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Jsa - A Ticking Timebomb?

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Jenni Russell

guardian.co.uk, Wednesday 20 May 2009 23.00 BST

Dave lost his job in a northern city two months ago. He had worked for more than 20 years, and in ­recent years earned about £30,000 a year from his marketing job – about a quarter more than the average wage. It's his income that has paid for the mortgage and most of the bills, because his wife, as the mother of two young children, has a part-time job.

Dave had never been unemployed. When made redundant, with just three weeks' redundancy pay, he assumed that the national insurance he had been paying all his life would provide a financial cushion until he could find work. Instead he's been ­staggered to find that, because his wife is earning at a low level, all he's entitled to is £64.30 a week.

Overnight, the family's take-home income dropped by about £1,500 a month. There's still a mortgage and bills to pay, but the state won't offer any help unless Dave's wife also loses her job. Then it will pay the full mortgage after 13 weeks, housing benefit if necessary, free school meals, and a host of other benefits. But while Dave's wife is working, he won't get a penny more – and in practice, considerably less – than someone who has never worked. And that discovery has left him feeling he's standing on the edge of a financial precipice, scared that the family may lose their house, embittered and betrayed.

Dave wouldn't be in this position if he were French. Or German, or Finnish. Or Dutch. In all those countries, unemployment benefits are both much more generous, and strongly linked to employment records and pay. In France, anyone who has worked for at least four months in the previous two years gets between 40% and 75% of their pay. The minimum rate payable is around £150 a week, and the maximum almost £1,500. Whereas Dave will lose all right to benefits after six months, the French system can pay out for at least two years.

On the continent there's an assumption that expecting something back from an insurance system you have paid into is only fair. We have lost that link. The earnings-related benefits introduced by Labour in the mid-1960s were snatched away by Margaret Thatcher in 1982, and replaced with an emphasis on need. The British welfare state will wrap you fully in its embrace only if you have savings of less than £6,000, and neither partner is in work. If you are in that position and have children, you get a little more, because the government regrets that children are growing up horribly poor. But for anyone with a standard of living to lose, the state has decided that it is not its business, even temporarily, to help bridge that gap.

This policy can be dressed up as fairness – we won't help anyone until they are on the edge of destitution. But it's really a calculated attempt by governments over the past 25 years both to save money, and to make unemployment so unattractive that anyone will be driven to keep looking for work.

An adviser who has worked with the Department for Work and Pensions is ruthlessly honest about the strategy that makes people like Dave sick with fear. The safety net is set so low because the priority isn't to reassure, but to ensure a swift return to work. Its discomfort is a key part of our much vaunted flexible labour market. And as far as the adviser is concerned, it has worked. The proof is that for much of the last decade British unemployment was lower – mostly about 5% – than the continent's 8% or 9%.

That ruthlessness looks unacceptable when jobs are plentiful. It looks much worse when people are desperate to work. There's no point in being hit with a stick when there are no carrots to eat. The economist Jonathan Wadsworth points out that our harsh approach isn't much of an advantage now. Britain's unemployment is now over 7%, while Germany's is still at 8%.

There is in fact no evidence that people with long employment records need to be forced into jobs. Research on Thatcher's savage reforms showed that while they marginally affected the young, they didn't get older people or those with families into work any faster. And Wadsworth points out that there are wider benefits to allowing people money and time to job hunt. First, their spending helps keep the economy afloat; and second, it increases the chance that people with the right skills find the right jobs. The economy is not best served by shoving desperate claimants into whatever comes along.

With hundreds of thousands of jobs lost since January, and another ­million set to join them within a year, it's astonishing that claimants' anger hasn't entered political debate. Frank Field is the only MP to voice the injustice of it, urging better treatment of those who have contributed. He suggests a ­doubling of jobseeker's allowance for those with five years' employment, and a tripling for those with 10.

Perhaps, as more and more Daves are hit, the mood will change. Perhaps a government that thought it necessary to offer every MP a housing allowance of £2,000 a month might just turn its attention to the absolute injustice of asking its newly unemployed citizens to live on an eighth of that sum.

I've posted on this very topic a while back.

IMO the totally inadequate of the JSA is bound to become a major issue in the next few months as unemployment continues to increase sharply.

Mixed with high level of personal debt and low personal saving it forms a lethal cocktail which puts a newly-unemployed Brit in a far far worse position than other Europeans.

The panicked rush in which the government increased mortgage payment benefits (maximum allowance doubled and qualifying period reduced by nearly two thirds ....) was a good indication of what may lie in store for the JSA when hundreds of thousands of, previously well-paid and highly-taxed, newly-unemployed 'professionals' find out what that the 'insurance' part of national insurance does not have the same meaning as in other types of insurance.

The angry comments from Grauniad readers against the benefit-addicted underclass and corrupt politicians are quite revealing ......

I can feel a tide of anger rising inexorably

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Jenni Russell

guardian.co.uk, Wednesday 20 May 2009 23.00 BST

Dave lost his job in a northern city two months ago. He had worked for more than 20 years, and in ­recent years earned about £30,000 a year from his marketing job – about a quarter more than the average wage. It's his income that has paid for the mortgage and most of the bills, because his wife, as the mother of two young children, has a part-time job.

Dave had never been unemployed. When made redundant, with just three weeks' redundancy pay, he assumed that the national insurance he had been paying all his life would provide a financial cushion until he could find work. Instead he's been ­staggered to find that, because his wife is earning at a low level, all he's entitled to is £64.30 a week.

Overnight, the family's take-home income dropped by about £1,500 a month. There's still a mortgage and bills to pay, but the state won't offer any help unless Dave's wife also loses her job. "

Its only because they are a couple that their income is added together. The policy is to encourage single parents. This country hates couples. So the answer is to separate. Then the full cornupia of benefits will flow, especially if Dave has one of the children.

Edited by roger196

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Tens of thousands of middle class workers are going to find out the hard way, like this family, that they have been screwed.

Most of our taxes goes towards paying public sector pensions and keeping a large but significant underclass in benefits when they should be working.

Benefits should be for the old, the sick and the need but millions in Britain now make a good living out of you working to pay for their benefits.

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Talk about the law of unintended consequences. There is something ironic in that Thatcher basically did this and the consequence has been to make it more tempting to give up work and live exclusively on benefits...

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It certianly is and I posted a response.

Someone has pointed out on that site that the total "welfare" budget is £200bn and you could give every man woman and child in the country £60/week with that. So if a single person gets £64/week and there are 2.2m unemployed thats £7.3bn. Then there are pensioners say 16m (not sure of the total) on £105/week so thats £87bn, then there's family allowance payable in respect of say 8m children at an average of £17/week and thats another £7bn. Where the heck is the other £99bn going?

Forgot to add - are tax credits treated as welfare payments or reductions in tax take? If they account for the other £99bn, I think I can see how Cameron will balance the books; this is going to get quite ugly for those on low to middle incomes.

Edited by bagsos

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Talk about the law of unintended consequences. There is something ironic in that Thatcher basically did this and the consequence has been to make it more tempting to give up work and live exclusively on benefits...

Good point - of course Thatcher was about to do that thanks to the North Sea oil tax bonanza which kept the benefits system affordable.

This is a rarely mentioned fact which Andrew Marr analyses brilliantly of his 'History of Britain'.

New Labour, her spiritual children, have now built an entire public/private sector whose livelihood depends on this mass underclass.

May all have been unintended but a lot of people, ranging from rogue landlords to shark-lenders, have done very well out of it

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Funny how 'Dave' and millions like him overlooked the problems with the benefit system... until he was at the sharp end of it :rolleyes: I just hope he wasn't one of the middle class corprobots who looked down their noses at the unemployed.

Having said that, the UK unemployment benefit system is in need of reform. A tapering payment starting at 50-60% of your salary and slowing reducing each month for 18 months would allow people who find themselves suddenly jobless to wind down their standard of living.

There are no two ways about it though, your standard of living has to be reduced if you have no job and it's not really up to the state to be keeping Dave in the manner to which he has become accustomed.

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Looks like the two income financial death trap.

Basing mortgages and outgoings on two incomes just doubles the likelihood that one of you will be forced out of work through redundancy/ill health etc and into the mire.

Bet that never got onto any of the lenders' risk models. Sorry, forgot, they threw their models completely in the bin when they thought they could palm off the debts to some other mug ad infinitum.

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Looks like the two income financial death trap.

Something many people failed to appreciate when calculating 'affordability' based on a large multiple of a joint income ....

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It certianly is and I posted a response.

Someone has pointed out on that site that the total "welfare" budget is £200bn and you could give every man woman and child in the country £60/week with that. So if a single person gets £64/week and there are 2.2m unemployed thats £7.3bn. Then there are pensioners say 16m (not sure of the total) on £105/week so thats £87bn, then there's family allowance payable in respect of say 8m children at an average of £17/week and thats another £7bn. Where the heck is the other £99bn going?

Forgot to add - are tax credits treated as welfare payments or reductions in tax take? If they account for the other £99bn, I think I can see how Cameron will balance the books; this is going to get quite ugly for those on low to middle incomes.

Don't forget the costs of administering the scheme. You now need a super computer to work out what your entitlement is.

Edited by Mr Prudence

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Well thats the capitalist system for you. Great if your one of the winners. Crap if your one of the losers.

I think everbody should experiance what its like be made redundant and unemployed when you have a family to support, in a recession.

It happened to me in the early 1990's and it was the lowest point of my life, so far.

One thing people dont realise is how slow the job hunting process is.

You look for jobs in local papers, job centres etc apply for the jobs, then wait weeks for a reply, thats if you get any.

Then you get the odd job interview. The pressure is so intense at the interviews because it is so important because you have kids to feed.

Then you wait weeks for a reply, if they bother to reply that is. All the time thinking over and over the interview how well or badly it went.

The whole process from seeing a job advertised to a job offer or rejection takes about 2 to 3 months and takes a lot of determination to keep going to you finally get a job.

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This recession is a very middle class recession. Previously, the middle classes would normally show their contempt for the great unwashed..now they are in the very system that they despised - where they saw it as giving handouts to freeloaders.

Of course there are freeloaders in the system, but there are also genuine people on it as well - those who really want a job, but are unable to get one.. 65 quid a week is nearly impossible to live on in this day & age, and perhaps it should be set at a level - possible a decent percentage of your income of the last five years.

In regards to this new mortgage payment scheme, to stave off repossession, only one person in the UK has claimed for it. One single parent in my area was refused mortgage help from the government, as she was experiencing "the wrong type of repossession".

For me, I'm coming to the conclusion that I never want a mortgage, unless I can build up a very significant deposit - ie. 50%. I've been made unemployed twice in eight years, so there is a very real possibility that i'll be out of work for a time, throughout the rest of my career..If you rent, the government looks after your housing costs (to a degree) - sometimes, mortgages just aren't worth the risk..

Edited by zagreb78

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Well thats the capitalist system for you. Great if your one of the winners. Crap if your one of the losers.

I think everbody should experiance what its like be made redundant and unemployed when you have a family to support, in a recession.

It happened to me in the early 1990's and it was the lowest point of my life, so far.

One thing people dont realise is how slow the job hunting process is.

You look for jobs in local papers, job centres etc apply for the jobs, then wait weeks for a reply, thats if you get any.

Then you get the odd job interview. The pressure is so intense at the interviews because it is so important because you have kids to feed.

Then you wait weeks for a reply, if they bother to reply that is. All the time thinking over and over the interview how well or badly it went.

The whole process from seeing a job advertised to a job offer or rejection takes about 2 to 3 months and takes a lot of determination to keep going to you finally get a job.

This brings back some memories. When I was last unemployed, 7 years ago, I used to hate the weekends coming round, because nothing would happen then for a couple of days. The progress was painfully slow during the week anyway. I wondered why the jobs were being advertised if they weren't in a rush to hire anyone.

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In Germany redundant employees get 90% of their salary for a year, part paid by their employer, and then I think it drops to 50% paid by the govt. Those who have never worked get a flat rate. That is what should be done here, but with lower percentages as 90% is way too high, and is part of the reason why their unemployment has remained stubbornly high throughout the boom.

Edit to add its also the reason Ellesmere Port and Luton are doomed when GM Europe restructures - the buyer will cut out the capacity that is cheapest to close.

Edited by bagsos

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All Dave has to do is register as "self employed" and spend 40hrs/wk trying to make a living doing something and keeping records of his activity. If he earns less than £5200pa He'll get about £1000/month in tax credits.

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This brings back some memories. When I was last unemployed, 7 years ago, I used to hate the weekends coming round, because nothing would happen then for a couple of days. The progress was painfully slow during the week anyway. I wondered why the jobs were being advertised if they weren't in a rush to hire anyone.

Yes looking back I realise I had gone a bit mental but had to try and act normal in the interviews.

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All Dave has to do is register as "self employed" and spend 40hrs/wk trying to make a living doing something and keeping records of his activity. If he earns less than £5200pa He'll get about £1000/month in tax credits.

Thanks for this, I will look into it - don't expect to be in my job for that much longer and the implications of JSA were beginning to look a nightmare. Do I have to have kids to get tax credits?

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65 quid a week is nearly impossible to live on in this day & age, and perhaps it should be set at a level - possible a decent percentage of your income of the last five years.

This is the basic point of my post.

How much longer can JSA be kept of this level?

Not much IMO as the growing army of middle-class unemployed realises that jobs just aren't there whilst daily reports of corrupt politicians (how the ferk can you 'not realise' your mortgage has been paid off?) and bloated banksters/senior civil servants (Merv and his £200K pension is a recent exemple ...) keep coming.

History can be very unpredictable.

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This is the basic point of my post.

How much longer can JSA be kept of this level?

Not much IMO as the growing army of middle-class unemployed realises that jobs just aren't there whilst daily reports of corrupt politicians (how the ferk can you 'not realise' your mortgage has been paid off?) and bloated banksters/senior civil servants (Merv and his £200K pension is a recent exemple ...) keep coming.

History can be very unpredictable.

If it was set at a level, say 70% of your income, so with a wage at 30k, you receive about 20k for a year - it then diminishes after a year, this should give you amble time to find another job at your previous wage. If you claim this via JSA, you cant apply for any other benefits (such as housing benefit, tax credits, etc)..it would simplify the system, with much less bureaucracy (you would hope so anyway)..

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Where the heck is the other £99bn going?

Staff. You need staff to dispense and deal with claims. Running costs come under the budget and that is a lot of money. I read that actual claim volumes are more like £128 billion, with the rest being operating costs.

Someone also told me that tax credits are factored in.

However, more fundamentally, not every unemployed claimant receives single person's JSA of £64. Long term ESA (formerly incapacity) is more like £90 a week -- and I would suggest the figures claiming ESA/Incapacity are far higher than those claiming JSA.

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