Have Benefits Risen Faster Than Wages? Is This The Right Question To Ask?

by richardhutton

There are several persisting myths which underscore public discourse on benefits and poverty. For one, the notion that somebody can somehow be in better financial circumstances through being unemployed, than by working for a living. This is untrue, precisely because of the benefit-system. As long as somebody is working at least 16 hours per week, at the minimum wage, then in-work benefits ensure that employment is financially worthwhile. Even without understanding how the benefit-system works, however, it defies reason for people to contend that unemployment can be more lucrative than employment, and yet not immediately resign their jobs, and sign-on.

Nonetheless, this particular myth is being used to dismantle the same in-work benefits which ensure that being in work does prove more financially rewarding than being out of work. During the budget announcement of July 2015, the Chancellor claimed that benefits had risen faster than wages:

“Since the crash, average earnings have risen by 11%, but most benefits have risen by 21%.”

This is false, and misleading, as a premise for policy. Those in receipt of benefits, and those receiving wages, are not distinct – benefits are not available only to those who are unemployed. Moreover, they did not actually increase at all in terms of value: they were tied to inflation, meaning that their monetary worth remained constant. They were, however, decoupled from this in April 2013 – causing them to decrease in value since then. The government made the same misleading claim about benefits supposedly rising faster than wages at this juncture – mainly via press-briefings which appeared in tabloid articles [1]. In both cases, they have engaged in a sleight of hand to justify reducing benefits which are paid primarily to people who are working. In reality, many of those whose wages have failed to rise significantly actually rely on benefits – such as tax credits – to prevent them living in poverty, despite the fact that they work. Their incomes are set to be reduced further still.

There is something extremely disturbing about politicians behaving in this manner; and it is equally dispiriting that nobody of consequence took notice. This is perhaps not surprising, however, given the media’s propensity for taking misleading claims on this subject at face value. But the question remains – why do people fall for this; and envy or resent those who have less than themselves? Perhaps a better question to ask here is, why do such egregious falsehoods have credibility?

This is difficult to answer objectively; but perhaps other myths come into effect, and leave people prone to being deceived on this point – namely, ones which surround poverty. If people are struggling financially, and yet would rather see somebody less fortunate than themselves be made poorer still, than have their own circumstances remedied, then there must surely be powerful misconceptions about the benefit-system at work. This is indicated by the popular perceptions which surround the general subject of benefits and poverty – that poverty only affects those who are unemployed, and thereby unwilling to work; those who mismanage their incomes; or people who are impoverished by addiction. Moreover, that benefit-reforms only affect these people. Evidence disproves these sentiments. They persist, however; and are being exploited by politicians as a pretext for policies which have already been tried, tested, and have proven extremely harmful to many people. The majority of working-age households living in poverty have at least one adult who works. 1.4 million of these people work fewer hours than they wish to; and are only able to gain low-paid and insecure jobs. This is the economic context which causes many working people to be reliant upon benefits  – and yet what social protection does exist for them is being incrementally withdrawn.



[1] There were at least three articles containing this claim, in their respective newspapers, published within 24 hours of each other during 2013:

‘Benefits Handouts Rise Twice As Fast As Private Sector Pay’ by Alison Little/Daily Express, 2nd January 2013: http://www.express.co.uk/posts/view/368165/Benefits-handouts-rise-twice-as-fast-as-private-sector-pay

‘Benefit increases far outstrip private sector pay, DWP figures show’ by Christopher Hope/Telegraph, 1st January 2013: http://www.telegraph.co.uk/news/politics/9774333/Benefit-increases-far-outstrip-private-sector-pay-DWP-figures-show.html

‘Benefits rising twice as fast as salaries: Payments to unemployed jump by 20% in five years’ by Gerri Peeve/Daily Mail, 2nd January 2013:http://www.dailymail.co.uk/news/article-2255837/Benefits-rising-twice-fast-salaries-Payments-unemployed-jumped-20-years.html