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CHAPTER 21: WORK INCENTIVES AND THE WAGE STOP The wage stop principle The origins of the

rule known as the wage stop (sometimes referred to as the wages stop, but the singular form became more common) were described briefly in chapter 8. George Reid drew attention to the need for such a rule in his outline of the boards regulations in June 1934: Whatever scale is laid down, which is likely to meet with approval, it will be almost bound to happen that its automatic application to some applicants would result in their being better off, or almost as well off, as they would be if in work. ... Notwithstanding the difficulty of finding exactly suitable terms, it is preferable that the Regulations should deal with the subject frankly. No doubt it will evoke criticism. It must be remembered, however, that a person is not eligible for an allowance if he is in full time employment, no matter how meagre his wages are. If there is no power to supplement full time earnings, it would be inconsistent to pay more than those earnings by way of allowance when the employment fails. He suggested, therefore, that a persons needs should not be assessed at a greater sum than would be available if he were following his normal occupation - or some such phrase.
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Presenting the draft regulations to the board in July 1934, Eady explained that consideration had been given to the best method of expressing the doctrine of less eligibility. The proposal, he pointed out, differed from the poor law practice of fixing a single limit related to the wages of unskilled labourers. The wage stop would be based on the individuals normal earnings. The principle, he added, was one upon which there could be general agreement, but it was not free from difficulty in administration.
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The changes made in successive drafts of the 1934 regulations were noted in chapter 8 - in particular the requirement that the allowance should neither exceed nor be equal to normal earnings, the purpose of the rule being not only to prevent applicants from being better off out of work but also to preserve an incentive to return to work. The 1936 regulations, similarly, provided that, unless there were special circumstances or exceptional needs, the allowance was to be less than the amount ordinarily available for the support of the household out of the earnings of the applicant and other members of the household included in the assessment, when following their normal occupations. The practical effect of the wage stop depended on the relationship between the boards scale and the general level of earnings. We noted in chapter 8 the divergence of views among board members, Violet Markham arguing for a generous scale and extensive use of the wage stop, while Strohmenger wanted a scale low enough to keep the incidence of the wage stop to a minimum. In practice the number of wage stop cases even under the more generous 1936 regulations was
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relatively small, estimated at about 6,500 (a little over 1 per cent of all allowances ) in December 1937. The number of applicants with allowances equal to or only slightly below their normal earnings, however, was thought to be much larger. A table in the boards annual report shows that at the end of 1937 the margin between applicants declared normal wages and their allowances was less than 4s. a week for 6.2 per cent of male and 14.4 per cent of female applicants, while 1.3 per cent of men and 3.5 per cent of women were getting as much as or more than their normal wages, in spite of the wage stop rule. If, as the boards officers believed, normal wages were frequently overstated, the numbers receiving as much or nearly as much as they could earn may have been substantially greater. The comparison, moreover, was with gross wages, making no allowance for insurance contributions and work expenses. The obvious inference is that in many cases the wage stop was applied either partially or not at all, whether through negligence or to prevent hardship.
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Normal earnings Eadys warning that the wage stop would prove to be not free from difficulty in administration was fully justified. The difficulties arose in part from the inherent conflict between the rule and the boards duty of meeting needs, and in part from the impossibility, in many cases, of making a reliable estimate of the applicants earnings in his or her normal occupation. The question of normal occupation was particularly problematic in the case of young adults who had done only low-paid work normally reserved for 14-18 year olds and could expect to earn more if and when they obtained adult employment, and older workers with little prospect of returning to their former occupation and no realistic expectation of finding other work. In reply to a parliamentary question in July 1936, Brown stated that regard would be had to the amount which would probably be earned by the applicant if he became re-employed in his normal occupation. This seemed to imply that past rather than future occupation was to be regarded as normal, but a memorandum discussed by the boards assessment sub-committee in March 1937 (just before the second appointed day which was expected to bring a considerable increase in the number of wage stop cases) argued that, where a man had little prospect of employment in his former occupation, his prospective earnings must be taken into account. The assessment sub-committee adopted this approach and an instruction was drafted accordingly. Young people who had never worked, or who had done only juvenile work, e.g. as errand boys, were to be regarded as having no normal occupation, any reduction being made under the boards discretionary powers, not under the wage stop rule; but in the case of other applicants who were unlikely to resume their previous occupation, the wage stop would be applied by reference to the occupation they were most likely to obtain. The Ministry of Labour, however, questioned the legality of this proposal and the instruction was amended to make it clear that, in these cases too, any
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reduction in the allowance would be made under the boards discretionary powers.
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Even where an applicants normal occupation was not in doubt, estimating prospective earnings involved many uncertainties. Applicants, it was believed, often overstated their earnings, either in the hope of a better paid job or to avoid the wage stop. The registers of wage rates kept at the employment exchanges were unreliable. And there was the further difficulty of deciding what adjustment to make for fluctuating hours and stoppages due to seasonal demand, bad weather and other causes. In South Wales, the normal working week for miners was assumed, for the purposes of the wage stop, to be 6 days in the Cardiff district and 51/2 days in the Newport district, while assumed deductions from gross earnings varied from 2s. to 3s. a week and the value of free coal was added in some areas but not in others. The resulting wage stop figures varied from 41s.6d. to 46s. a week. After investigation of the number of shifts currently worked, it was agreed that the wage stop should be based on a 6-shift week, producing a wage stop figure of 45s. for labourers. A year later, however, when the situation was reviewed after a 4s. wage increase, it was decided that the 45s. figure had been too generous, on the grounds that the earning capacity of many unemployed mine workers was reduced by disability or prolonged unemployment.
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In practice, the difficulties of establishing normal earnings on an individual basis were frequently circumvented by using the local wage rates for general labourers. Even if the applicant had done other work in the past, it was assumed that after a long period of unemployment he was more likely to be employed as a labourer. Out of seven wage stop cases selected for detailed examination by the Hanley district office in 1939, at least six were classed as labourers, including two former mine workers and a steel worker who had been forced by illness to give up these occupations. A report on these cases commented on two of the applicants: H... has done only 20 weeks work since 1926 - an average of about 10 days a year! Who can say, therefore, what he would earn if he obtained employment? The best we can do is to take the lowest rate paid to an unskilled labourer (about 45s.). Similarly, in the case of R..., who has had only casual work since 1919, but in this case we have taken a lower figure (40s.) as he lives in Shropshire.
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In such cases, the wage stop operated in the same way as the poor law less eligibility rule which simply required outdoor relief to be below the wages of the lowest paid worker. Although the regulations required that the boards allowance should be less than normal earnings, they did not say how much less. The December 1934 instructions stated that, subject to any special circumstances, the margin should be at least 2s. The proposal put to the board in March 1937 was that it should be a percentage, say 10 per cent, rather than a fixed sum, but the instruction issued in June 1937
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left it to officers discretion, stressing the need to leave the applicant with a sufficient inducement to obtain work and suggesting that, while 2s. or 3s. might be enough in the general run of cases, a bigger margin might be reasonable if the applicant was known not to be availing himself of opportunities of employment or if his allowance, but for the wage stop, would be exceptionally high - 45s. a week or more. Despite this instruction, there was a tendency to fix the margin more or less automatically at 2s., although in some districts a percentage deduction was made instead. To add to the confusion, in some areas the margin was treated as covering work expenses, for which a separate deduction should have been made in calculating normal earnings. It is fair to say that the board never had a clear policy on the size of the incentive margin and the inconsistencies of local practice reflected this fact. It was generally understood that applicants were to receive a lower net income than they would receive when in work, but the means of achieving this were as much a matter of local custom and common sense as of precise adherence to instructions.
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Prevention of hardship The initial instructions stated that exceptional cases might occur in which observance of the wage stop principle would lead to obvious and acute hardship. These were to be referred to the district office. The 1936 regulations themselves prefaced the wage stop clause with the words except where special circumstances or needs of an exceptional character exist. As Middleton Smith pointed out in February 1937, however, hardship was an inevitable consequence of the wage stop:
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The operation of the wage stop must invariably impose some degree of hardship on applicants affected by it, and in many cases the operation of the wage stop must either result in malnutrition or constant recourse to sudden or urgent relief. In the majority of wage stop cases the households include children, and it would not appear to be justifiable to regard the mere presence of children in the household as constituting special circumstances, without disregarding the intentions of the clause. It could, indeed, be argued that, since wage-stopped applicants and their families were left with an income little lower than if they were in work, the cause of hardship was not the wage stop but the level of earnings on which they normally subsisted. Hallsworth acknowledged the dilemma:

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The hard fact to be faced by the Board is that normal earnings in a large number of cases are insufficient for the needs of the household, as assessed by the Boards scale. Cases of 1 a week for a household of 3 persons, of 2 10s. for one of 10 persons, 1 8s. for one of 6 persons have come to light. It is obvious that in these cases the application of the clause would cause hardship and lead to under-nourishment.

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To ignore such hardship would expose the board to criticism, but to pay allowances in full wherever there were fears of under-nourishment would place a premium on idleness. The board was therefore invited in March 1937 to consider a middle way: payment of allowances above the normal earnings level but below the scale rates in cases where strict application of the wage stop would cause hardship. The boards scale, it was argued, included a margin for minor luxuries which applicants could forgo without hardship.
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Adopting this approach, the assessment sub-committee concentrated on mitigating the effects of the wage stop on families with four or more children. With scant regard for logic they agreed that, for a four-child family, it would not be offending the principles of the wage stop provision to pay an allowance of about 35s. whatever the wages (the scale rates for such a family would have varied from 36s. a week if all the children were under five to 45s. or more if they were all over eleven); while for larger families it should be left to the individual officer to decide on the wage stop deduction, bearing in mind that the larger the family the larger the deduction that could be made without causing hardship. When the sub-committee met again a week later, however, Hallsworth declared his opposition to this proposal. The wage stop, he argued, must be applied properly or not at all. To apply it fully would leave needs unmet; but not to apply it would be, in his judgment, to endanger the wage structure of the country. The choice, he believed, should be put to the government. Meanwhile, the only compromise he was prepared to accept was that, for families with children, any excess over the wage stop figure should be paid in kind. Strohmenger, uncharacteristically, took a less rigid view, arguing that a practical rather than a logical solution was needed, and Hallsworths objections were overruled. The resulting instruction indicated that large families (say of five or more children) should ordinarily be regarded as in themselves constituting special circumstances. Whether the wage stop would cause hardship was to be decided on the facts of the individual case, bearing in mind the scope for economies of scale in a large family. Officers were told to look with special closeness at cases where the normal allowance would be 45s. or more, since many families maintained themselves without undue privation on wages of that amount. On the other hand, they should hesitate to award less than 35s. a week to a couple with four children living in urban conditions and paying the standard rent.
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The boards annual reports show that, following this instruction, the wage stop deduction was mitigated in a significant proportion of cases in some areas, including 31 of the 181 potential wage stop cases submitted to the London I district office in 1937 and about one in three cases in the Nottingham district in 1938. Seven examples of families with between five and nine dependent children were reported by the Hanley district office in 1939. The allowances paid exceeded the applicants normal earnings, in several cases by as much as 5s. a week, but nevertheless fell short of their assessed needs by between 3s. and 11s. a week. The two applicants with the biggest reductions had
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children of working age whose earnings would have helped to fill the gap. In another case, however, a man with a wife and nine children under 12, whose needs were assessed at 57s.3d., received an allowance of only 49s., though even this was 3s.6d. above the wage stop figure. The man, a former miner, had had double pneumonia in 1931 and had done no work since then except some snow clearing in 1935.
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The action taken in these Hanley cases was viewed with some misgivings. The official then responsible for wage stop policy, Dora Ibberson, wrote: ... we note that AOs are accustomed to mitigate the wage stop cut on account of families numbering five or more dependent children. The relevant circular ... does not, of course, call for automatic action on this account but merely indicates that families with five or more dependent children are singled out for special examination of needs. We are anxious that this shall be fully understood and that the wage stop shall not be waived or mitigated unless our officer is satisfied that hardship would otherwise occur. [Three of the seven cases] raise some doubt in our mind as to whether the allowance paid is based upon a careful estimate of the amount required to avoid real and acute hardship.
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The district officers reply summed up the difficulties: ... the whole question is an extremely difficult one in a low-wage district such as this is - and not the least difficulty is that of making clear to the AOs the Boards wishes in this connection. They are left somewhat in the air by the two opposite considerations - the desirability of maintaining incentive to work and the necessity of avoiding hardship (a very intangible factor) and the latter consideration must, of course, be paramount.
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In some other areas the wage stop was applied with excessive zeal, the need to maintain work incentives being regarded as paramount. Some district officers openly disapproved of the policy set out in the 1937 instructions. On receiving them, Anderson wrote from the Newport office: My own view is very emphatically that the wage-stop should never be waived. If there is hardship it would exist equally if the applicant were at work. To waive the wage-stop where families are large is putting a premium on improvidence. In any event, we find it difficult to apply such expressions in the circular as undue privation and real hardship. How is it possible to decide when privation or hardship become undue or real if the Boards scales are not to be the criterion? It is impossible for our Investigators to say what degree of hardship exists.
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The neighbouring Swansea district was equally recalcitrant. An audit report on the Swansea area office in August 1938 stated: In all cases examined where the sum calculated exceeded the wages stop figure, a deduction had been made ... although in several cases the household comprised an abnormal number of children and in one case the deduction reduced the amount which would otherwise have been allowed for extra nourishment. I asked whether [the 1937 instructions] were considered in these types of cases and was informed that the practice of limiting the assessments to the wages stop figure is in accordance with the District Office policy.
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The district officer, Ellis Thomas, told a conference of district officers in March 1939 that the wage stop was never exceeded in his district and that he had the support of the Miners Union in ensuring that persons without work were not placed in a better position than those in work.
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The avoidance of hardship was not the only ground on which the wage stop could be waived or modified: all that was required under the 1936 regulations was that there should be special circumstances or needs of an exceptional character. One other example may be mentioned, if only to illustrate the boards use of ambiguity as a means of circumventing awkward policy issues. Under the fall-back rule, the married couples scale rate of 24s. was to be raised to 26s. in the case of a childless couple with no other resources. On a strict interpretation of the regulations, in a case where the wage stop applied, the allowance was first to be reduced under the wage stop and then increased by the 2s. fall-back addition. This, Middleton Smith wrote, appears legally correct but nullifies Parliaments intentions in the wage stop clause. The boards officers would no doubt have welcomed clear guidance, but the instructions merely stated that the fall-back was a consideration which an officer should have in mind in deciding upon the amount of the deduction which should be made under the Wage-Stop Clause in order that the purpose of the clause should not be defeated - a form of words whose meaning is as unclear seventy-five years later as it must have been at the time.
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The wage stop and family size The probability of being affected by the wage stop was closely related to family size. The relationship was confirmed by an analysis of 75 cases of long-term unemployed men in the Tonypandy area, in the Pilgrim Trust report, Men Without Work: In 16 of the 17 cases of men with wives and two or more children there was very little advantage in working rather than living on unemployment allowances, the difference being less than 15s. a week, without taking into account deductions from wages ... and the additional expenses of working. In 10 out of 11 cases of men with three or four children there was probably no advantage at all in working - the gross difference in earnings and allowances being
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less than 10s. a week. In 6 cases out of 7 of men with more than four children there was probably a definite advantage, from the point of view of domestic economy, in not working, for the gross difference between stop wages and allowances in these cases was less than 5s. a week. There is every reason to believe that these results ... are typical of the Rhondda Valley and the other mining valleys of South Wales. Similarly in the mining areas of County Durham: Unemployed miners in Crook with three or more children would probably find no great economic advantage in returning to work unless they were able to earn a good deal more than the fixed minimum. Ordinary shifters and labourers with three children might well find that they were at an economic disadvantage if they returned to work. Four or five children would probably make a return to employment an uneconomic proposition for every grade of work in the Durham mines, except in the infrequent cases of men who can earn considerably above the minimum wage for their grade even after being out of the mines for long periods.
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The report did not state what proportion of applicants in either area were wage-stopped, but it seems clear that the wage stop ought at least to have been considered in many cases where there were more than three children. Smaller families could also be affected by the wage stop, especially where the breadwinner was a woman. The number of female applicants with dependent children was small - about 10,000 in 1937, of whom less than 3,000 had three or more children - but there was a high probability of their allowances under the normal rules exceeding their earning capacity. The London I district officer wrote in 1938:
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Domestic work and office cleaning is not highly paid and a woman working full-time is unlikely to earn more than 35s. per week, this being the outside maximum. It is frequently nearer 30s. per week. The result is that a woman with two or more children paying what is normal rent in London is as well off or better off on a Boards allowance (either with or without part-time earnings) than she would be in full-time work.
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The objections to a single mother choosing to live on an allowance from the board rather than working, however, were plainly less cogent. A necessary evil? Nobody ever argued that the wage stop was anything other than an unpleasant necessity. The board deserved some credit, first, for trying to apply the principle of less eligibility in a way which took account of the individuals past work history and future prospects, rather than imposing a crude ceiling based on the wages of the lowest paid workers, and, secondly, for allowing the prevention of undue hardship to take precedence over strict application of the principle. But the
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policy, however reasonable and humane in intention, could not succeed. There was no satisfactory way of predicting how much an unemployed person would earn in the future, especially if his or her previous occupation (if any) was no longer available. Nor was it reasonable to expect the boards officers to decide when privation became undue or hardship real, given that the normal income of families affected by the wage stop was below what the board itself had decided was required to meet their needs. The case for a wage stop arose directly from the fact that many fulltime workers had incomes below the boards scale. The long-term remedy lay in measures to raise the earnings of low-paid workers and in the introduction of family allowances and other benefits to enhance the incomes of families with children when the breadwinner was in work. Such measures, however, were not within the boards powers. The wage stop was an inevitable response to the existing situation. But the knowledge that, having accepted responsibility for providing a minimum level of income for the unemployed and their families, it was deliberately denying many of them that minimum could only be an embarrassment to the board - especially when most of those affected were not single people but families. The wage stop was to survive until 1975. It seems appropriate to close this chapter with a quotation from the annual report of the Supplementary Benefits Commission for that year: At its peak in 1970 the wage stop affected 35,000 claimants but the need for it was reduced by the provision of other benefits for people in work, notably rent rebates and allowances, rate rebates and family income supplement. These developments led to a steady reduction in the numbers wage-stopped to about 6,000 at the time of abolition, with the result that the majority of those still affected by it were larger than average families where the wage earner had poor employment prospects. These were often the claimants who most needed help and it became increasingly unacceptable to keep these families incomes below the basic level of requirements set by the supplementary benefits scale rates. The end of the wage stop was widely welcomed as a relief to some of the most deprived families in the community. For the Commission it removed one of the unhappiest duties which fell to it under the Supplementary Benefit Act.
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It is interesting to note that the estimated number of wage stop cases in December 1937, 6,500, was almost the same as in 1975, and that in both years this was just over 1 per cent of the number of unemployed applicants (referred to in 1975 by the more dignified term claimants). It was the dramatic fall in numbers between 1970 and 1975, rather than the absolute number remaining in 1975, that made abolition seem possible.

Reinventing the dole: a history of the Unemployment21/9 Assistance Board 1934-1940 by Tony Lynes is licensed under the Creative Commons Attribution 3.0 Unported License. To view a copy of this license, visit http://creativecommons.org/licenses/by/3.0/ or send a letter to Creative Commons, 444 Castro Street, Suite 900, Mountain View, California, 94041, USA.

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