The Net Contribution Myth

Lies, damned lies and statistics
Saturday, 14th July 2018

Inconvenient fact: Total Public spending is £23 thousand per worker

This is quick one, but the subject keeps coming up in discussions about working parents, welfare dependency and mass migration. Yes, I know any mention of the last subject will put off many readers and ring alarm bells about potentially xenophobic rants, but the claim made repeatedly by various self-defined progressive opinion leaders is that young mothers and new immigrants contribute more in tax than they consume in services. Now we could have many other arguments about motherhood and sustainable migration that address the human aspects of these issues, such as children’s need for a strong bond with their biological parents, a mother’s desire to enjoy her children’s early years or the social and environmental effects of rapid migratory flows. Nobody doubts these are not simple black and white issues, though many would pretend they are so they can shut down rational debate. Here I will focus more on the economic aspects.

First economic growth does not necessarily improve our quality of life once we have met our basic needs and staved off the scourges of malnutrition and extreme hardship. To live long, happy, rewarding and meaningful lives we do not always need more money or more high-status consumer goods, but better social integration, greater personal independence and above all a sense of purpose in life. Just because the economy is growing does not mean people are happier or feel more fulfilled. It just implies a growing money supply, often brought about by monetising services that people used to offer for free to loved ones. Consider motherhood. Until relatively recently, in most two parent families the mother would stay at home to bring up her children. Somehow the family would make ends meet with the father’s salary alone at least until the kids started school. Often married women would work part-time, especially in the caring professions. Longer life spans, lower infant mortality, smaller family sizes and domestic appliances have opened up more opportunities for mothers. By the 1960s and 70s women were no longer confined to monotonous housework and child rearing duties, but we still accepted the biological reality that only women can bear children and are thus best suited to the important task of shaping the next generation. This doesn’t mean fathers cannot play an important role too or that in some situations the father, rather the mother, cannot stay at home to look after his children or take it in turns with his wife. The good news is with the advent of smart automation and shorter working weeks, both mothers and fathers could have much more time on their hands to dedicate either to vocational creativity or their cherished offspring, all without redefining human nature. So if a modern mother wants to write a novel or design clothes on her computer, with modern technology she can literally have the best of both worlds. However, if she opts to work over 40 hours a week in a physically or intellectually demanding high-stress job such as a nuclear physicist, bioscientist or software engineer, then she’ll need someone else to take care of her children. As these professions attract high salaries, it may make economic sense for women in such situations to choose their careers over their children. Some lucky professionals may have loving partners or available relatives who can provide their offspring with all the care and attention young children crave with a little mummy time at the weekends or in the evenings. However, in the real world most jobs are pretty uninspiring and only attract modest pay packets. Would you give up your spiritually rewarding role as a loving mother of young children to work in a call centre or the marketing department of a major brand on little more than the average wage which is still around £28,000? If families had to foot the bill for all additional childcare and transportation services required to let mothers of young children go to work full-time, it may not be worth it at all. Do you really want your babies and toddlers to end up in a crowded creche or nursery eight hours a day without any personalised attention from someone who really has their best interests at heart? Can you afford a dedicated childminder and house cleaner on your modest salary? The fact is without state subsidies you cannot. Half-decent childcare services can easily set you back £400 - £1000 a month. Once you factor in the additional costs of transport and all the stress involved, it simply isn’t worth it. If we monetised motherhood in crude economic terms, considering the benefits of dedicated early parenting for a child’s future, as proven by countless sociological studies, should merit a top salary. If you want your child to succeed in life and be able to compete effectively in a labour market requiring higher and higher minimum levels of analytical intelligence, rearranging your career ambitions for a few years to act as a full-time parent will help much more than short-term concerns about your income.

Now let us consider the economics of mass migration to a small country with a large settled population and a high rate of youth under-employement. While the UK has much lower youth unemployment than most Southern European countries, millions of young adults have unrewarding part-time temporary jobs with limited career prospects. Why do media studies or business management at university if you end up working in a call centre or a games tester? Today most under 30 year-olds have yet to embark on a career that can guarantee their livelihood till their reach the age of retirement. The government has shrewdly concealed the true scale of youth worklessness by promoting expensive university education and through the proliferation of zero-hours contracts and part-time jobs. If you’ve graduated in business management or media studies, you probably don’t want to work in adult day care or food processing. As a result ever since the then Labour government allowed people from the EU’s new member states to seek work with full in-work welfare benefits in the UK, many of the entry-level jobs that English, Scottish and  Welsh youngsters used to do are now dominated by transient migrant labour. We hear regularly how the NHS would grind to a halt without unrestricted levels of migrant workers from the rest of Europe. Yet the UK population is not ageing as fast as in most Southern European countries. Many recall Tony Blair’s slogan of education, education, education, yet only 7 years later mass migration lobbyists bemoaned the poor writing and number-crunching skills of the products of the British education system. If you listen to some Guardian reading professionals grumbling about ignorant white trash, you’d seriously think they believed the native underclasses are somehow genetically inferior, incapable of emptying bed pans, cleaning toilets, picking fruit or serving coffee. Naturally left-leaning Guardian readers always find a way of blaming the Tories, without admitting that the scourges of welfare dependency, single parenthood and Mickey Mouse degrees with little practical application have condemned millions of working class Britons to a life of welfare dependency. Yet the Guardian seems to think the solution is yet more welfare, more mental health screening and more abstract education. The last thing they want is for young people to set up their own small businesses offering all the services the chattering classes take for granted. Whatever happened to sixteen year old school leavers learning practical trades like plumbers, car mechanics or electricians on the job possibly attending college part-time before setting up their own businesses in their early twenties? Instead they learn at school that they should always call an approved professional from a reliable company with appropriate insurance and compliant with a zillion health and safety regulations, whenever they encounter a technical fault.

How much do we cost the government?

For all the hype about austerity for the left-leaning establishment media, by which I mean Channel 4, the BBC and Guardian, UK government spendings stood in 2016-17 at £780 billion. Considering a total population of 66 million and a working population of 33 million, that’s just under £12,000 per person and over £23,600 per worker. Of course, income tax and its close companion, national insurance, only account for around half of government revenue (30% income tax and nearly 20% national insurance). Moreover, the top 25% of earners pay around 75% of all income tax and the top 1% alone account for over 25% of income tax revenue. The remainder compromises mainly various sales duties, council tax and corporation tax, paid by the UK’s growing army of contract workers as well as by small and medium businesses, but tenaciously avoided by big enterprises. However, if your total gross income is £28 thousand, you cannot possibly pay your share of £23 thousand even if you squander your meagre earnings on booze and perfume. To break even you’d need to earn way more than £40 grand a year. Over the last decade we’ve seen a hollowing out of the middle income group. In most of the Southeast of England, a salary of just £40 thousand is very unattractive if you aspire to buy a house. At this income level you literally have the worst of the both worlds. You earn too much to be entitled to working family tax credits, housing benefits etc. and too little to get a mortgage on a modest 3 bedroom house. You will end up spending over £1000 a month on rent alone plus exorbitant commuting expenses. Worse still you could be homeless within a few months if you lose your temporary job. For some time now the economy has simply not added up, with most adults in a perpetual cycle of debt and borrowing subsidised by state handouts.

How can these very logical figures diverge so radically from the oft-quoted statistics showing that immigrants are net contributors to the exchequer? The answer is simple: by only taking into account some services and assuming much higher spending for vulnerable citizens such as the elderly, disabled and long-term unemployed from disadvantaged backgrounds. Such statistics do not take into account additional spending for policing, social services, transport infrastructure, waste management, town-planning, defence, administration etc. all of which increase in line with the population both in terms of size and complexity. By far the biggest cost for most UK residents is housing, especially if you live near property hotspots such as London, Bristol or Edinburgh. This is conveniently excluded from the Retail Price Index that the government uses to calculate inflation and is, as such, a fiction. If house building fails to keep up with rising demand, property prices will inevitably rise over and above their natural level determined by other market forces. Before 2004, most EU migrants contributed more on average than home-bred UK citizens of the same age group. It’s easy to understand why. As West European countries all have comparable salary levels (though still lower in Southern Europe) and welfare provision, working abroad appealed mainly to the well-motivated and better educated looking to enhance their career prospects, improve their English or experience a different country. Some married British nationals or just felt disenchanted with their home region, but by and large migration within the EU remained relatively balanced, although many more British pensioners retired to Spain than vice versa and many more Italians and Spaniards worked as waiters in London than Brits in Spain or Italy. Then recruiting agencies decided to hire directly from Eastern Europe bringing in over a million malleable workers willing to endure short-term hardships to boost their earning potential.

Successive UK governments had abandoned the descendants of their native working classes who once powered the industrial engine that enabled Great Britain conquer over a fifth of the planet’s landmass and rule the waves. If youngsters could not adapt to the new precarious service-oriented economy of banking, insurance, marketing and media, they often found the practical manual jobs of their fathers’ era had been outsourced, automated or assigned to temporary agency workers. Meanwhile family breakdowns and the rise in single-parent households saw a dramatic decline in self-reliance and a poor work ethic. Employers would often complain that they had tried to hire local youngsters to work in their meat-packing factory or electronic gadget warehouse, but they turned up late and were ill-disciplined. This common perception is only half true, but the point is; whom should we blame? Are native Britons genetically inferior to their Eastern European cousins? If this were the case, why has the laziness bug spread to the descendants of 1950s and 60s immigrants ? By failing to address the long-term problems of under-employment and lack of ambition among many young Britons, the government has allowed a growing proportion of the population to depend on welfare handouts and get sucked into the growing mental health system.

Surely a government’s job is to manage the economy and regulate big business in such a way as to let its people stand on their own two feet and fulfil their ambitions without unduly restricting their personal freedom or allowing unjustifiably unethical and/or exploitative practices. This dream can only work a high-skill economy where employers values workers for their creative and intellectual talent rather than as numbers on a spreadsheet.

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