THE TIERS OF THE INCOME MAINTENANCE SYSTEM
1. Two political decisions remain even after
reviewing the collected evidence from primary and secondary source
triangulation, (a) which tier or level of the income maintenance
system (see table 2) should be taken as the benchmark for the
MIS; and (b) at what qualitative standard should it be implemented
(as the Family Budget Unit have phrased it, "modest but adequate"?
Or "low cost but acceptable"?).
2. Historically, the UK habit of thought
has been to assume that social assistance (Income Support now
or its predecessors, Supplementary Benefit or National Assistance)
in some way reflects the view of "official poverty".
This is a mistake because it confuses a low level cash benefit
with the criterion by which to judge it reasonable, adequate or
decent. In fact the real direct comparison standard of minimally
tolerable level of living (tolerable to Government even if not
individuals) has always been the lowest levels of wages, from
1834 New Poor Law "less-eligibility", through the 1935
"normality" comparisons of Unemployment Assistance (see
Veit-Wilson 1989), to the present day's concern with employment
responsibility and "incentives". A case can therefore
be made that the governmental minimum income standard of participatory
adequacy should refer to the statutory minimum wage.
3. This argument can be supported by evidence
from both the UK and USA. When Seebohm Rowntree was Director of
Welfare for the UK government's munitions workers in the First
World War, he reviewed the basis of official minimum wages thoroughly.
In reports published in 1918 and revised and republished in 1937,
he asserted forcibly that:
a clear distinction must be drawn between the
principles which should guide us in fixing minimum wages and those
which should determine wages above the minimum. The former should
be based on the human needs of the workers, the latter on the
market value of the services rendered.
4. Similarly, in USA the Living Wage Movement
(LWM) argues that the discharge of social responsibility in the
form of a full week's work must be rewarded by the public obligation
of paying wages at or above the official US government "poverty
threshold" which is used as a MIS there and which has considerable
political credibility. The LWM campaigns for contract compliance
with this principle. The principle would be equally applicable
in the UK where the Government emphasises the social obligation
to work, though so far without the reciprocal political obligation
to ensure adequate wages.
5. In spite of these principles, the UK
minimum wage was not set on the basis of any measure of income
needs or adequacy for any kind of household but purely on the
basis of negotiation in the Low Pay Commission over what the market
Its current foundations cannot offer a politically credible basis
for a MIS in the UK at the present time.
6. However, both the Rowntree and the LWM
proposals suffer from the disadvantage that pay for work is not
intended to reflect the varied needs of the households dependent
on it. In the Netherlands the minimum wage rates (the basis of
MIS) originally assumed adequacy for "the family wage",
that is, a stereotypical family composed of a breadwinner, a carer
and a small number of dependent children. In the UK in 1945 the
Beveridge scheme assumed the adequacy of minimum wages for one
child with Family Allowances starting with the second dependent
child. Even if we ignore the gendered assumption of a male breadwinner
and a female carer, the fact remains thatunless government
is to make special allowances to cover the total costs of caring
and of childrenit is generally assumed that minimum earnings
for social participation plus child benefits ought at least to
support a carer and some dependent children as well as the main
earner, without the family having to apply for augmentation
in the forms of means-tested benefits or tax credits which imply
the inadequacy of the basic earnings and carry the risk of stigma
and low uptake.
7. Indeed, to put the case more strongly,
the UK governments' readiness to augment low earnings with, for
example, FIS in the past or the Working Families' Tax Credit today,
implies the inadequacy of those earnings on their own in terms
of some implicit standard to which past and present governments
must be referring. If this standard was evidence-based, that should
be revealed. If not, what is the source of and justification for
8. Some of the current issues affecting
possible choices of the tiers of the income maintenance system
(see table 2) include the following:
Minimum Wage rates? Even if this
is aggregated for a full weekhow many hours? What size
of household is to be maintained by the minimum wage? Should it
meet the minimal adequacy needs of a stereotypical household of
two adults and two dependent children without having to be supplemented
by means-tested benefits? Naturally variable household needs and
dependencies may demand extra incomes, but these should then be
designed for the whole population's needs and not just those of
"the poor", since benefits for the poor do not dispel
but reinforce the social exclusion the government aims to combat.
Tax thresholds? The 1971 Steering
Group for Family Poverty Review, chaired by HM Treasury, recommended
that the tax threshold should not be set below Supplementary Benefit
levels, thus implicity reiterating the 18th century British principle
that direct taxes should not be levied on inadequate incomes.
OECD reported in 1986 the Nordic principle that every citizen
should have the obligation to pay direct income tax and the expectation
that they will have enough left after doing so to meet these same
This contradicts the current UK government assumption that low
incomes should be topped up by income related tax credits or means-tested
benefits, both of which reinforce the image of inadequacy and
receipt (social exclusion) instead of adequacy and contribution
which are marks of social inclusion. It is relevant that in Sweden
and Germany the tax threshold is related to the MIS.
Long-term social security such as
NI pensions? Politically, how could the Government's Guaranteed
Minimum Pension be allowed to fall below what the evidence shows
is the minimum "decency" level? The minimum pension
is used as the MIS in Norway and Finland.
Income Support? In some countries
short term social assistance rates are less than long term benefits
because it is assumed that "occasional or lumpy" expenditures
will not be needed or will be met by exceptional needs payments.
However, UK experience suggests that even for short periods debt
repayments and saving for future needs must be covered in an adequate
social assistance scheme, since the current level of benefits
is demonstrably so inadequate that the Social Fund may withhold
loans for lumpy purchases because claimants do not have the disposable
resources to repay them. The means-tested Income Support or Job-Seekers'
Allowance schemes would not be adequate as the basis of a UK MIS.
9. Similar questions have been faced and
answered by other countries, in America and Europe. Their experience
is not the issue here so much as the fact that these are not unprecedented
questions. Which level to take in the UK must therefore be a matter
for further political debate.
Table 2: Tiers of income maintenance affected
|The scientific side: poverty lines, etc.
||The political side: MIS and income maintenance provisions
|"Modest but adequate" budget standards
||Minimum wages (plus variable dependency allowances such as child benefits) to ensure that a full week's work produces an adequate income for individuals and families
| ||Tax thresholds below minimum wages to ensure that everyone pays income taxes, but above the poverty boundary to ensure that everyone has an adequate income left after paying relevant taxes on their incomes.
|The dotted line above reflects the income level (top level of the income band) needed to meet the minimally adequate level of living, other things being equal. The two "poverty lines" below are based on mixtures of empirical evidence of the minimally adequate level of living, with calculations in terms of budget methods. The governmental MIS used as a criterion of minimal adequacy ought not to fall below this level, though it could be above it.
The long-term (fully capital-replacing)
|Long-term social security benefits|
The level of means-tested social assistance benefits will depend on national beliefs and assumptions about the significance of keeping contributory benefit levels above means-tested benefits in order to preserve the incentive to make contributions and gain higher benefits by doing so.
|The short-term (running costs only: no|
capital replacements) poverty line
|Short-term and temporary social security benefits
|The dotted line above reflects the lower level of the band of income correlating with deprivations. Below this, there is a high and increasing correlation. No form of income maintenance should fall below this line. If it does, a government is not paying benefits "enough to live on at all times", but only a contribution towards such a minimal level. In that case, it has an obligation (enjoined by the concept of social justice) to ensure that all citizens have their incomes made up to the minimal level from other guaranteed sources, including forms of the social wage.
The Human Needs of Labour, 1918 p 15; p 121; 1937 p 15;
p 111. Back
DTI (1998), First Report of the Low Pay Commission, Chapter
For sources see Veit-Wilson 1999b pp 225-6 and 233. Back