The Staggers

The New Statesman’s rolling politics blog

Why unemployment benefit is worth less than ever

The benefit has failed to keep pace with wages over the past 40 years.

By George Eaton Published 18 February 2011 16:06

In my column in this week's magazine, I look at how the value of unemployment benefit has fallen over the last 40 years. There wasn't space to include all of the data in the magazine, so I thought I'd share some more of it here.

As the table below shows, unemployment benefit rates (£5) represented 19.2 per cent of average weekly earnings (£26.10) in 1970. But the Tories chose to raise benefits in line solely with prices from 1980 onwards, with the result that the replacement rate (the percentage of an old wage that a new benefit replaces) fell to 16.6 per cent in 1985.

First Major, and then Blair, stuck with the policy change and benefit rates fell to 13.8 per cent in 1995 and to 12.2 per cent in 2000. Today, Jobseeker's Allowance (currently £65.45 a week for a single person aged 25 or over) is worth just 10.9 per cent of average weekly earnings (£600.90). Had JSA risen in line with earnings, as the graph below shows, it would now be worth around £120.

Ahead of the Budget on 23 March, I argue that the coalition should recognise that there is an economic as well as a moral case for raising benefits. Low earners spend a greater proportion of their disposable income than high earners and stimulate the economy as a result. Almost no one but the TUC has made this argument; it deserves a wider hearing. As unemployment continues to increase, pressure for a fair deal for the jobless will grow.

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10 comments

Sat, 2011-02-19 00:16 — D Laird (not verified)

@ Stu:
And when the Tory media tell you that eating your own crap is is the correct thing to do, you will swallow that gleefully too.
Enjoy. You'll deserve it.

Sat, 2011-02-19 03:04 — Unemployed and fed up! (not verified)

Stu's comments made my blood boil. I have been trying for a pharmacy dispensing assistant to no avail for about the last two years. They're not very willing to take you on for voluntary experience either. Same as in a chemistry lab as I have a BSc in chemistry and yet I'd take a job lower than my qualifications. I few times, I have applied for entry grade jobs (I didn't get the work experience like they do now during their degree) and I lack experience.

If you want to have people off the dole, help us gain experience! Also if you go self employed from scratch, isn't there a risk in the market becoming saturated?

Sat, 2011-02-19 10:45 — saltyseadog1

When are people going to wise up and realize that it isn't benefits that are too high, it is the vast majority of ordinary workers wages are too low!!!.

Fri, 2011-02-18 16:41 — Dave C (not verified)

George,

Do your figures take into account the abolition of earnings-related benefit at the beginning of 1982?

http://hansard.millbanksystems.com/commons/1981/dec/01/earnings-related-...

Earnings-related benefit gave people a bit more in the first few months of unemployment to lessen the shock of the drop in income. As most people got jobs fairly quickly when unemployment was low, earnings-related benefit was an important part of the claimant's income.

If you take account of earnings-related benefit, then the pre-1982 figures would look even more 'generous'.

Sun, 2011-02-20 22:06 — Amanda (not verified)

@Stu:
Let me guess, something you read in The Daily Mail perhaps? Besides, it is perfectly legal for a disabled person to claim DLA and work. Read the DWP website if you are unsure.

Fri, 2011-02-18 18:33 — Stu (not verified)

Good, it might encourage some of them go get off their lazy arses and do some work for a change.

Fri, 2011-02-18 19:39 — Dave C (not verified)

Stu,

"The figures show that in the Great Britain there are a total of 1,359,282 unemployed claimants chasing a total of 521,729 unfilled job vacancies."

http://www.gmb.org.uk/newsroom/other_news/3_workers_chase_each_vacancy.aspx

So that's 837,553 people who couldn't find a job even if all vacancies were filled.

Sat, 2011-02-19 20:11 — Mrs Nobody

I have a problem with these figures. You say average earnings are £600 per week - they may be but the vast majority of people donot earn £600 a week. I'd like to see the % of the poulation on average earnings and the % below.

Anyone have these figures?

Fri, 2011-02-18 21:00 — matthew fox (not verified)

Stu is so 80's blaming the lazy unemployed.

Fri, 2011-02-18 21:16 — Stu (not verified)

1. We've been importing people from eastern europe and elsewhere to do the jobs our people didn't want to do for years. There was plenty of unemployed even in the boom years, especially when you include those on disability benefits who are easily capable of working. Just lazy!
2. There's the option of self employment, that's what I did when the firm I worked for went bust 2 years ago.
3. Not all vacancies are shown on the official figures, and new ones become available all the time.