PERSONAL COLUMN

Poverty-a new approach?

JOHN VAIZEY

The problem of poverty is one of the most intractable in modern industrialised societies. It is strange that it should be so, because it might seem at first sight that nothing would be easier in countries which by any standards are wealthy than to ensure that all people have a minimum decent standard of living. Yet, even in the Scandinavian countries, with their highly sophisticated social arrange- ments, there is a residue of families that fall into what, on most definitions, would be accounted poverty. The reasons why this should happen in rich countries like Eng- land and the United States are complicated.

They may be divided into a number of cate- gories. There are families whose poverty is due to 'too many' children; there are fam- ilies where the mother or father is dead; and there are families where the main bread- winner is either unemployed or works at a job which gives him an income which is not suffi- cient to maintain his family. This last cate- gory usually subsumes the other two, and it is this category which is the most crucial. It is crucial as well for an odd reason. The Poor Law of 1834 remained (until the Attlee gov- ernment) the basic statute covering the prob- lems of poverty. Despite much new legisla- tion the Principles of 1834 endure to this day. Oddly enough, the successor to the Poor Law Board set up under the most recent Act, the Supplementary Benefits Commis- sion, enshrines some of the philosophy of the Poor Law. This is the principle of the least eligible labourer, that is to say that nobody could get from relief more than he could earn if he were in work. This means that a number of low income earners receive less than other families from the Supplemen- tary Benefits Commission when they cease earning, because when in work they earned less than the minimum level of benefit. Be- cause of the large size of this low-earning groffp, and the intractable nature of its prob- lems, it has become urgent to find ways to raise their incomes. It is in this context that the government's Family Income Support Bill is to be understood.

There are really three main ways in which their incomes could be raised. The first would be by a substantial increase in social benefits directed towards the children. Fam- ily allowances could be given to the first child, and all allowances could be made double or treble their present level.

The second way to set about this problem would have been to have enacted minimum wage legislation. A recent report by the Department of Employment has suggested, on somewhat jejune grounds, that minimum wage legislation would not work well and would be expensive to implement. The evi- dence from overseas is not convincing either way.

The third approach is the one that the Government has adopted: to pay allowances to families whose wage-earner head is earn- ing less than the acceptable minimum.

The opposition to the plan is understand- able. The legislation looks complicated, and, compared with the high hopes that had been raised by lain Macleod and others, it looks a comparatively small measure. Those Mem- bers of Parliament who are experts on social security matters are almost certainly correct

to criticise and, if necessary, to oppose the Bill on these grounds. Some of them go further, however, and express fundamental opposition to it. Is this fundamental opposi- tion as soundly based as it seems? After careful thought, it seems to me that it may well be that the Bill represents a major de- parture from the philosophy of the 1834 Act, and it may well be the beginning of a substantial advance into a new attitude to the problems of poverty.

Perhaps this may best be expressed by con- sidering the grounds of opposition to the principles of the Bill. They appear to lie mainly in the following areas. First, and mainly, that it is a reversion to pre-1834 Act principles, a reversion to the so-called Speenhamland principles under which agri- cultural wages were subsidised according to the price of bread, which (it was commonly asserted) led to the pauperisation of the agricultural labourers. Associated with the opposition to the proposal on the so-called Speenhamland grounds, however, are three other propositions. First, that it subsidises wages in low income occupations, and that this removes incentive from employers to pay adequate wages for the labour they employ. The second is that it weakens the incentive of low income earners to earn more, and the third is that it contradicts the doctrine of marginal productivity and leads to a mis-allocation of resources. All three grounds, in fact, rest ultimately upon the basic anti-Speenhamland view.

How much merit is there in the case?

Wages are determined by a process that is by no means fully understood. But one thing, at least, is clear and that is that the workers with low earnings are on the edge of un- employability. If their relative wages were raised, there would be a tendency for them not to be employed. The easiest example, but not -the most important, is cleaning ladies. There is a rate per hour at which most families who employ help would feel they could or ought to dispense-with help in the house. Now, if this is so and higher wages would mean less work—and some people might contest it—is there any sound moral or economic reason why a person's standard of living should be closely and inevitably linked to what he can earn? Clearly, as a general proposition, for those who can earn a decent living, there are such reasons. But unless incomes are made equal, there will always be a group at the bottom of the income distribution. The problem is that at the bottom end the wages are bound to be unacceptably low.

Their earnings are in fact already subsi- dised by family allowances, by SET premiums paid to employers if they work in certain trades, and by social benefits like housing subsidies. In this sense if they did not exist, wages would have to be much higher to avoid actual starvation. A more open recog- nition that the standard of living of a family does not have to be closely related to its earning potential seems to me to be a major step forward. It is already true (and always has been) for those with capital assets; the new step is to apply the principle to those without capital.

The objections to the recognition of this principle fall into two categories. The fin concerns the effects of such a policy on in centives to work. It is argued, obviously wi some justice, that if a man or woman ge an income from the state, he has less incen tive to earn for himself. Yet, it is sure) being a little hard-nosed Co believe that th loss of production implied by any possibl lessened effort on the part of those margin workers is a serious national matter? A worst, it would be a loss of output by th valued at £20 to £30 million, if the lo represented £3 to £4 a week each. A loss o output of such a size, balanced against th significant gains in removing poverty fro low income families, is not a seriou economic argument. These are margin workers who are marginal precisely becau their work is unfortunately worth ve little.

The other leg of the argument about centives concerns the personal integrity a self-esteem of the subsidised workers. if th need not work, because the state will provi them with an income, will they not beco paupers in the psychological sense of th ambiguous word? Unwilling to work, an sitting back on the dole? Obviously this likely to be true of some people. But as general doctrine it seems to me implausib Men and women like to work; they like t feel useful; they like to feel some objectiv purpose in their lives. My judgment won be that they will seek to work whenever the can, and that the so-called 'workshy' are fact, for the most part, people with sped difficulties. It is surely better for people work, even for very low wages, than not work at all, and this principle is alrea applied to the sheltered occupations for a victims and the other handicapped. The issue is whether or not most unskilled ve low wage-earners falls into a roughly sim category. Work, in this sense, is not onl important because of the pay it gives peo but because it is a good thing in itself.

Behind the constant reaffirmations of t 1834 Principles lie a series of judgments th seem to me to be questionable. The first that people only work if they are driven b necessity, and that society depends for survival upon the recognition of this. In rich country this ethic seems to me to oversimple and in the present instance pe nicious. - There is also a rationalisation this view that poses as economics. This that people fife paid what they are 'uo and if the system is interfered with it will go wrong. As a matter of fact, econom has never taught that wages are determi by 'marginal productivity' (which is fancy name for this sort of thing). economics of wage determination in hands of the proper authorities has alga laid emphasis on the social and cultural c text within which bargains are struck. some notion persists among people who ha an acquaintance with economics that pattern of income differentials exists go reflects directly market scarcities and pre ences, they have clearly misread both situation and the doctrine.

The reason why I regard the Fain Income Supplement as a breakthrough because it is a formal recognition 0 break between earnings from v..orks,. what is needed to keep a family fora s1n

into

which going. It represents a 'social

which is not paid in kind, like the Bea Service or education. It is an irrIporl break with- laissez-faire assumption assumptions so deeply ingrained in society that they pop up all over the pla despite their official abandonment years