Mar 6, 2016

UK: The poor are worse off if they work

According to this report (The Aspiration Tax. How our social security system holds back low-paid workers, Feb 2016, by the EqualityTrust), people on benefits get to keep about 23% of what they earn if they work. In some cases, they may end up with a net loss if they work.

The withdrawal of benefits may be seen as a super heavy tax that discourages the poor from working.

An unconditional basic income has a very clear advantage compared to this social security system. Under the unconditional basic income system, the basic income is not reduced when people work.

Here are a few interesting quotes from the rather long report:
Families currently receiving tax credits, and paying Income Tax and National Insurance contributions, lose 73p of every additional £1 they earn.
Families who move on to receiving Universal Credit, and who pay Income Tax and National Insurance contributions, can lose up to 76p of every additional £1 they earn.
A single parent working full-time on the minimum wage under Universal Credit would lose 71p of every additional £1 they earned.
Out-of-work social security, like Jobseeker’s Allowance or Income Support, is currently withdrawn very quickly. For every £1 that a person earns from work, they lose £1 in social security entitlement. This can mean that people are not better off when they enter work for a small number of hours. 
(The above numbers have not counted the cost of working. Working will incur transport cost, meal cost, etc.) 
And, lastly, a quote from the Director of the Equality Trust:
“We can’t keep pretending that our taxes and benefits system is fair when the rich are given all the ladders and the poor all the snakes."

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