Jobs Growth Wales is a government funded programme (partly and perhaps ironically EU funded) designed to put encourage young people into work.
On January 3rd it celebrated creating over 10,000 jobs. 81% of those entering private sector jobs (fully subsidised by the government for six months) retain employment afterwards. From a public sector viewpoint, the programme is a success - officials have spent 12 millions on providing jobs in high unemployment areas or about £12,000 per person.
What's the economics here? Companies are offered the services of an 18-24 year old for free (to them) for six months during which time the youngster has an opportunity to learn the key skills required either for that job or to make themselves more employable.
If each of the 10,000 people managing to get government funding, the state is in reality spending £24,000 per annum per person - a relatively high salary for a low employment area. Could the money have been spent better elsewhere?
Possibly, but when it comes to spending tax payers' money, governments will generally tend to be highly inefficient spenders.
Arguably, from a free market perspective, the deprived areas would have been served better if that money was returned to the people rather than taxed from them in the first place: when the government 'creates' a job, all it is doing is diverting funds from one area of the economy (and so depriving that area of funds and jobs) and giving it to another.
As such, many people may think of this as a simple game in redistributing income, but because the funds are also funnelled through government offices, they also have to support all the officials involved in the scheme.
Say £12m was removed from the economy somewhere ... £10m may be used in 'job creation' but £2m may be spent on the programme. Simply put, it's robbing Peter to pay Paul, with Patrick being paid as a middle man. The minimum wage does not help of course: if a young person has to be worth £5.03 (18-21) or £6.31 (for over 21 yr olds) and a company views there skills as not worth that much (for there are other costs in hiring people) is it any wonder that there are so many unemployed young people? To encourage companies to take on these victims of state education (we could call them) the entire salary and national insurance bill has to be covered.
This indicates how poorly educated these folk have been (more of that in a moment) but also that the minimum wage acts as a barrier for them to be able to compete in the market place for work.
Consider it from an employer's perspective. She wants to hire a person to work in her shop; at the minimum she has to pay £5.03 (who came up with the .03?). She has two applicants (to make things simple): one applicant who has never worked, didn't get great grades, has never volunteered (couldn't be bothered), has a few interesting piercings and believes the world owes him a living; the other has worked since the age of 12, had paper rounds, baby sat, acted as a mentor at school, volunteered in the town, played team sports, got okay grades, has ambitions of passing a business diploma and becoming a manager... hmm, which one, which one... same price...hmmm, difficult.
Now imagine that the ambition-impaired youngster could be taken on for a pound an hour to see how they get on with some responsibility, time keeping, and general workplace duties. The employer may take on both - one for £4 an hour, as they seem good, the other for £1 an hour as they have to prove their worth. They may do this in the space of a week, but the minimum wage bars them from competing. Their only alternative, and one that is often recommendable, is to work for free for a week to build up work experience. This can be a very successful way of getting on the job ladder - but it doesn't attract the entitlement minded however.
Ethically though, other issues arise.
Is it right to remove funds from one area of the economy (and it doesn't matter if it is Cardiff or Rome) to channel money into deprived areas? Removing those funds is taking money from a productive area, from people who are creating wealth through their commercial activities and then are distributed to areas not producing relatively as much. For a socialist, for whom the world should present a picture of social and economic equality, there's no ethical problem on taking from the productive to the give to the unproductive.
In other words, there's no problem in stealing (or being a recipient of stolen goods). From a consequentialist point of view, we can ask troublesome questions concerning the propping up of economically deprived areas. If a company needs subsidising, it means that the market does not want its services in sufficient quantities; likewise, if a worker needs subsidising, the brutal truth is that the market does not want his or her services in sufficient quantities. Take away the subsidy, and the company and worker go bankrupt.
That's the name of the game of the market: each of us has to serve our fellow neighbours with what they want and if we fail to do so, then they do not provide us with sufficiency and we get a big hint to change what we are doing.
If the government comes in to rescue us, we are given a false sense of security (which is lying to us about our job's chances) as well as presenting us with resources taken from other people who are (or even were following a tax hike) succeeding. The market is not, by the way, some whimsical Grendel like monster that kills people indiscriminately (something the military tend to be good at); the market is you and I and millions of other people making decisions about what to purchase - and what not to purchase.
When we serve more people, we earn more people; when we serve only a few, we earn little. When we have low level of skills and are easily replaceable, funnily enough we don't earn much relative to someone whose skills or aptitude for a job are less replaceable.
But now let's look at this from another viewpoint: from the educational point of view. We can ask: is this really job creation or is it providing the young people with the education that their initial (ironically state sponsored) education failed to offer?
This is another sharp critique best avoided if you wish to remain fuzzy headed about things governmental. But seriously, the government 'educates' people for around eleven years in the UK leaving many of them (currently one in five in the UK, fifty percent in Spain, Greece, and France) as unemployable as they went into school.
Now that is a failure of education. (We can of course ask, what do you expect when the government runs the school system? Did you really expect highly productive, literate, cultured, critically individualists capable of adaptive thinking and innovation in the market place...? Dream on.)
The scheme is however, from this point of view, nominally successful - as a re-education programme. It is finally providing some of the Welsh youth with an education that is relevant and indeed gets 81% of them a 'real job'; but that should encourage Welsh taxpayers to look at the value for money they've (not) been getting over their children's education!
The failure is manifest and a human tragedy when young people leave school with little or no skills that can gain them access to the job market. But perhaps we can underline the deeper malaise: attitude.
When deprived areas are subsidised, the people living there are given a false sense of security that some day, some how, the real jobs will return. Perhaps they may - if the government gets out of the way of wealth creation. But throwing welfare into deprived areas creates an entitlement attitude that perpetuates the belief that someone else should be providing them with a living - people in London for instance, or people who live in big houses.
Again, we're back to theft - and generalisations about other people's wealth and their ability and willingness to fund strangers' lives.
The false hope that is fostered with welfarism is compounded with the entitlement attitude that creates, in the words of Bill Bonner (the "rogue economist" newsletter writer) a zombie class: unskilled, poor attitude, dependent on the living, and not going anywhere fast.
Ministers in the Welsh government may counter that at least the programme is giving people hope - and I agree: it is. Hope is vital for all of us, and if the money is to be spent anyway (and not given back to the taxpayers), then assuredly providing people, especially the young people whose lives have been thwarted by an inadequate education and perhaps an entitlement philosophy (i.e., socialist principles), then certainly I would condone spending money on helping people gain hope and a sense of self worth through work sponsorship. Because once people gain a sense of self worth and can act daily towards bettering themselves, then we all gain.
Nonetheless, that is more likely to come from the people themselves than patronising politicians dishing out other folk's money.
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