Should normal rules be suspended in the battle against unemployment, asks Richard Boot, West Midlands chairman of the Institute of Directors.
The rising unemployment numbers make chilling reading, particularly here in the West Midlands. They raise the issue yet again of whether there should be a major shift of focus from the Government to help keep people in work rather than spend billions looking after them once they are lost to the workplace.
We have useful initiatives in operation to help the unemployed retrain and seek work and I am very much in support of schemes focused on younger people like the recently-announced Graduate Internship programme.
But this post-event approach seems to be the primary focus and I seriously question whether it would not be more beneficial if we had additional creative schemes aimed at protecting people’s jobs while they are still in place within our strategic industries.
History shows that it is far harder to get someone back to work than it is to keep them there; skills are often lost forever if the industrial base shrinks.
But also remember that for every person who becomes unemployed the economy takes a major hit.
You do the maths: 3.5 million people unemployed x redundancy pay (if paid by Government ) + plus unemployment pay + social security costs + other ‘social costs’ + loss of income tax/NIC and VAT on spending. The answer is a massive number.
For me, investing a lesser amount now in targeted support to keep people in work in the chosen strategic sectors feels like a better solution.
The classic economic textbooks will tell you that the deadweight of any form of wage support is a bad thing; you just don’t support business this way.
But what happens when the financial market isn’t yet functioning properly to provide funds, even those backed by Government guarantees, companies in strategically important sectors are laying skilled staff off who are often lost forever and the country in any event is facing a massive bill for unemployment pay?
Worse still, what if other competitor countries like France, Germany, Spain and even Wales (!) are providing support for keeping people in work.
It could be time to apply Boot’s Theory: Bend the rules and let’s make sure we have some industry left after all this mess.
Is there a case in an economic meltdown that normal rules are suspended and, alongside all the other initiatives, there is scope for selective assistance with employee retention?
This is not in any way to support across-the-board subsidy schemes but when many businesses cannot access financial support to see them through until markets recover they understandably reduce staff as a knee-jerk reaction.
There must be serious merit, therefore, in exploring temporary, sector specific and focused relief directed solely at employment retention and in-company skills development.
Intervention has to be focused because many sectors are not of strategic value to the UK economy. Upset as you might be about the passing of Woolies, retail, for instance, will shrink and come back as demand lifts.
But a vibrant manufacturing industry with high employment, export earnings and added value will be critical to the success of UK PLC. Let’s concentrate on retaining jobs in designated strategic sectors until an upturn rather than spending millions once they are lost.
Automotive is one of these fundamental sectors by virtue of scale. In the UK it is an efficient and world-class sector and we should directly invest in supporting it now to retain its skills.
I fear, following normal economic doctrines and concerns over the potential complexity of labour cost, support schemes will put the Government off from really looking at this. But my view remains; it may need to shift its priorities pretty quickly if we are to avoid the permanent damage of high unemployment in our critical industries.
The Treasury’s response will, of course, be ‘where do we get the money from?’ I fully appreciate the pressure on resources but it is about carving the cake in a different way. Unemployment pay or focused investment on keeping skilled people at work and ready for the upturn? Extraordinary times warrant extraordinary measures.