Job creation and social care – would this work?

March 26, 2009 by
Filed under: Credit crunch, Politics 

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?

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12 Comments on Job creation and social care – would this work?

  1. Simon W on Thu, 26th Mar 2009 1:18 pm

    2. This may have been put forward before – but how about a ‘national internship’ scheme that matches community needs with experienced or skilled workers. The internships could be offered to the unemployed, recent education leavers and the retired. The pay for the internship would be the minimum wage but could be topped-up by the employer, the individual could then gain exposure to a new industry/sector as well as minimising the dreaded gap in the CV. This could work well for high demand areas of the labour market looking to attract new workers and could be accompanied by re-training. The internships could also be geared towards emerging green industries.

  2. William Shaw on Thu, 26th Mar 2009 1:22 pm

    3. While I’m wondering how local reporting is going to survive this collapse of local newspaper reporting, I do think these suggestions to create a subsidised type of journalism would only scupper the declining standards of journalism further.

    Polly Toynbee was suggesting something similar in the Guardian. I can’t see it being anything other than a disaster. Whatever safeguards are put up, if the government pays for journalism there will inevitably be questions of independence.

    The sad truth is that local journalism has been in decline for a very long time. One of the difficulties is that effectively local journalism has been subsidised by local authorities – who are often the newspaper’s major advertisers.

    This has already led to local newspapers being pretty toothless when it comes to local reporting. The numerous scandals that took place within Hackney Council over the last decade were almost never broken and only ever thinly reported by the Hackney Gazette. Part of the decline in local journalism means that as commercial advertising drifted away from them, they became more anodyne in their reporting of local politics and therefore less relevant.

  3. matthewtaylor on Thu, 26th Mar 2009 2:54 pm

    4. Thanks William. I agree with the problem you describe but not with your pessimism. The body overseeing the community websites should be independent. The funding should be just for initial year after which the sites will need to get their own funding. However, community web sites can be run successfully on a shoestring so wont rely on council advertising (indeed the bets ones out there right now are highly and irreverently independent). Who knows maybe we’ll even get some sties brave enough to challenge the sacrosanct freedom of artists from any wider social accountability

  4. matthewtaylor on Thu, 26th Mar 2009 2:57 pm

    5. Hi Simon. This is interesting. My guess is that the internships would need to be in areas where an inexperienced worker, possibly needing a lot of support, can add value. The other issue – if the workers were more skilled – would be the danger of displacement of existing fully paid workers. This is why i have tended to emphasis areas of current unmet need.

  5. joe on Thu, 26th Mar 2009 9:05 pm

    6. Well, I like your thinking. There ought to be a load of social activities which could be usefully done if the government decided to invest in this kind of thing.

    Regarding local news, I thought you might enjoy this little news item I saw today – possibly the best local newspaper article I’ve ever seen.

  6. Nigel Edwards on Thu, 26th Mar 2009 10:17 pm

    7. Great post

    The NHS has had a very good 2 year settlement but no one imagines that the 5 years after this are not going to be very tough. While the NHS has had generous settlements over the last 8 years the social care sector has not. We are concerned that this is about to come and bite us. Patients who could stay at home will end up in hospital. Once there they will be hard to send home but hospital is an inappropriate place for them.

    Their carers are aging too and when they need health care the people they care for come to us as well. The retreat of social care means that there is tendency to intervene when people have already deteriorated and often when they have had a fall or other adverse event which means that the eventual intervention is more expensive than necessary and people can lose their independence too soon.

    If your conditions can be met – it’s a big ask – the result would not just produce better, more appropriate care – it might be cheaper and there could be significant savings or at least the avoidance of additional spending in health. A great deal of residential care is paid for directly not by social services and this sector also employs people so there may be a crowing out effect – however, with care I suspect there is such a large volume of unmet need that this could be avoided.

    In the longer term when the economy recovers a shift to a proper insurance basis for future social care needs is ppobably going to be needed.

  7. Frances Zammit on Fri, 27th Mar 2009 9:27 am

    8. I would like to relate your ideas to the debate on the economic crisis last night. It was interesting to hear the four different views, but both I and my friend came away with a feeling that this is just more ‘tinkering around the edges’ . History shows us that new ideas are not only strongly resisted, but are not even in the ‘conceptual world view’ of most people.
    The economic crisis cannot be resolved until three fundemental aspects are addressed.
    The first is the mindset many of us have about how we are paid for our work. At present the view is that ‘we are paid for our work’. This is a completely outdated view that refers back to the step we took out of ‘slavery’ – ‘Oh, now, that they are no longer slaves we will have to ‘pay them for their work”. The correct view for today (which is finding its way into society) is that we need to be paid ‘so that we can work’ – a lot more can be said about the effects of this.

    The second is the mistaken view that ‘land’ in any form can be bought and sold as ‘personally owned property’ . The effect of this is that ‘capitalised debt’ (which we strangely see as positive thing ‘Oh look how much my house is worth now!’) has, at some stage, to be ‘called in’ to be paid by society – exactly what is happening now. The other effect is that it becomes impossible for society to function. For example, key workers are not able to afford to live near where they are needed and farmers cannot afford to produce affordable, healthy food locally. It’s not rocket science.
    We’ve tried the buying and selling of land and now that it is obvious that it doesn’t work, it becomes clear that the true situation is that we have certain inherent ‘rights’ over land merely by the fact that we are human beings on the earth today. The right to a secure home, the right to engage in our work – whether farmer, mother, father or lawyer etc……the right to enjoy the beauty of the earth… And while, in some cases, these rights may take some work to achieve, this will not do as an excuse not to aim for them. Close observation shows that this is already happening in numerous small ways, let us hope we are mature enough to work with it and not against it.

    The third is to come to a clear understanding of how the economic life of society and the cultural life of society interact and are balanced by the ‘rights’ or ‘political’ life of society. An example of where this is going wrong is with UK Universities. A mistaken view is arising that education is an economic process that. of itself. has to make ‘money’ or a ‘profit’. The profit comes from the fructification of the economic life of society from individuals receiving a true, cultural education. Then the economic life is well able to fund the cultural. Again, where things work well, this is already happening.

    Oh, how fortunate we are to live in such interesting times.

  8. Chris Cook on Sat, 28th Mar 2009 12:23 am

    9. I think that there is a lot to be said for a fundamental switch from taxation of earned income and means tested benefits to a simpler system of taxation of privilege, as follows:

    (a) the privilege of exclusive right of occupation of the Commons of land – ie a tax on land rental value or Location Benefit Levy;

    (b) the privilege of the exclusive right of use of the Commons of non-renewable resources generally, and carbon-based fuels in particulare – ie acarbon Levy;

    (c) the privilege of Limitation of Liability – where I advocate a Limited Liability Levy on the GROSS revenues of “For Profit” entities whose investors have the benefit of Limited Liability.

    These are all simple, and pretty much unavoidable. With the first I would replace most, if not all taxes on income, and with the second, replace existing excise duty and create a Carbon Pool for investment, leading to an energy dividend

    I would get rid of means-tested benefits, and replace them with a National Dividend or Citizen’s Income.

    Using the Limited Liability Levy I would get rid of Corporation Tax and taxes on dividends, and also VAT.

    The savings in relation to deadweight costs in the Public and Private sectors from the simplicity of the structure would be phenomenal. It would put the entire tax avoidance industry out of a job overnight. I wouldn’t think the accountancy and legal professions would be overjoyed, mind you.

  9. matthewtaylor on Mon, 30th Mar 2009 11:39 am

    10. Thanks Joe. Loved the article; that’s what local news should be!. There is, of course, an austerity angle to the custard story – the future will be a world where we make our own custard rather than buying expensive pre made tinned or chilled stuff.

  10. matthewtaylor on Mon, 30th Mar 2009 11:44 am

    11. Thanks Nigel. It is very flattering to get a comment from you. I agree with everything you say. I am speaking tomorrow at a Resolution Foundation event on care for older people. My core argument is that as we think about the new world we will be living in after the crisis a good question to start with is; is this a society in which we would like to grow old? The well-being society is one which loves, respects, and cares for, its old. Unless we get this and understand what it means for us as citizens, family members and future elders we will continue to make demands that neither the state nor the market can meet.

  11. matthewtaylor on Mon, 30th Mar 2009 12:04 pm

    12. Thanks Chris. Big thinking. The challenge is to have both a bold vision for a future architecture of tax and revenue generation while also recognising the problems of incremental change in a world where (a) we are spending way more than we are raising (b) in any tax change the winners pocket the winnings and stay quiet while the losers take to the streets in protest. In my experience policy makers are open to bold destinations but wary and pessimistic about the individual steps along the road.

  12. Naomi Alexander on Tue, 2nd Jun 2009 4:19 pm

    13. Hi Matthew,

    Another idea is the Community Allowance. http://www.communityallowance.org

    A lot of the work that needs to be done in communities to ensure they are places we want to live when we are old, to ensure that we are loved, respected and cared for, is often part time or sessional work.

    This kind of work is notoriusly difficult to do when you’re on benefits, (despite the fact that it could be a perfect stepping stone into work for people on benefits) because of the earnings disregard. http://www.community-links.org/uploads/editor/EP12.pdf

    Could community organisations – trusted, in-touch, on-side, local and aiming to be there forever – employ local people to do the work that needs doing in their own neighbourhoods, including some social care work?

    It’s the obvious stuff – childcare, playschemes, youth work, school crossing patrols, health promotion, parent links, debt counselling, driving people around, advocating, befriending, caring, cleaning, greening, lunch clubs, arts or sports clubs… the list has always been long in poor neighbourhoods.

    Some of this happens on a voluntary basis, but how much more could we save if local unemployed people were paid to do the work that could transform their neighbourhood into the kind of place where people want to live?

    We are working with NEF over the next few months to do a Social Return on Investment analysis of the Community Allowance to try and create a £ value of savings for the tax payer.

    You can read an introduction to the Community Allowance on our blog here: http://communityallowance.wordpress.com/2009/05/26/speech-at-dta-national-policy-symposium/

    I’d love to hear your thoughts on this idea of a Community Allowance Matthew.

    Thanks, Naomi

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