Tuesday, 26 July 2011


The world is full of incentives. Work hard, study and your chances of personal success improve dramatically. Give workers a target and a bonus scheme and you will be surprised (or not) at the results.

The state, whether it admits it publicly or not, creates a leviathan minefield of incentives or disincentives. It also does not admit to doing this gob-smackingly badly. Take the banks. They were told, implicitly or not, that the state would bail them out, regardless of how egregiously reckless they were with their landing, watched over by the FSA regulator. The result? A housing boom based on reckless lending and taxpayers money stolen to bail them out.

This creation of "moral hazards" brings me on to the topic of today's rant - the benefit system. This blog has already dealt with the subject of the minimum wage and how it increases joblessness by dis-incentivising employers from taking on people. The other side of the coin is the overgenerous welfare state allowing people to make the rational decision to stay at home rather than take a tough, low paid, taxed job.

People are not stupid. They make the decision that is best for them, despite the wailing of protest from the left, who believe human nature to be other than what it is. Take the BBC analysis of the ESA (the replacement for disability allowance)

"ESA is the successor to Incapacity Benefit and claimants are required to go through a series of tests to judge their fitness for work.

The department has released the results from 1.3 million tests over a period of more than two years which showed:

  • 7% were incapable of any work
  • 17% were able to do some sort of work given the correct support
  • 39% were deemed to be fit for work and were moved onto jobseeker's allowance
  • 36% dropped out of the application process
  • 1% of applications were still in progress"
36% of the claimants dropped out before they were tested - "it's a fair cop guv" and almost 40% were found to be fit for work. These individuals knew that they would be better off "on the sick" and went for it. These are smart people and should have no problem holding down a job.

1 comment:

  1. Nicely done MNN - people will always do what puts the most money in their pockets...