Sean O'Grady: Popular? Yes, but that doesn't mean it's right

Share
Related Topics

At first glance, paying an employer to take on or retain staff seems a no-brainer. Lower the cost of something – labour – and you will increase the quantity demanded. Jobs done, so to speak. Notwithstanding the apparent reluctance of ministers such as the Business Secretary, Peter Mandelson, to countenance such a move, it would have three obvious advantages.

First, boosting consumer confidence is a short-term dividend. Nothing erodes that fragile commodity more surely than unemployment, and the fear of it. Think about that. How many people did you know or hear about who were losing their jobs a year ago? And how many now? And how has that affected your own attitude to a bigger mortgage or a new car, say? Precisely.

Second, a wage subsidy would save on the costs of unemployment. If the Prime Minister is serious about wanting to help "hard-working families" (or should that be "formerly hard-working families"?) get through this then that means a huge budget to house those who will lose their homes, as well as provide all the benefits that destitute families will need to survive.

Third, and let's not be squeamish, subsidies might help the Government keep unemployment below three million as it goes into the next election.

Precedents abound in Europe. The number of full-time employees on government wage subsidies to compensate for working shorter hours in Germany is 250,000, up from 16,000 a year ago. Wales has the ProAct scheme, which provides employers with a £2,000 wage subsidy for workers on short-term hours. The TUC says that, for around £1.2bn annually (plus training costs), up to 600,000 workers could get support. That is for only one-tenth of the cost of reducing VAT from 17.5 to 15 per cent.

And next month the Government will implement its own limited subsidy scheme: a £2,500 bonus to those who take on someone who has been jobless for more than six months. The Tories, TUC and Federation of Small Business make up an unlikely coalition pushing for more comprehensive wage subsidies, but ministers seem unwilling, digging their heels in – notwithstanding the trauma in the car industry and other sectors.

Perhaps that's because the long-term costs of wage subsidies are as obvious as short-term advantages. There's the "dead weight" argument – where the taxpayer ends up paying the wages of staff who'd be employed anyway. The TUC says this can be solved by involving the unions and submitting claims for a subsidy to an independent committee. But that could be bureaucratic and unreliable.

These wage subsidies to relatively inefficient enterprises will have to be paid for by taxes on employers – and employees – in more viable companies. Before free-market arguments went out of fashion it would be pointed out that the profits made in successful firms ought to be re-invested rather than diverted to sunset industries. But that is the transfer of resources we are talking about. Short-term, emergency measures have a strong case. Longer term, the policy ends up eating itself.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Tradewind Recruitment: PMLD Teacher

Negotiable: Tradewind Recruitment: PMLD Teacher A specialist primary school i...

Recruitment Genius: Online Media Sales Trainee

£15000 - £30000 per annum: Recruitment Genius: Now our rapidly expanding and A...

Recruitment Genius: Public House Manager / Management Couples

£15000 - £20000 per annum: Recruitment Genius: Are you passionate about great ...

Recruitment Genius: Production Planner

£20000 - £30000 per annum: Recruitment Genius: This fast growing reinforcing s...

Day In a Page

 

Political satire is funny, but it also causes cynicism and apathy

Yasmin Alibhai Brown
As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links