with three people in it, and the average income goes up by a billion dollars or so, and then everyone runs screaming.
Eli has been having a look at the report that Niamh Crilly, Anne Pentecost and Richard S.J. Tol authored and that was withdrawn by Richard's former employers in Dublin, Economic and Social Research Institute (ESRI), for having some questionable issues, which, to be honest, ESRI did not explain, and Tol, well you know Tol.
Since the watchword at Rabett Run is RTFR the Rabett went and did that. Eli has some questions, really two.
The report claimed that
The main finding is that the additional costs of working are highly significant at nearly €7000 per year without children; increasing to nearly €9000 per year with one child under the age of five. These substantial additional costs seriously hamper work incentives as it is shown that there is a 25-fold increase (without young children) in the number of individuals who have a higher income when unemployed than when in employment with the inclusion of these additional costs of working.which as the bunnies might imagine caused no end of anguish. The key graphic is Fig. 2
This generates two series of income when in work and not, for otherwise identical individuals. This forms our baseline figure of the difference between in-work and out-of-work pay for each individual. From this baseline, the additional costs of working (the far right hand column in Table 15) were subtracted. Figure 2 shows only two scenarios against the baseline as the graph for zero children under 5 years old is very close to the no childcare scenario and the two children under 5 very close to the 1 child under 5 and thus not shown for clarity.Negative numbers mean that you make more money on the dole than on the production line..
The Rabett looks at this figure and says, ok, at the right end are the 1% or 10% who have a lot of income when they are employed and not so much when they are unemployed or on the dole. That's a difference in annual income of €30,000 or more, and on the left end the folks who don't earn much more than they would get on the dole so the baseline difference is zilch. But, dear bunnies, here is the interesting thing. If you look at the red and purple lines, they pretty much run parallel to the blue one. The implication is that folks who are well off have the same reduction in costs when unemployed as the folks who are dirt poor. The difference is about €200 per week across the board.
A huge problem with that is that if you look at direct income, over 30% of households in Ireland had direct income of less than €200, and even considering transfer payments, a bit less than 20% had weekly income of less than €200. This is from the 2004-5 Household Budget Survey that Crilly et al used). Are you telling Eli that they blew it all on work related expenses and did not spend a dime on rent (more about that later) or food cooked in the house??
To figure out what it cost to work, Tol and friends looked at childcare, transport, Take away food and clothing costs (dress for success). For example, in Table 15 they set the average expense for transportation if someone is working as €106.30 and €23.93 if not working. Now some, not Eli to be sure, are on the floor laughing their asses off. If a bunny is well off, has a car and commutes from the suburbs well, that €106.30 is reasonable. If not, if your weekly income is €106.30 you are not spending it all on a car (well maybe if you are a 20 year old, that fags and Guiness). It's Bill Gates walking in to the room
|Decile||Transport||Housing||Food Away from Home|
So right away it looks like expenses were not properly assigned by income. Richer people have higher expenses, poorer people scrimp and scramble. If expenses related to work are lower for poorer people (and two of the categories above were the ones Tol looked at) then while the blue line would stay where it is, the other two lines would angle up to the left, moving the point at which they cross the axis towards the left and substantially decreasing the number of people better off unemployed.
It looks like friend Richard assigned high costs of work to low income people.
Which brings the Rabett to housing. Housing costs, rent and mortgages, simply don't appear in the Tol paper. Some, not Eli to be sure, would point out that when your income goes to zilch because you are unemployed, you loose your house, either to the mortgage or the rent. You get tossed out on the street. That is a rather negative outcome that is not considered. Or perhaps not if you are Richard Tol.