Financing the social state: towards a full employment economy

Document type
Murphy, Richard; Reed, Howard
Centre for Labour and Social Studies
Date of publication
1 April 2013
Policy paper
Employment, Poverty Alleviation Welfare Benefits and Financial Inclusion, Social Policy
Social welfare
Material type

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This report looks at means of reducing unemployment, and the idleness which results of unemployment, as outlined in 1942 as one of Sir William Beveridge's giant evils. The paper argues that an alternative, successful and socially just course for the welfare state, or social state, for 2015 must be built upon a series of assumptions: that those who would wish to work and who are denied the opportunity to do so are prejudiced against as a result; leaving people unemployed when they could be and want to be working is economically irresponsible; the vast majority of people who are unemployed have to be fed, housed, clothed, educated and be provided with health care and other services when unemployed - as such unemployment has a double cost to society in that the unemployed person is maintained and yet makes no direct contribution to economic well being within the economy whilst society suffers the social consequences of the idleness it has imposed; the inequality of economic treatment between those in and out of work imposes a social cost both on those suffering the impact of that inequality directly and on society at large; and unemployment denies people the chance to fulfil their potential, at least part of which is realised for most people through the process of work, which imposes costs beyond the lost value of economic output.

The report concludes that in order for unemployment and the resultant idleness to be effectively tackled a major reform of the benefits, National Insurance and tax system is required. Major barriers to full employment at a micro and macro level are shown to exist. The authors argue that people want to work and it is clear that it makes sound economic sense for the government to invest to get people back into work. However, there are sound and wholly economically rational reasons deep rooted in the current tax and benefits system why for some people work quite literally cannot pay, even before their additional costs arising from being out of their homes are taken into account. If idleness is to be tackled, then the authors consider there to be an irrefutable case for broader reform of the tax, National Insurance and benefits system, than the contemporary government, or any since the current structure was created has been willing to undertake.

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