Danny Finkelstein’s defence of cuts to welfare and taxes has caused a row with Jolyon Maugham:

The government argues that the best thing for less well-off people is that the economy should thrive and jobs be created. Income from work is the most secure foundation for vulnerable families of all types. To ensure this, it is essential to control the costs of spending programmes and to ensure, with low corporate and (though this is slow work) low personal taxation, that Britain is one of the most attractive places to have a job and invest in businesses. And this works. It’s successful. Job creation has been extraordinary.

There’s some truth in this. Getting people into work is a wholly good thing; those in work are better off both financially and psychologically than the unemployed. The Tories have increased (pdf) incentives to work by increasing the gap between in-work and out-of-work incomes. And I’ll even concede that low and simple corporation tax might play a part in generating jobs. I have, however, some quibbles with it.

1. Insofar as welfare changes have increased work incentives, it’s by cutting out-of-work benefits ratherr than increasing in-work incomes. The IFS says (pdf) that changes to tax credits since 2010 have caused “significant losses for low-income working households.” This is not the action of a government that is deeply concerned for the low-paid.

2. For many, income from work is not as secure as Danny claims. ONS data show that in Q4 – a time of decent overall growth – 893,000 people left employment. Many of these were low-paid workers who lost their jobs. The Joseph Rowntree Foundation has estimated that “more than a third of low-paid workers (38.4 per cent) experience a period of worklessness over a four-year period”. The unskilled suffer a cycle (pdf) of low pay and no pay. This isn’t solely because of bad macroeconomic policy. It’s simply because of normal job creation and destruction; around ten per cent of all businesses cease trading each year.

3. Low paid work is not often a stepping stone to better things. The Resolution Foundation says (pdf) there’s been a “long-term decline in the rate of movement between jobs”. This, they say, implies that prospects for pay growth and career progression for younger workers have deteriorated.

4. The Tories – and in fact the last Labour government too – have not reduced the extent of relative low pay. The Resolution Foundation estimates that 21% of workers earn less than two-thirds of the median wage, a proportion than hasn’t changed over the past 20 years.

5. Although employment has certainly increased remarkably since 2010, it’s not clear how much this is due to benefit changes and sharpened work incentives. In fact, insofar as these have played a part it’s because the increased supply of labour has bid down wages – a mechanism the Tories are surprisingly coy about mentioning. I suspect that a much bigger reason for the growth in jobs is that the slump in productivity growth means that a given growth in aggregate demand now translates into much more jobs growth than it did in the past. As the government is probably not responsible for the productivity slowdown, it shouldn’t claim credit for the jobs growth.

6. There’s something Danny is silent about – macroeconomic policy. If we’d had a less tight fiscal policy since 2010, employment and wages for the low-paid (and everyone else) would very probably be higher now. Danny does not rebut this point.

Let’s take another perspective on this. Imagine that economic policy were governed by a Rawlsian difference principle – that it serves the greatest benefit of the least advantaged members of society. Would this principle really give us Tory welfare and macroeconomic policy? Or would it instead mandate fiscal expansion and a more generous welfare system? I suspect the answer is clear.