Friday, April 09, 2010

Public Sector Jobs As Welfare

Enough pyramids already

How many of our 6m public sector jobs are just another form of welfare?

The reason I ask is that listening to today's BBC coverage of the continuing debate over National Insurance Contributions (NICs), the question didn't get a mention.

The BBC naturally began the day by giving prominence to Labour claims that the Tory plan will cost jobs because of the associated spending cuts. But as the day progressed , it gradually dawned on them that all parties are planning to cut spending, so all parties will cut jobs. And that's A Very Bad Thing.

And on one level of course, it is a bad thing. Nobody likes to see people losing their jobs.

But the trouble is public sector jobs cost money. And right now, we don't have any money. So unless we cut spending on public sector pay, we'll have to find the money by some other means - like increasing NICs, which will cost up to half a million private sector jobs.

However, even setting aside that point, how many of these jobs are producing valuable output - stuff the rest of us actually want?

Suppose for a moment we weren't under the money cosh. Suppose we had fiscal flexibility to employ all our current public employees and maybe some more on top. Would that make sense?

Consider this famous quote from John Maynard Keynes:


Which is more or less the current Labour argument - keep all our public employees in jobs because, although many of them are doing the public sector equivalent of burying bank notes and digging them up again, at least they're in employment, which must be a good thing.

Keynes went on to extol the benefits of ancient Egyptian culture:
What he's saying in essence is that there's a mass of people who for whatever reason cannot produce anything that other people want to buy. So the best thing to do is employ them on public projects. Projects that don't compete with the stuff other people are producing , by reason of the fact that these projects don't produce anything of any actual value to anyone (other than the producers themselves and the high priests/commissars).

This is public employment as welfare. And when we look at the high dependence on public sector jobs in the depressed regions of Britain today, we can see it's more than an empty slogan.

The one slight snagette is that welfare employees still need paying (even the Egyptian slaves still needed feeding). Which means that someone else has to part with the fruits of his own labour in order to provide the wherewithal. And all he'll get in exchange is the sight of another new pyramid, or if he's lucky, a government promise to repay the loan in some distant future, probably in debased coinage.

Getting low skill, low productivity, welfare dependents into work is going to be one of the very toughest challenges facing Cam's government. Given the catastrophic fiscal legacy, leaving them on the public payrolls will not be an option.

PS Interesting article here about the ancient Egyptian economy. It was essentially a command economy, with high levels of taxation and slavery. Life expectancy was 24. Keynes was a towering genius who shed huge light on the way economies work. But he was also a member of the Bloomsbury group of champagne socialists, who had little faith either in the market's ability to invest rationally, or to provide jobs for all. He believed in the existence of noble commissars, such as his good self, who could plan and organise things much more scientifically. Not a lot of people know that. Or at least, they choose not to remember it.



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