The Blog

What Can Government Do About Unemployment?

With the Green Wage Subsidy, that same money is transformed into a stimulus for a vibrant and positive sector of the economy that benefits society and environment.

Unemployment is a serious social malady that must be addressed directly by Government. It has risen in the UK by 80,000 over three months, taking the total to 2.51 million, 7.9% of the workforce, with youth taking the worst hit. This is bad news not just for the jobless, for their families and communities, but for the whole of society. Unemployment brings mental and physical ill-health to individuals (leading to an increased burden on the NHS), poverty to their neighbourhoods, falling tax revenues to the Treasury, and the danger of alienation, crime and civil unrest to our nation.

The IPPR think-tank has said: "Promoting a speedy return to full employment in the UK should be a priority for the Government".

The Economist suggests seven general adjustments to economic policy to reduce unemployment including "incentives that cut the cost of hiring, particularly for extra new workers".

To be fair, Ian Duncan Smith's reforms at the Department for Work and Pensions (DWP) of the welfare system are trying to do this. It is well known that the present benefit system creates an unemployment trap, where low-skilled workers on benefits find themselves worse off when they take up work. IDS plans to taper off the sudden cut in benefits. Although sensible, his reforms are too slow to make a difference in the coming recession-blighted years.

Serious problems require radical solutions. The Government should take the DWP reforms one step further, and transform benefits into a stimulus to the green sector of the economy.

It is not difficult. First, local authorities will set up tribunals with a remit to judge whether any enterprise, public or private, is acting to benefit society or environment. Organisations that are accredited by the tribunal will then be able to go to the local Job Centre and take on workers. These workers will be allowed to continue receiving all their benefits while working in the approved organisation. The employer will top the benefits up to match the going rate for the job. There would be a simple, in-built feedback mechanism to prevent employers from displacing existing employees with the new subsidised intake.

This scheme is called the Green Wage Subsidy (GWS), or Work Stimulus Scheme.

The GWS produces multiple wins: individuals win by getting work that improves their finances, businesses win from increased productivity and the local community benefits from environmental and social services. The national economy benefits from the increased tax take, decreased NHS and criminal justice costs and from improved social integration and national happiness.

In Bills of Health I estimated that 1-2 million new jobs could be created in the green sector of the economy.

Pride of place would go to energy conservation, especially insulating homes.

This scheme has already been developed by the Green New Deal group.

The effect of energy conservation is to take people out of fuel poverty, and to reduce imports of natural gas, which will help the UK balance of payments. It also helps to achieve the Government's vital CO2 reduction targets.

Renewable energy technologies and manufacturers of energy efficient goods will be able to benefit, along with pollution control technology, waste minimisation and water management.

Small and medium enterprises who carry out repair and recycling will be able to apply, as will those engaged in sustainable agriculture, forestry, timber use and countryside management. Traditional crafts such as coppicing, hedge-laying and thatching would flourish.

Then there is the housing industry. New building will benefit as well as repair and refurbishment of existing properties.

The deal will extend to anything that results in improvements to the visual environment, since there is a great deal of evidence that this will result in improved general happiness.

Public transport will prosper, and the list goes on: education and training, counselling, caring and healing, community work, leisure and tourism,

innovation, research and development.

It must be emphasised that there is no element of compulsion in this scheme. Participation of both employers and employees will be voluntary. It is also a non-time limited scheme, at least for as long as the economic recession lasts. At that time we can have a mature national discussion on the merits of Citizen's Income, which is very close in effect to the GWS.

The crowning glory of this scheme is that it comes at no cost to the Treasury. The benefits would be paid anyway, but grudgingly, as a dead dole paid on condition that the recipients spend their whole time in the dispiriting task of searching for jobs that do not exist.

With the Green Wage Subsidy, that same money is transformed into a stimulus for a vibrant and positive sector of the economy that benefits society and environment.