UK benefits system linked to immigrant workers says report

January 02, 2008

Evidence that the system of social security benefits is one factor in attracting large numbers of foreign workers to the UK has come from a new study out today.

An in depth analysis of the operation of the current benefit system, by think tank Migrationwatch, has shown that the effect of benefit levels combined with means testing of benefits for those who are working means that there is little financial incentive for people with families living on benefits to find employment. This may partly explain why, despite there being 3.5 million people on Jobseekers Allowance or Incapacity Benefit, some 1.3 million immigrants have come to work in the UK in the past ten years.

There would be considerable benefits in getting our own population into work rather than encouraging immigration says the report.

These include:

- huge savings on the social security budget
- an increase in GDP per head (i.e. higher production without higher population).
- less pressure on our infrastructure
- less downward pressure on low wages
- a reduction in the non working underclass

Said Sir Andrew Green, Chairman Migrationwatch UK: ‘We keep hearing that we need immigrants to do the jobs that the British won't do.

‘It has been suspected for some time that benefit levels are a real disincentive to take work that is on offer and our research spells out why this may be so,’ he said.

Sir Andrew said that there were a number of other factors. For example, British workers who have accommodation and, perhaps, children at school, cannot be as mobile in search of work as immigrants.

‘However, an important factor is that wages are now so close to benefits that there is very little financial incentive for unskilled British workers to find a job. By contrast, Poles have very strong financial motivation. On the minimum wage in Britain they are earning 4-5 times what they would earn at home and, by living in multi-occupancy, they can afford to send considerable sums of money back to their families - according to the National Bank of Poland, Polish migrants in the UK are sending home about £9 million a day,’ said Sir Andrew.

The paper gives a number of examples:

A family with two children is just £30 a week better off working on the minimum wage than not working. If they are in rented accommodation and receiving housing benefit the worker keeps only between 4p and 10p in the pound of extra wages above the minimum wage until his gross pay reaches £507 a week.

A single person under 25 has more incentive to work but, on the minimum wage of £193 per week, is still only £50 a week or £10 a day better off than a non working person. If he is over 25 the difference is only £43 per week.

A family with two children and one working member receives £79.50 of Working Tax Credit, intended to cushion the impact of means testing of benefits and be an incentive to work. However Working Tax Credit itself is means tested and is also treated as income for means testing Housing Benefit and Council Tax Benefit. Overall this worker keeps only £6.77 of the £79.50.

All working families with children and one working member on the minimum wage are slightly worse off (by £14 -£24) than the same family receiving the maximum Incapacity Benefit.

They remain worse off until the worker in the family earns £430 a week or £12.25 an hour. A single person on the minimum wage would be £3 a week better off than a single person on the highest level of Incapacity Benefit.

Said Sir Andrew: ‘The maximum level of Incapacity Benefit has effectively been brought very close to the minimum wage. There are good reasons of social equity for this but it does mean that there is very little financial incentive for such persons to return to paid employment, especially as they are allowed some earnings. This means it is particularly important to ensure that claimants are genuine cases’.

‘This problem of incentives is a perverse effect of attempts to lift families out of poverty. It is not the result of immigration but it is made more difficult by large scale immigration which, according to the Bank of England, tends to hold down the wages of the lower paid. The risk is that we will develop an underclass of discouraged British workers’, he added.

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