Research by Richard Murphy (of Tax Research) has shown that the state recoups 92% of the cost of creating new public sector jobs – through lower benefit payments and increased tax revenues.
That\’s a way to get tax rates down isn\’t it? So instead of us having to pay £100,000 in taxes to employ a GP, we really only have to pay £8,000! The rest just magically flows from that perpetual money tree that is government.
The implication being that if we only hired a few more people then tax rates could be 8% of what they are now!
Sadly, Richard\’s calculations don\’t in fact say that, even he\’s not that daft. What his calculations say (and I am saying nothing at all here about whether they are correct or not) is that firing a current civil servant, who then goes on the dole and gets all sorts of benefits, never to work again, only saves 8% of the cost of employing them in the first place.
This does not translate the other way around of course: pulling a current private sector worker into the public sector does not cost only 8% of the cost of their wages. It is only (by Ritchie\’s calculations again) if it is someone on the dole, getting all sorts of other benefits, who would never gain private sector work, who gets the public sector job that this is true.
The thing is then, while Murph might be a little cockeyed at times, Swerotka is simply too dim to understand what he\’s actually being told.
I wonder whether most public sector workers are, in fact, employable in the private sector? Talking to one social worker over Christmas – just about to lose her job as a result of cuts – I wouldn’t employ her. I know it’s only a survey of ‘one’, but she kept using the word so beloved of accountants and the public sector: “worth”. Basically she wants a private sector job with public sector pay, conditions and pension. When I pointed out, politely, that the private sector is a market and others would decide her “worth”, she went all militant! As a private sector employer myself, I would reject her on the basis of her attitude and not her demands or qualifications – and the latter were narrow one trick pony stuff.
“firing a current civil servant, who then goes on the dole and gets all sorts of benefits, never to work again, only saves 8% of the cost of employing them in the first place.”
Wow! 8%!! Saving!!! How many can we fire?
So a modest pay cut will mean that public-sector employees cost nothing at all?
Right. Lets see, there are approx 5m unemployed/on benefits at the mo. If each ‘job’ cost £25K, thats a cost of £125bn, if my maths serves. So is RM saying the net cost to the rest of us (ie the taxpayers currently funding the benfit system anyway) is 8% of that £125bn, or £10bn per year? Thats chump change for govt these days.
Go for it I say. Tell everyone currently on benefits that the State will give them a job at £25K/pa. No questions asked, no qualifications needed, they’ll be found something to do, even if its digging holes and filling them in again. The kicker being, if you get sacked (and strict rules for non attendance/insubordination/laziness/ drunkeness/drug taking/ etc etc will apply) you get nothing. Nada. The only way to leave is if you can prove you have a job elsewhere to go to. Or you don’t want the State to support you at all anyway.
That would soon sort the sheep from the goats.
There will for sure be huge swathes of public sector peeps who are now completely de-skilled by 10+years of ‘work’ as Diversity Outreach Coordinators or whatever. That group will never last in the real world of work, and the savings probably are around 8%. I believe The Murph.
The complication is opportunity cost. For other public sector workers, they do real work and could easily get a real job (let’s be serious for a moment, these people do exist and in your heart you must know that). For that group, the saving is 100%.
The true saving therefore something between 8% and 100% depending on the proportion of public sector workers you believe could get a real job.
Now that leaves 3 conclusions:
1) The Murph hasn’t thought of the opportunity cost. That makes him an intellectual cretin. And wrong.
2) He has thought of opportunity costs, but chose not to mention it. That makes him a dangerous disingenous dissembler. And wrong.
3) He has thought of opportunity costs, and has mentioned it (implicitly), ‘cos he takes it as self-evident that *no* public sector workers could ever get a real job. None at all, including his own wife. That makes him bloody offensive. And wrong.
Take your pick.
Maybe there is another possible conclusion: the number is meaningless, he knows that already, but he is willing to knowingly write up any old rubbish if it pays the bills.
To be fair to The Murph, he has previously confessed to writing things he didn’t believe in just for the money (wasn’t it an article on how to avoid tax by becoming self-employed?).