Job Creation Schemes

I'm not really all that sure I understand what is being complained about here:

One of the Government's flagship employment schemes is costing the taxpayer more than £1,000 for each person it finds work for, MPs have warned.

That sounds remarkably cheap to me actually.

Once the reduced benefits bill and added tax gained are factored in, the overall loss to the Exchequer for each job is £1,100.

Yes, I realise that this is a net figure, not a gross one. But it still sounds remarkably cheap to me. The gross figures seem to be £5,600 to find the job and get the person placed, with £4,500 or so saved in benefits.

OK, so what happens in the second year? We still save the £4,500 in benefits and don't have to pay the £5,600.

But even if they are already using multi-year figures there's still something that they are missing on the benefits of the scheme side. Something that is part of the point of such schemes, as pointed out by Richard Layard* who is the intellectual father of them.

Having a few unemployed around helps to keep wages down. But if people are so discouraged that they're not even looking for work (nor employable if they were) means that they fester there on the dole but don't even have that beneficial effect. The aim is therefore to take those who are out of the labour force altogether and get them, if not back into work, at least vying for a job, so that they do have that beneficial effect.

In effect, we've lowered NAIRU (a very supply side thing to do) and thus both increased the possible growth rate of the economy and made it possible to reduce unemployment further wihout sparking off inflation.

Between them, the New Deal programmes have helped nearly three million people in the past decade and created 1,729,000 jobs at an average of net cost £580 each - meaning a loss to the taxpayer of around £1 billion more than if they had remained on the dole.

A billion over a decade to do that? I'd say it's a bargain myself.

* Yes, he did teach me, possibly why I've a soft spot for this form of welfare reform.

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