Tag Archives: welfare

Social Expenditure : Benefits in Kind or cash – Some comparative data

Lets leave aside for a moment what the levels of social expenditure might be. The composition of these also matters I contend. At one extreme we can give people a lot of cash and allow them to go find the services they need. At another extreme we can give them very little cash and provide the services. This debate comes into focus now and again when people in Ireland compare welfare rates here with those in Northern Ireland. The argument is usually “here if you are  in receipt of [insert welfare program name] you get X and in the north you would only get Y (Y << X), its a disgrace, we should slash [insert welfare program name]”.  This of course ignores that the cash benefit versus the in kind benefit makeup of the comparators might well and usually does differ

Below is a chart taken from OECD data on this composition. A high level means lots of benefits in kind  and not much cash (as a percentage of total expenditure). Its for all programmes, and show this issue in fairly stark terms.  Note how things have changed in Ireland over the years. We show the biggest variation over time of all.  Initially we gave people things, then we gave cash then as we got rich we gave things now we are back to cash. This is hardly indicative or supportive of a consistent and coherent policy on social expenditure.
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Should we cut longterm unemployment payments?

There is some comment today in the newspapers on an EU commission report which states, inter alia, that welfare rates should be cut in the forthcoming budget. They state in a draft report (which doesn’t seem to be publicly available)

“In part this may reflect the structure of the benefits system in Ireland, whereby activation does not increase with the spell of the unemployment duration nor does unemployment assistance generally decline over time.”

The logic here is that cutting the benefits paid to those in longterm unemployment will induce (aka force) them to work. At one level this is trivial – if we cut unemployment benefit to zero then people would starve, emigrate or work and thus there would be no longterm unemployed. At another level it is problematic as it implicitly assumes that there is a mismatch between a stock of longterm unemployed who are better off on the dole and a stock of jobs that they could take if only they were not better off on the dole.  There is a very nuanced EU report on benchmarking unemployment benefits etc here , which suggests that looking at EU Averages is not helpful, and countries that appear very generous or stringent with respect to same actually are generally in line with near and cultural neighbours. Although this report does note the lack of tapering off of UA in Ireland, it also notes that there are offsetting reasons for same.
This is nonsense. The structure of unemployed in Ireland by last occupation is given below. The largest part are craft and related, then personal services then clerical. The first are in large measure the construction related workers who were sucked into the industry at the height of the boom.While these are by no means unskilled, their skills are not those that are needed now or prospectively. The second and third groups are dependent on the domestic economy, when people will go for haircuts and take on office staff.

Unemployment traps tend to be discussed as too much dole. The reality is that since at least 1987 with the work of Tim Callan we have known that there are structural welfare traps. A good overview is given here. Report after report have suggested things such as tapering of benefits (whereby if one goes over a threshold of eligibility for a benefit one does not lose all the benefit immediately but instead the benefit is reduced by a (high) percentage of the amount by which you exceed the threshold) and so forth. These are dull technocratic measures which are unlikely to appease the “on yer bike” brigade but which might well just work… A combination of ensuring that domestic demand is somehow reflated, sensible structured welfare reform (perhaps indeed tapering both benefits and allowances as discussed) and some sensible retraining will result in slow erosion of longterm unemployment. Seeking quickfixes wont.

Richard Tol, academic freedom and the ESRI.

The ESRI-Richard Tol brouhaha has been strangely ignored by many academic blogs. I guess its because we are all on holidays…

To summarize; in May 2012 Richard, who had left the ESRI under rather strained circumstances earlier this year uploaded a working paper on the welfare-work wedge, whether and under what circumstances it is “better” to be on the welfare than to work. A part of the findings were that for some cohorts there was a significant wedge.

The paper was, according to the details on IDEAS (along with SSRN one of the larger repositories of working papers) uploaded in May.

It appears to me, but maybe I misunderstood, from the various statements that staff in the ESRI may be able to upload papers without any formal checking, but then again they are seasoned academics and researchers who will not generally issue working papers that are manifestly flawed as that will rebound on their reputation.

In any case, the newspapers picked up the findings, and it was widely reported. Here we must note that it was generally reported as “ESRI report” finding something. It was not. To describe it as such is to misunderstand the nature of the research process and to disregard the clear statement on each ESRI working paper that it is not official and should not be treated as such. Why the newspapers and other media choose to so mislead is a source of concern for another day.

In any case, yesterday the ESRI took what it described as the unprecedented step of withdrawing the (unofficial) working paper, declaring it to be in effect shoddy and error prone. It is now no longer on the ESRI working paper site, but the ever reliable Michael Taft has an extensive summary of it here and the entire paper can be downloaded here. Why it felt the need to create a precedent where none existed is unclear. This is worrying for those of us concerned with academic freedom. The ESRI press release states the ostensible reason for withdrawal as

“it has emerged that the underlying analysis requires major revision and that the paper’s estimates overstate the numbers of people who would be better off on the dole than in work.”

This seems to me to fly in the face of how research works. The ESRI working paper series is like any other. Papers start as ideas, then go to drafts then to working papers and then after informal and formal critiquing at seminars and conferences may be submitted for publication where extensive peer review suggests major revisions and then perhaps eventual publication. If the ESRI are now to require all working papers to be error free then they should set up a journal. As a journal editor the only time I would countenance the withdrawal of a paper from any series or publication is if it becomes clear that there is plagiarism, fraud or unethical behavior. None are alleged here. What is clear is that the public debate spooked the ESRI.

When the ESRI next publish a working paper on any area of controversy (and as a social science research institute that is going to happen on a regular basis) we now can no longer be sure that the publication is the thoughts of the author pure and unsullied, but is instead the outcome of internal editing. Nat O’Connor notes that the whole point of working papers is to gain comments from a wide range of people prior to further work ongoing. Editing, as we now seem to see will be the norm at the ESRI, implies control, and control is manifested in a power relationship. The role of an editor or a research institute director, in my view, is not and should not be to ensure that material which might confuse the public is not published. The role should be to ensure that the abstract and press release make clear the main finding, the strengths and weaknesses of the paper, and its role as merely one stage in academic research.

A more reasoned response from the ESRI might have been to note the unofficial, working paper nature, stress that it was part of an ongoing process, and to suggest that (as is always the case in social science) we cannot be sure and must weigh countervailing evidence. What has happened now is frank censorship – and that is not a good outcome. Nor is it feasible in the wired world.

I am neither a labour or tax economist, and so have no clue about the academic quality of the work. It seems methodologically sound, but the data are weak, and that is acknowledged in the paper. Do we wait for perfect data to investigate social phenomena, or press on, carefully, with poor data and the inevitable extra hedging of our conclusions that that will bring? I do know that Tol is a most prolific researcher who well understands the nature of the research process and who is imho unlikely to have put out knowingly flawed work. Although best known as an environment.energy economist, he has published in many areas, including tax policy. The ESRI director, Frances Ruane, is also a seasoned, well regarded researcher . When the paper, as it almost certainly will, appears in a peer reviewed academic journal with the main thrust of its findings unaltered as seems to be the case, the ESRI will stand as having for publicity or politic reasons withdrawn a working paper. That mars its reputation and the reputation of Irish academia.