Politicians of all parties profess to be concerned about unemployment – but they are absolutely clueless when it comes to implementing practical solutions. Or are they ignoring the facts deliberately?
They love to focus on big “job creation” projects – or, if in opposition, on big layoffs – by big business. British government spin doctors have been busy pushing the lasts ‘initiative’ this week.
Yet in most countries small businesses, having smaller reserves, are hardest hit by recession and are more likely to come under pressure to make people redundant – but also generate more new posts than big businesses.
In the UK, for example, there are over two million unemployed and almost five million small businesses. If half of those small businesses could take on just one new employee each, then there would be no more unemployment.
To this the objection might be made that over half of those five million small businesses consist of a single self-employed owner-operator with no other employees. However, this objection misses the point that these are the very people who would most like to take on some help – albeit on a casual basis, rather than full-time.
However, when they try to do so, they find that there are two enormous obstacles – one on each side of the deal that both parties want to make.
On the would-be employer’s side, there is a mountain of bureaucracy. Employing a single individual on a casual basis is a trip wire that triggers an avalanche of red tape that is, in some respects, just as complex and time-consuming as employing a dozen people full-time. Filling in tax forms for someone to whom you are paying a hundred pounds or dollars to do a little casual work is often more trouble than it is worth.
Meanwhile, on the would-be employee’s side, there is another, completely different pile of paperwork if the employee is, as usual, on some sort of benefits. Many benefits are withdrawn as soon as the unemployed person begins to earn – in effect 100% taxation of the very lowest earners!
So even where both parties are keen to do a deal, there are major disincentives on both sides.
Yet these disincentives are all artificial, the result of government regulation. If the government is serious about reducing unemployment, it is high time they did three things:
1. Consult real small businesses – not various self-appointed trade bodies that cosy up to the government because they enjoy being part of the Establishment.
2. Genuinely listen to and understand what they are being told – not just patronise us with the usual ‘lip service’.
3. Find the political courage to act on the suggestions they are being given.
There are more employees than employers so in the short term there are more votes in robbing Peter (the employers) to pay Paul (the employees). But in the longer term we are left with a retarded economy and high unemployment. Short term political courage would lead to much long term economic gain.