Idea to stimulate the economy & cut unemployment

furryfeaturesFri 21/10/11 19:08

I have had this idea which I think could dramatically reduce unemployment, stimulate economic growth and cost the government almost nothing.

My idea is simple: a tax incentive to get the very rich to help the very poor.

One of the things about times when the economy is faltering is that employers tend not to hire, even if there is sufficient demand for their product or service. This is particularly so among small employers. Taking on a person, even at minimum wage, costs probably £30,000 in the first year and £20,000 each subsequent year. My idea is to persuade each rich person to pay the recruitment costs of two people and their wages at the level of a living wage, which is a bit higher than minimum wage, for two years from each million pounds of invested capital or each £300,000 of gross pay. Companies would be free to pay more than the living wage, so using the living wage as a subsidy for higher value work but recruits would have to come from the long-term unemployed and the disabled.

The idea would be quite simple. If someone on £300,000p.a. gave away £60,000 in the first year and £40,000 in the second year, he or she would deduct £130,000 and £88,000 from their gross pay before tax. Thus, in the first year, tax would be paid on £170,000 and in the second year on £212,000. In that time two long-term unemployed people would have jobs for two years or more, if they were successful in their jobs. In fact, the amount that the rich person could deduct from his or her gross pay might need to be slightly higher because the gain with my figures would only be £5000 in first year and £4000 in the second. Their gain might need to be £10,000 in each year to be interesting enough to stimulate use of the scheme.

My idea is that the rich people would initially sponsor long-term unemployed and those on DLA, ESA and other similar benefits, while the companies that could benefit would, at least initially, be smaller companies, perhaps those with 50 or fewer employees before taking on new recruits.

I believe that this could benefit huge numbers of long-term unemployed and disabled people, though there would need to be rules to prevent businesses exploiting this system for cheap labour. Thus, while at the end of two years workers on the scheme could be laid off without penalty, there would have to be a rule that companies that laid off these workers could not use the scheme again for a given period and could not re-advertise the jobs from which these workers were laid off for the same period that applies when ordinary workers are made redundant.

I think that this system could create hundreds of thousands of jobs at almost no cost, possibly at benefit to the exchequer. While the rich people sponsoring workers would pay much less tax to the point that they'd benefit, the workers taken on would cease to claim Jobseeker's Allowance and ESA and would pay tax and national insurance on their earnings. In addition, the workers would spend a high proportion of their earnings, generating VAT revenues for the government. This new expenditure would help the economy to grow.

I think that this scheme could actually have the capacity to help more unemployed people than actually currently exist. This really could drastically cut unemployment at the tiniest cost to the government.

chutzpahFri 21/10/11 19:20

So, basically back to Victorian values of the poor relying on the kind benevolence of the rich then?

dazbarFri 21/10/11 19:44

But what jobs would be created - there are very few out there!