The average person who leaves welfare and gets a job on the minimum wage is less than a pound an hour better off.
The Coalition government should increase the earnings “disregard” and guarantee that anyone leaving welfare and entering work will be £100 a week better off.
The earnings disregard varies considerably depending on the type of benefit received. It is at its lowest of £5 for a single adult on Jobseekers Allowance. This level was originally set in 1988 and it is even below the National Minimum Wage.
People on Jobseekers Allowance (JSA) have a £5 cap on the amount they can keep each week. Above this amount, benefits are deducted at the same rate as earnings. This presents a real disincentive to work.
In contrast Employment and Support Allowance has an earnings disregard of up to £93.
Whilst it is widely accepted that it is desirable to spend more up front now to improve the incentives to work, a sober assessment of the tight fiscal squeeze means that it may not be possible in the way that we think it is. The Coalition may be forced to prioritise up-font savings in the welfare budget in order to fund better incentives to work. See “Reducing the deficit: Lib/dem pledge means stealing from the poor to pay the poor”
See DWP research summary ‘Better-off in Work Credit’
