Monday, May 03, 2010

Another way to reduce welfare dependency

When he announced the Future Focus welfare reforms, including work-testing the DPB when youngest child turns six, the Prime Minister suggested a modest reduction of 5,000 DPB recipients going into work. But what we never hear about is preventing or discouraging people from coming into the benefit system in the first place.

What most people don't understand is that the DPB caseload has a very high turnover. Each year there are around 35,000 grants and a similar number of people go off it. In a period when the numbers have been increasing I have used conservative numbers (35,000 in, 34,000 out) and a baseline of 100,000 to model what difference it would make if, as well as getting 5% off the DPB, influx was also reduced by 5%.

The way to stop people coming into the system is to change the incentives. Or more rightly, remove the incentives.

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