Try these. The root cause of most worklessness, strangely enough, is an continuing shortage of work.
Oh, and one other thing: as the report concludes, in places where the private sector largely refuses to go, if you\’re going to convincingly deal with labour market failure you\’ll probably have to spend a reasonable amount of public money.
Now as then, in too many places, there is hardly any work at all. Britain\’s economy is as segmented as ever, and to repeatedly kick people into local labour markets that barely exist is not just cruel but stupid.
There is another way of looking at this which is to ask, well, why are there these areas that the private sector won\’t go into?
That private sector is absolutely delighted to go into areas of low labour productivity: China, India, Mauritius, all sorts of places private companies will happily employ people who don\’t produce all that much.
And as they are, places like Merthyr Tydfil have labour forces which are less produtive than others in other parts of the country. So why is it that companies will employ low value add labour in one place but not in another?
Because of course the simple output of labour is not what a company is interested in. Rather, the output of that labour compared with the price of it. That labour in China may be low output but it\’s also low price. Thus the productivity of it compared to the cost of it can be quite high.
So, if it were possible for companies to vary the pay they offered to reflect that output, then there wouldn\’t be these black spots of labour simply doing nothing. Companies would much rather employ low output labour in Merthyr than they would low output labour in China (although perhaps not than Mauritius which is actually a nice place to go).
So, abolish the national minimum wage. If £1 an hour is what some feckless Welsh youth\’s labour is worth, then allow companies to pay him that. Top it up with in work benefits if you like. It won\’t take long for that labour to be worth more than £1 an hour: Chinese manufaturing wages have risen fourfold (yes, after inflation) in only a decade. That\’s the sort of thing that can and will happen if wages are able to reflect value add.
You can also say that it\’s immoral to ask people to work for such a pittance. Perhaps it even is immoral. But if you set the price at which people can sell their labour above the amount that can be made by employing that labour then there will be unemployment.
Your call: unemployment or free wages?