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More jobs – the easy way
22nd September, 2009
A simple way of creating jobs is to subsidise goods that use lots of labour and tax those that don’t. This increases the use of labour and decreases non-labour factors of production. See for example the proposals for employment friendly VAT proposed by Professor J.K.Swales. This is a combined tax and subsidy scheme which gives a rebate on VAT for each person employed. He says
… governments are generally concerned about the overall level of taxation within the economy. However, the type of integrated subsidy and tax scheme that we investigate in the simulations could, in principle, be operated as a uniform tax scheme. That is to say, the change in the firm’s tax bill could be calculated as the net difference between the additional VAT and the per capita subsidy. In so far as the scheme increased total employment, and thereby reduced payments of unemployment benefit, it would be associated with a reduction in the required overall tax take. That is to say, the introduction of the new tax scheme would increase employment and reduce taxation.
It’s that easy.
P.S. An earlier paper Employment creation with very large scale labour subsidies was a precursor to this work.
The private sector does it
5th October, 2009
Prof Swales proposals can be expressed very easily.
Firms that are labour intensive pay less VAT and the others pay more.
and as Prof Swales says
[These proposals] do not rob the private sector of resources but reallocate resources within that sector. [They] generate an expansion, not contraction, of private sector economic activity.
The private sector does it.
Less government expenditure
24th October, 2009
The title of Professor Swales’ proposals, “The Employment Effect of Subsidies” has led some to imagine that the proposals involve greater government expenditure. But as he says in his report:
If the labour subsidy could be incorporated as part of a tax scheme, in the form of tax rebates, the total tax take would actually fall.
The proposals are a rebalancing of tax – reducing them on employment and increasing them elsewhere. Because unemployment creates government expenditure both total taxes and government expenditure are reduced.
Note: In a private communication, the UK Treasury now concede that the “subsidies” in Professor Swales proposals can be regarded as “tax forgone” and should not be consisered to be Government expenditure. They admit “a tax foregone is not government expenditure”. but they also say “but it has the same fiscal effect as additional government expenditure”.
A tax forgone may have the same “fiscal effect” as government expenditure but it does not have the same “effect”. Spending your money is not the same as government spending your money for you. The “economic effect” is quite different.
Hansen’s Carbon Fee
29th January, 2011
James’ Hansen has proposed a Carbon Fee which would tax carbon and return all the proceeds to citizens as monthly cheques. Hansen prefers to use the term “fee” because “taxes” are spent by governments and the proceeds from the Carbon Fee are not.
This would support the lower-paid who have lower carbon footprints than the affluent. This could allow other changes to tax regimes which could conteract the poverty trap that unemployment payments can create, mirroring some of the effects of Professor Swales proposals to make Value Added Tax employment friendly. See above: More jobs-the easy way.
Professor Swales will soon finish his duties as Head of the Economics Department at The University of Strathclyde. Perhaps he will now have the time to investigate the employment effects of Hansen’s Carbon Fee.
Basic Income Grant in Namibia
In distributing monthly cheques, Dr Hansen’s proposal has a similarity with the Basic Income Grant scheme which has been trialed in Namia:
A Basic Income Grant (BIG) is a monthly cash grant (e.g. N$100) that would be paid by the state to every Namibian citizen regardless of age or income.
There are significant differences between the UK and Namibia but this comment from the final report of a pilot study is worth noting:
The introduction of the BIG has led to an increase in economic activity. The rate of those engaged in income-generating activities (above the age of 15) increased from 44% to 55%. Thus the BIG enabled recipients to increase their work both for pay, profit or family gain as well as self-employment. The grant enabled recipients to increase their productive income earned, particularly through starting their own small business, including brick-making, baking of bread and dress-making. The BIG contributed to the creation of a local market by increasing households’ buying power. This finding contradicts critics’ claims that the BIG would lead to laziness and dependency.
Localisation of employment
One of the benefits of financing a basic income grant by a carbon tax is that it will tend to keep employment local. Jeff Rubin’s, former Chief Economist with CIBC World Market, spoke at the 2010 conference of the Association for the Study of Peak Oil andGas SPO-USA. His talk Oil and the End of Globalization was reported in The Oil Drum:
Rubin talked about why he believes high oil prices caused the recent recession. He also talked about how high oil prices are likely to vastly reduce globalization. He views this as a positive situation, because he expects this will change supply curves in such a way as to make American-made products more competitive. He believes that we will find our new smaller world much more livable and sustainable.
Rubin believes the correct approach to rising oil prices is not to cut taxes on oil but even to increase them.
Let us hope Kim Swales and colleagues can get some localisation in their economic models.
Which way is Damascus?
18th June, 2011
[Note April 2015: The title was a biblical reference not a reference to the present tragedy in Syria]
TAX BADS SUBSIDISE GOODS
The economist at the barbecue said “Tax bads not goods” – it’s hard for economists to use the s-word. But “Tax bads not goods” is a radical start for someone in a profession that has had the sense knocked out of it by the bully boys of Chicago.
But it’s good to see – at last – that the profession coming out of their collective madness. Soon they might achieve the next level of awakening and get to “Tax bads allow tax credits for goods”. Will they ever get to “Tax bads subsidise goods”? … continued page 104.
BUT IT’S SO F***ING OBVIOUS:
TAX BADS SUBSIDISE GOODS
And immediately there fell from his eyes as it had been scales: and he received sight forthwith, and arose, and was baptized.
Acts 9:18
Top of today’s list is
TAX CARBON SUBSIDISE JOBS
That’s the new header for the MoreJobs blog.
For me no more struggle to deflate economists with complex arguments about why they now talk “happiness” after banning it as unscientific since that nutter Robbins conned them after misunderstanding the nature of science. (Weren’t Popper and the rather better philosopher, Imre Lakatos, in the same building! How could Robbins have been so f***ing dim?)
The scales forty years have fallen from my eyes.
I have seen the glory of the coming of the lord.
Pass the Valium.
1 Comment by Sue June 18th, 2011
