Taxing Jobs

WEDNESDAY, FEBRUARY 11, 2009

Taxing Jobs

Today's unemployment numbers are dire. 2 million unemployed, redundanciesdoubled in six months, and those 700,000 vacancies we used to hear so much about down to 479,000 (they'd be even lower but for continued buoyancy in the state-funded Education, Health & Public Administration sector).

The outlook is even worse. Bank Governor King says we are in a "deep recession"with risks "heavily weighted to the downside". Commissar Balls says it's the worst in 100 years.

So can anything be done?

According to Gordo, the solution is to do something not nothing. As we know, that means letting public borrowing rip, bailing out the banks, and printing huge amounts of money.

But what about jobs?

By next year we could very well have the 3 million unemployed everyone's talking about - maybe more. True, fiscal and monetary hyperactivity could mean the economy will have stopped shrinking by then. But does that also mean the jobs will come flooding back?

Short answer - no.

Because despite sterling's historic depreciation, lean times worldwide mean we will be facing fearsome competition right across the board. And whereas in the last decade the huge boom in financial services funded jobs for all (or at least all those prepared to saddle up a bike), in a world of debt restraint there will be no such easy options.

So when Gord talks about doing something not nothing, what does he mean exactly?

Rely on the Jobcentres, or Jobcentres Pluses as they're now known? They have long experience, they cost us £3.5bn pa, so surely they must know what they're doing.

Yeah, right. This morning, on a BBC R5 phone-in, we heard from the newly unemployed middle classes, people who've just had their first taste of the JC+. They were quite polite, but their verdict was unanimous: it began with sh and ended in ite.

Of course, that's no real surprise. As an anonymous Commissar told the Times:“Frankly Jobcentre Plus just isn't geared up to cope with the sort of people that will be coming through their doors in increasing numbers.” Translation - nobody ever thought JC+'s would have to deal with real employable people who actually expect a real employment service - they're only meant for low grade no-hopers who don't expect anything other than a giro.

The Commissars are desperately scrabbling round to cover up. They apparently have "secret plans" for a whole raft of three-month "courses" to help "recently out-of-work professionals to refresh their qualifications" - aka massaging the unemployment figures.

So actionwise, what else?

Ah yes, there's that idea to pay private sector contractors who will shepherd the unemployed back to work on commission - an idea put forward by yet another of Gordo's favoured City banker advisors.

We've blogged this before (eg here), expressing serious concern about the Simple Shopper being taken for yet another ride. And whereas it might just conceivably have cut unemployment in a world of jobs, in a world of widespread joblessness, it doesn't have a prayer. Unsurprisingly, reports last weekend confirm that the whole project has collapsed in disarray.

So what's left?

Well, there is one idea. And it's an old one: cut the tax on jobs.

Tax on jobs, you say. Surely only a maniac would impose a tax on jobs, especially at a time like this.

But in reality, politicos routinely tax employment. They talk the talk about getting everyone into work, but when it comes to walking the walk, they impose huge taxes on any form of employment.

According to the latest OECD analysis, as of 2007, the tax imposed by Gordo on employing a single man on average earnings was 34%. That is the so-called "tax wedge" between what the employer has to pay to employ him, and what he actually takes home in his pay packet.

And whereas in most countries this tax wedge has being coming down, here in the UK under Labour it has been going up. Worse, under the tax plans announced by Darling in November, it will be going up even further post the election.

If Brown was serious about "doing something" to get people back to work, he'd forget all his three month non-courses, and his tinkering around with job brokers. He's simply cut the tax on jobs.