Today the Chartered Institute of Personnel Development launches a package of proposals that they say will improve the jobs market, and indeed the whole UK economy. Controversially, perhaps, they involve freezing the National Minimum Wage for younger workers in order to tackle youth unemployment. They also want the government – or the next government – to abandon the National Insurance Contribution hike planned for 2011, and to delay measures to reduce the deficit.
Well, two out of three ain't bad. Yes, we should freeze the minimum wage for younger workers. Younger, and unskilled, workers are always the worse sufferers in a recession. That is why there are nearly a million 16-24 year-olds who are not in education, employment, or training (NEETS). Because they have few skills and experience, they just aren't worth as much to employers. When unemployment is rising, and employers have their pick of experienced and qualified staff all queuing up for interview, why should they taken on youngsters who they would have to spend time and money training up? When the economy's booming, employers can afford that. When it's not, like know, they can't.
As for NICs, it's a no-brainer. National Insurance was originally planned as a social insurance premium to cover pensions, health, and the rest. Now it is a straight tax – and a tax on jobs. Most people do not notice it, because the employee's contribution is tiny – just 1% of earnings for some people, 1.6% for most others (who said tax was 'not taxing'?) But the employer's contribution, conveniently hidden out of the sight of most electors, is 12.8%, and rising. A few weeks ago our Tax Fellow Richard Teather showed here just what the effect of that is – basically, making it very expensive to hire people. And the more the tax rises, the more expensive it is. Again, in a recession, who is going to take the risk of taking on new workers?
As for deficit reduction, well, as Jeremy Warner said in yesterday's Daily Telegraph, the economy has been running on the steroids of cheap money and government spending for far too long. Time to get down to reality. You cannot spend and borrow your way out of debt. And we are in a lot of debt right now. Nor is government spending somehow more magically efficient at creating jobs. In fact it is less so, because so much of it is wasted. No, CIPD, we do need to get the government deficit under control, and fast. If we do not look serious about it, investors will get nervous, The UK's credit rating will fall, and we will be cap in hand to the IMF again, just like the last time. And what do you think that is going to do for our job prospects.
See Dr Butler's new Alternative Manifesto here.