We live in a capitalist economy. It's this trivial fact that must determine how we view the Chancellor's so-called plan for jobs.
The point is that much of what he's doing is a lot like corporate welfare. For example:
- The Job Retention Bonus - £1000 to an employer for every employee who remains continuously employed to January - will hand out cash to firms that would have retained staff anyway. At the margin, it will encourage firms to retain employees insofar as it reduces the cost of doing so. But the margin might not be very extensive.
- The Kickstart scheme pays bosses the cost of hiring onto a minimum wage job a young worker who is currently on Universal Credit. This risks encouraging firms to hire such workers, at the expense of those who are not on UC - such as those leaving school or college. And again, it give money to firms who would have done this anyway. Again, it's a handout.
- Paying employers to take on apprenticeships and trainees encourages them to do so at the margin, but again also pays some for doing what they would have done anyway.
- Some people are objecting that the VAT cut for the hospitality trade will not be passed onto customers. But this is the point: it will raise profit margins instead.
- The Eat Out to Help Out scheme will boost demand for restaurants. Yes, insofar as it does so it will encourage diners and staff to take risks with their health. But as Marx wrote, "Capital is reckless of the health or length of life of the labourer."
The point here is that capitalists only hire or retain workers if it is profitable to do so. Wage subsidies increase those profits. In this sense, the fact that so much of today's plan is corporate welfare is a feature, not a bug.
From this perspective, complaining about the deadweight cost of the plan - that it will pay firms to do what they'd have done anyway - misses the point. For one thing, there's a knowledge problem here: the government cannot distinguish between firms that need incentivizing to retain or workers and those who don't. Given that fine targeting is impossible, some deadweight cost is inevitable.
And, in fact, desirable. Whereas those of us who have kept our jobs have seen our finances improve - the Bank of England reports a £41bn rise in households bank deposits in the last two months - the lockdown has been terrible for many firms' cashflow.
Sure, in normal times it would be reasonable to complain that such costs distort allocative efficiency. Right now, though, a big Okun gap is more important than a lot of Harberger triangles. These are not normal times, and Sunak woudn't be introducing such measures if they were.
As it is, Sunak at least has the wit to see that in a capitalist economy it is imperative to maintain profits. This outweighs any consideration of allocative efficiency.
This also helps explain why support for freelancers - and indeed the arts until very recently - has been so patchy and late. A loss of freelancers is not an existential threat to capitalism but a slump in profitability is.
In theory, there is an alternative here. A Job Guarantee would protect and create jobs without corporate welfare. And it could, in theory, do so by providing jobs that are socially useful but not highly valued by capital, such as care work or improving local environments. This, though,was not an option for Sunak. We lack the policy infrastructure to identify good jobs; this task can only be done locally, and yet local government has been almost destroyed.
In the real world of capitalism, then, corporate welfare and cronyism are the only options - for now.
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