£0

£40,000

£40,000

Income Support / Jobseeker’s Allowance

£3,400

£3,400

£0

£0

Child Benefit

£0

£1,050

£0

£0

Child Tax Credit

£0

£2,850

£0

£0

Housing Benefit (HB) entitlement

1-bedroom flat

2-bedroom flat

£0

£0

Gross income (excluding HB)

£3,400

£7,300

£40,000

£40,000

Equivalised gross income (excluding HB)

£5,575

(=£3,400/0.61)

£8,490

(=£7,300/0.86)

 

£40,000

(=£40,000/1)

£32,000

(=£40,000/1.25)

Despite the criticisms of Howard Flight’s remarks, there is a very strong case to be made for a tax and benefit system which is a lot more neutral with regard to household composition. This is the key lesson from the recent controversy.

It’s a shame Flight used that kind of language which gave statists a chance to paint the Tories as ‘nasty’ and ignore the serious underlying point that we’re subsidising the poor to have children and punishing the better off and are then somehow surprised when we have high levels of child poverty and associated social problems. Eugenics is clearly a vile position because it advocates social engineering – why should this sort of inverted eugenics be viewed as a ‘good’ thing?
I thought the table needs one row showing the totals net of tax and HB because then we can make an overall comparison between the employed and welfare recipients. Great post.

The changes to Housing Benefit may also provide incentives for claimants to have children, since this will give entitlement to self-contained accommodation rather than shared housing. In addition, the relative generosity of Child Tax Credit and Child Benefit (which in total exceed JSA or Income Support given to adults) means that claimants with children will be able to shield themselves from any sanctions that come with increased conditionality. The failure to reduce child-related benefits for workless households may prove to be a major flaw in IDS’s welfare reforms.

Responsible people take care to see whether they can afford children before having them. By largely relieving the poor of the need to take care, our welfare state encourages irresponsibility.Ian Hislop’s current television series about the Victorian do-gooders suggests that they were mostly far more realistic about the behaviour of the poor than modern political do-gooders. Indeed the latter themselves seem irresponsible in establishing, or continuing, a welfare state without recognising the likely long-term consequences. Or is it even worse than that: do some of them positively welcome those consequences?

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