Here is an argument you will be hearing a lot as the unemployment figure rises: it costs only a thousand pounds either to keep a family breadwinner in a £30k job or to create a new job for them. Why? Because someone on a £30k salary pays about £11k in tax whilst an unemployed parent will receive an average of £18k in benefits, tax credits and other entitlements.
Looked at this way the Government should surely create jobs for everyone out of work. I said yesterday that my proposal to employ a thousand former regional journalists, or newly qualified journalism graduates, to set up community websites would cost £30million. This assumed £5k start up costs and a gross salary cost of £25k. But if we factor in the cost of unemployment benefits and the tax our website developers would pay, the cost falls to between £5 and £10 million.
Whilst this is a valid case for more job creation it is important to understand three counter arguments, which are, in order of importance:
1. Administrative costs. Employment schemes cost money to establish, to manage and to regulate. It might cost a million pounds plus to establish and manage my community websites.
2. Dead weight cost. Despite a dire labour market we might expect about two thirds of the former journalists and new graduates to get jobs (even if not in their chosen field). So two thirds of the money we spend will not be offset by the benefit tax switch.
3. Displacement. It might be that other third sector and private organisations are thinking of setting up community web-sites. In which case the publicly funded scheme will simply displace other activity (and other jobs).
So, job creation schemes need to be unbureaucratic, well-targeted and avoid displacement.
There is much talk about what will be the new motors for economic activity. Many people hope for a ‘green new deal’. As I have said before, the Government should make its national priority in this area an ambitious and comprehensive commitment to tackling domestic energy efficiency. This might involve a commitment to 90% of homes being made energy efficient by the end of 2011. Low income households would get help free, the rest of us might be asked to sign up to a scheme whereby, in return for help to become energy efficient, we pay a surcharge on our lower energy bills for a fixed period.
Otherwise, I don’t think we can hold out too much hope for green jobs in the short to medium term. The combination of falling energy bills and falling energy use (due to recession) will reduce demand and investment (as we have seen today with more companies pulling out of renewables).
Instead, the focus should be on schemes which allow people to meet genuine social need in ways which the state cannot currently do and the market never will. In doing so we may help to create a new set of services which could – as the economy picks up – become partly self financing.
So, another idea focuses on those with lower level social care needs (who have been abandoned by cash starved local authorities). Based on the sums in my first paragraph an army of unemployed people providing low level care and support for clients and carers would meet real need and save families - and the state - money. Research shows that the market is failing for social care. Many people go into residential care earlier than they need to as they lack the support to stay at home. Residential care costs about £600 pounds per week. If better low level care meant that those receiving care stayed out of a home for an extra three months it would save the state much more than the net cost of employing support workers. And given that we already have the infrastructure of care assessment and services (in both the public and third sector) the administrative and on-costs of running such a scheme should be relatively minor.
That’s two ideas in two days. Any others out there?