Sunday, December 2, 2012

Tanweer Ali — Future Jobs Fund vindicated

Last week the government finally published its impact report on Labour’s Future Jobs Fund. According to the report, two years after starting their jobs with the scheme, participants were 16 per cent less likely to be on benefits than if they had not taken part and 27 per cent more likely to be in unsubsidised employment. The net benefit to society of the scheme was £7,750 per participant, after accounting for a net cost of £3,100 to the Treasury . Not bad for a scheme condemned as a failure by the current government, and certainly better than anything that replaced it.
The Future Jobs Fund was introduced in 2009 to address the problem of long-term youth unemployment. About 100,000 people in the 18-24 age group out of work for a year or more were guaranteed a job for six months. Later the threshold was reduced to six months. An additional 50,000 guaranteed jobs were available for people of all ages in selected unemployment hotspots.
The idea of addressing long-term unemployment through job guarantees is not new. A number of such schemes were created in Depression-era America, putting young people to work in the National Parks, among other places. An economic rationale was provided by the economist Hyman Minsky. Many schemes for the unemployed focus on skills, and making people more employable, but don’t address the lack of demand for labour. Especially in times of recession and economic stagnation, the big problem is that there simply aren’t enough private sector jobs to go around. Minsky’s solution was for the state to act, in his terminology as ‘employer of last resort’, and provide work at the minimum wage (though I’d prefer to see people paid a living wage). This way the state is not competing with the private sector, merely providing a buffer in hard times....
Progress Online
Future Jobs Fund vindicated
Tanweer Ali
(h/t Scott Fullwiler and Stephanie Kelton via Twitter)

What was that about a job guarantee by the employer of last resort as a buffer stock of employed being infeasible?


alittleecon said...

It's important to say that this was not a Job Guarantee in the MMT sense. It was quite modest, and time limited. What I would say though, having had some minor involvement in the programme, it certainly proves wrong those who argue there are not enough worthwhile jobs that could be created for the unemployed to do.

In the area I worked, the majority of the jobs were created in the non-profit sector. They came with training. There was always a surplus of job opportunities as there was insufficient funding to fill all the places, even though there were unemployed people willing to work.

I've blogged about my take on the Future Jobs Fund here:

Ralph Musgrave said...

The claim by “Alittleecon” that “There was always a surplus of job opportunities..” simply reflects a very basic bit of economics, namely that humanity’s needs and greed are infinite. Put another way, as unemployment falls, the marginal product of labour declines, but it never declines to zero.

Ergo if one implements a subsidy that takes account of that poor marginal product, jobs can be created.

alittleecon said...

Thanks Ralph. Glad you agree with me that the common claim that insufficient work could be found in the non-profit sector for JG workers doesn't bear scrutiny. Grateful to you for translating that into economist-speak.