Customers and employees

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There was a report on Sunday claiming that the introduction of the national Living Wage will disproportionately affect Welsh jobs, because “we have a more economically instable (sic) environment".

I don’t doubt that for companies trading on the margins, any increase in costs could indeed tip the company into the red.  But how viable really, in economic terms, is any company which can only survive by paying its staff less than the amount which the government calculates they need to live on?  Paying staff a low wage and then depending on those staff receiving in-work benefits to survive is a form of back-door subsidy to any company affected; in essence it transfers part of the cost of wages from the employer to the state.  And since the state has no magic money tree, it transfers the cost of wages to taxation.

There was another aspect of this which struck me as well.  It was also stated that "We're seeing accelerated rates of shop closures in Wales - we're also seeing higher rates of footfall decline”.  I don’t doubt that; it's something we see in our towns regularly.  But the question is why it is happening.  At its simplest, people don’t feel that they have the money to spend by going to the shops and businesses.  Arguing that, therefore, wages should be kept low seems to me to be a somewhat curious response to a problem of a lack of money in the pockets of customers.

But it goes to the heart of the real problem which the businesses complaining about the living wage have.  They seem at times not to understand that employees are also customers – and it’s an underlying problem with the current economic paradigm in general.  Companies look at their own situation, and from that perspective, minimising wages can seem like a good idea.  But seen from a wider perspective, it’s simply a race to the bottom which nobody wins in the end.

Losing the plot

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The latest comments by the Labour leader on Trident look like the sort of fudge which we’ve seen far too often from Labour on a range of issues.  Half-baked would seem to be an inadequate description of the suggestion that we should build a new generation of submarines which are specifically designed to launch nuclear missiles and then not arm them with nuclear weapons.  Insofar as there is any point at all to Trident, it is that it has the capacity to remain hidden at sea and exact revenge for a nuclear attack by posthumously wiping out a few cities somewhere.  As a means of delivering conventional explosives, it would be a hopelessly over-engineered and expensive approach, and all done, apparently, to keep people employed in the shipyards where the submarines would be built and the docks where they would be based - and to keep a few trade unions on side.

Labour have form on coming up with compromise and fudge designed first and foremost to maintain some sort of precarious party unity (as anyone familiar with the history of Welsh devolution will be only too aware).  But this suggestion takes that to a new height.  I can think of lots of ways of spending the £100billion which would produce more jobs and deliver more useful outputs.

Another example of the way in which Labour is losing the plot on Trident was the comment by the sacked shadow minister Michael Dugher, reported in the same story, that “We tried unilateralism before.  It ended in electoral disaster then.  There is no evidence to suggest that it won't end in disaster again.”  I’m sure that he is entirely sincere in his belief that nuclear weapons are essential to Labour’s electoral prospects, but the thing that struck me was the complete absence of any attempt to put forward any reason for possessing such weapons other than electoral success for Labour. 

Both his comments and those of Corbyn go to the heart of the problem that Labour faces.  It no longer has any raison d’être, in the eyes of most of its own MPs, than to win elections at all costs.  Corbyn started out with a different view – slowly but surely, he’s being brought back into line.

Jobs aren't everything

Tweet The new Plaid MP for Meirionnydd, Liz Saville Roberts, is certainly making her mark early in the parliamentary session.  I was always confident that she would.  Yesterday’s Western Mail carried a report of her speech marking the anniversary of Tryweryn.  The speech was powerful and robust.

I particularly liked the way in which a comparison was drawn with what we still see happening in Wales, with a particular reference to the “super-prison” in Wrecsam.  I thought that she was absolutely right when she said that “Almost any atrocity can be justified in Wales on the ground that it creates employment.  This justification is still used today…”.

I entirely agree that we should not allow people to get away with using that justification to inflict developments on Wales which are inconsistent with the way that we want to shape our own future.  It would be a great pity if other members of her party were to undermine fatally such a clear and resolute position by arguing that jobs are so important that there are some things that we just have to accept.  Like a new nuclear power station on Ynys Môn, for instance.

Morality in politics

Tweet In the first two elections that I can remember, those in 1964 and 1966, I was too young to vote.  But I can remember a certain amount of excitement at the time, and also some of the promises being made by the Labour Party under Wilson.  One of the headline policies was that Polaris, the UK’s nuclear-armed submarines, would be scrapped.  It didn’t happen, of course; and far from divesting the UK of its nuclear arsenal, the Labour Party have either taken, or been complicit in, every subsequent decision to modernise and replace the nuclear arsenal.  I ended up disillusioned with the promises of the Labour Party before I was even old enough to vote.

Although there has long been a strand in the Labour Party which has opposed the possession of nuclear weapons, and the issue looked like it might come to the fore again when Michael Foot was leader, time and time again the Labour Party has proved that it is not a serious party of disarmament, and with the other two main UK parties committed to retention as well, it has never really been an election issue for the last half a century.

The anticipated closeness of the coming election has created a situation where the Green Party, SNP, and Plaid can again put the matter on the agenda.  There’s a certain amount of posturing in this, of course (there is no conceivable outcome to the election which doesn’t result in a House of Commons containing an overwhelming majority in favour of the continued possession of nuclear weapons), and talk of ‘forcing’ the government into abandoning them is fanciful at best.  But at least it’s an issue which can be discussed in a way which hasn’t really happened for 50 years – and almost everyone in the UK looks like having an opportunity, at least, to vote for an anti-Trident candidate.

It’s hard to discuss the issue without getting into moral arguments.  For the three main UK parties, that’s something to be avoided at all costs.  For them, the ‘fact’ of deterrence is a given, the possession of these weapons is an inalienable right, and the only question is about the most cost-effective way of renewing them.  But for most opponents, there is always and inevitably a moral dimension to the debate.  

For the ‘deterrent’ to be in any way credible, those in charge of it have to be able to say convincingly that there are circumstances in which they would be prepared to give the order to obliterate whole cities. I have no doubt that Cameron, Clegg, and Miliband are all, in effect, saying that there are circumstances in which they would indeed be prepared to give that order, even if it meant killing millions of civilians whose only crime was to live in a particular place.

The comparison between the jobs provided by Trident and those provided at Auschwitz which was used by Dafydd Wigley earlier today was unfortunate, for a number of reasons.  The comparison is far from being a direct one and the timing on the day after the 70^th anniversary of the liberation of Auschwitz was awful.  It has also helped enable the cheer leaders for Trident to divert attention away from the morality of the possession of nuclear weapons and on to ground on which they feel more secure – criticising the poor choice of words of a political opponent.

Of course there's a huge difference between the actual deaths of the 6 million Jews slaughtered under Hitler’s orders, and the potential slaughter which would result from the use of nuclear weapons.  One is very real, it actually happened; the other is merely a potential scenario for the future.  But in the knowledge of the horrors of the past, the fact that any politician could seriously consider that it is ever right to threaten to unleash death and destruction on the scale of a nuclear war certainly makes me wonder whether we have really learned anything from the past.

Trident is more than just a technical matter; for many of us it is, at heart, a moral issue.  And I hope that those opposing it will continue to make that point, even if they need to choose their words with a little more care.

Taxes and entrepreneurs

Tweet One of the themes running through Tory economic policy is that, as the party’s leader in the Assembly put it a few weeks ago, “Low tax economies are more competitive, more attractive to job creators and are where small businesses are most likely to prosper.”

But where is the evidence for this being a causal relationship?  Note that their approach to taxation is to reduce personal taxes on income, a policy which disproportionately reduces the tax bill of those with higher incomes.  It also shifts the emphasis of taxation from progressive income based taxation to more regressive forms of taxation such as VAT.  But where is the evidence that lower income tax either attracts people to set up businesses, or makes those businesses more likely to succeed?

There are some things to note about these people called entrepreneurs: 

·         Some of them are extremely successful, and earn huge amounts of money as a result.  They’re a small minority of the total, but they’re a minority for whom the small differences in taxes being proposed are little more than small change.

·         There are other entrepreneurs who are running small to medium businesses very successfully.  I’m sure that they’d like to have more money in their pockets (who wouldn’t?), but a tax cut isn’t really going to make that much difference to their entrepreneurial activity.

·         And then there are a large number of them who barely make a living from their economic activity, and for whom the sort of salary at which higher rate tax cuts would start to make a significant difference is but a distant dream.

·         Entrepreneurs tend to be hugely (and often overly) confident.  Their business idea is invariably brilliant – to them at least – and a certain route to earn them a fortune. 

From none of these perspectives does it seem likely to me that a cut in higher rate taxation is going to make any significant difference to the level of entrepreneurism in Wales, which is the stated objective of the policy.  That’s not the same as saying, though, that it’s a policy from which no-one will benefit.

When we look at the higher paid people in Wales – those who would benefit from this sort of reduction in personal taxation – very many, perhaps most, of them are high paid public sector workers.  (Now, it might be argued that that is a problem in itself, but that’s an argument for another day.  Let’s just accept that things are as they are for a moment.) 

How likely is it that any of those people will wake up one morning and say “Oh look, I’m going to pay less income tax.  So I’ll throw in the day job and go and start a company”.  It doesn’t immediately strike me as an obvious reaction.  Far more likely is “Let’s have another holiday this year”.

Now of course, enabling people to have another holiday adds to GDP if they spend their money in the local travel agent (although it doesn’t have quite the same effect if they book online; and a lot of that GDP leaks out of the country to the foreign hoteliers and airlines), but if the result of those tax cuts is cuts to public services, it isn’t so much ‘extra’ GDP as ‘redirected’ GDP.  And, above all, it’s a switch in effective spending power from those at the bottom to those at the top.

So if it doesn’t seem likely to achieve the stated objective, and on the not wholly unreasonable assumption that the Tories know that as well as I do, what is the real aim?  It couldn’t possibly be to try and buy the voting loyalty of the better off could it?

Credit stealing and blame avoidance

Tweet For those who will fill the jobs generated, there is no doubt that Wales’ reported success in attracting inward investment is good news.  It’s not clear how many jobs there really are however.  There has been a tendency in the past to overstate the numbers, and I’ve long been sceptical about claims that “n” jobs have been “safeguarded” and would otherwise have been lost.  When the organisations giving the grants or aid and the organisations receiving them all have a vested interest in presenting the highest possible numbers, there is obviously a potential to, shall we say, ‘use the most optimistic forecasts’.  And some of the jobs will not arrive for 3 to 5 years, which leaves ample scope for ‘changed circumstances’ to lead to a revision of the numbers.

I’m not sure what it says about the Welsh Government’s economic policy.  I had thought that the emphasis was moving away from attracting inward investment in order to concentrate on growing and developing indigenous businesses; not least because of experience.  Whilst some inward investment into Wales has created some sound long-term employment, there are plenty of other examples of a short-term presence which moves on when the grants run out.  In effect, policy often seems to be whatever is happening at the time; events drive policy rather than policy driving events.

Political reaction has been predictable.  The Tories point to every failure in economic policy as being down to the Welsh government and claim the latest news as a success for UK policy; whilst Labour point to every failure as being the fault of the UK government, and claim the news as a success for their policies.

They can’t both be right of course – but that doesn’t mean that they can’t both be wrong.  I don’t simply mean that the policy pursued by the UK government would have been much the same if Labour were in power (although it would have been) or even the same thing in reverse in Cardiff Bay (although it’s easier to conceive of a Labour UK government than of a Tory Welsh government).  I mean rather that economic policies pursued by governments at both ends of the M4 might actually have had a negligible impact on the outcome.  Governments like to pretend they’re in control when things are going well, and pretend that things are out of their hands when things are going badly.  I suspect they’re right on the latter, but simply deliberately understate the applicability of that conclusion.

Why would they?

Tweet One of the scare tactics being deployed by the anti-independence brigade in Scotland is that jobs will be lost as companies move out.  Whether it’s “true” or not is irrelevant to those using the argument; their hope is that it will scare enough people into voting no so that the proposition will never need to be proved one way or the other.

Of course, there are companies which are saying they will leave if Scotland votes yes, but this probably owes more to the political prejudices of the people running those companies that to any thought-through policy.  Whether they actually decide to leave will ultimately depend more on the policies pursued by an independent Scotland than on the fact of independence itself.  And the traffic - if such there be - is unlikely to be one way; there will be other companies attracted by the possibilities of independence.

I’ll admit that I don’t know for certain whether companies would or would not leave Scotland, although unless the new government of an independent Scotland introduced a whole tranche of policies likely to drive businesses out (and why on earth would they do that?) then it seems unlikely.  But I’m not the only one who doesn’t know for certain; none of those stating as a fact that businesses will go can actually be certain either.  They just pretend to be – it’s simply propaganda.

The point about propaganda of course is that, if it’s any good, people will believe it and act accordingly.  Truth doesn’t enter into the equation.  I don’t know how effective this particular piece of propaganda will be in Scotland.  Some will believe it; but others will see it for what it is.

It does though seem to have found a ready audience in a group calling itself the Cardiff Business Council, whose members have managed to convince themselves that a number of leading Scottish companies might be persuaded to move to Cardiff if Scotland votes yes.  They are so convinced by the propaganda that they’ve written directly to the companies urging them to come to Cardiff.

There are two things that strike me about this, quite apart from the fact that they’ve been taken in by such propaganda.

The first is that it highlights the negative side of much of what passes for economic development.  It isn’t about growth or the promotion of new jobs; it’s merely about moving economic activity from one place to another.  Whilst the result of moving a company from A to B might well be good for B, it will invariably be bad for A.  And if grants or other forms of aid are involved, it means that we as taxpayers end up paying for a net increase of precisely zero jobs.  It’s much better, for all concerned, to use our time and effort seeking real additional jobs than to compete to move those already existing.

And the second point is this.  If someone running a company is so opposed to the idea of independence that they really will move their company out of Scotland if it happens, why on earth would they choose Wales rather than England?  No matter how unlikely it looks at this stage that Wales might follow Scotland, a yes vote in September will change the dynamic, and Welsh independence will, inevitably, appear more likely (or perhaps I should simply say “less unlikely”) than it does now.  Those involved would surely avoid – almost instinctively – potentially putting themselves in the same position again?

Of course it could simply be that the group concerned are engaging in a bit of anti-independence propaganda of their own…

Wortless guarantees

Tweet Politicians have been taking turns to express their concerns about the proposed take-over of Astra Zeneca by American firm Pfizer.  They’re concentrating on the potential negative impact on jobs and research in the UK, and on the possible tax implications, naturally – but they’re missing the point.

One classic example was the MP grilling the Chief Executive of Pfizer and demanding guarantees about how many people would be employed in a specific location in five years’ time. The Chief Exec looked and sounded evasive; but in reality, how many companies, whether a take-over was in the offing or not, would be able to give that sort of guarantee anyway?  The underlying assumption seemed to be that without a take-over, everything would be certain to carry on as it is at present – but that’s a hopelessly invalid assumption.

Any demand for guarantees and binding promises from a multinatiional company will ultimately be next to worthless, and I’m not at all convinced that attempting to make them ‘legally-binding’ will really make much of a difference. Under the system of company law which all the politicians support, and which none of them show any predilection to change, both Pfizer’s and Astra Zeneca’s prime legal obligation is to maximise value for the shareholders. If legally cutting their tax bill, reducing the number of employees, or shifting activity from one part of the world to another helps, then not only are they free to do that, they are more-or-less obliged to do so.

It’s not an approach which I support, but it’s the inevitable result of a legal system whose objective is to support and protect capitalism.  The politicians could promise to change the law to give other stakeholders – such as employees, customers, and governments – more rights.  But they won’t; indeed, most of them would happily dismiss such changes as ‘more red tape’ – government regulations standing in the way of ‘free enterprise’ and the ‘right’ to make profits.  But unless they’re prepared to tackle that question, all the hand-wringing and pleading is ultimately just grandstanding.

Is it really just about jobs?

Tweet Wales has long been a testing ground for the flying of drones.  Although a few brave individual politicians have consistently raised their voices against using our country in this way, far too many have swallowed the convenient excuse that they might also have civilian uses as a fig leaf to defend the jobs which the programme supports.

A fortnight ago, a new drone was unveiled.  This one will fly faster and higher than anything which has gone before, and is also built using ‘stealth’ technology.  It is apparently “the most advanced air system” yet, and is able to “deliver its weapons deep behind enemy lines” (military speak for killing people, although why anyone believes that there are ‘enemy lines’ any more is something of a mystery to me.)

They’re calling it the “future of warfare”; a future based on more effective killing machines with less risk to those who actually order them to kill.  Not exactly part of any future that I’d choose.  They’ve also given it a nice Celtic name, ‘Taranis’. 

One thing is perfectly clear; even if it were true that there might be some limited applications for existing drones in the civilian world, there is no requirement outside the military for stealth technology.  This is a machine which has one, and only one, use – making war.  I’d like to think that any suggestion that it should be flown from the drone testing base in Wales would be rejected out of hand, and that, just for once, the interests of peace would be placed above any possible economic benefit.  It isn’t something I’d put a bet on though.

Butter not guns

Tweet There was a story recently about the problems being faced by General Dynamics UK, which will probably lead to a number of job losses in Wales.  I, no more than anyone else, want to see Welsh people short of jobs; we have enough of a problem in that respect already.

But General Dynamics is, of course, an armaments company; they refer to some of their products lovingly as ‘combat systems’; their business, ultimately is in the field of warfare and killing.

Calls to find ways of helping the company and retaining the jobs seem to me to be the wrong response to this particular situation.  I will never shed any tears over any job losses in the armaments industry.  And I’ve never been one for the idea that we should take any jobs at any price; expending time and resources on the production of weaponry is not something that I could or would support.

The question we should be asking is not how we keep these jobs but how we replace them – and all other jobs in the “defence” industry – with more useful and productive activity.  I don’t understand why so many of those amongst Wales’s politicians who claim to support the peace movement aren’t saying the same thing.

Beware the siren voices

Tweet No surprise that I’m far from being as thrilled as others seem to be about the phoenix-like resurrection of the Horizon project for another nuclear power station on Ynys Môn.  There’s more to energy policy than jobs, but this is not only not the best energy policy for Wales, it’s not even the best way to generate jobs in the energy industry in Wales.

The game is far from over however; it will be some time before the fat lady can commence her aria.  There are still many hurdles for the project to overcome, not the least of them being the unanswered questions about how it will be funded.  The official line about no public subsidies for new nuclear is simply not credible; without subsidies, whether hidden or open, there will be no new build.

At a time when most of the rest of the world is turning its back on nuclear stations (well, uranium-powered ones at least), it’s hard to believe that any project run by a company whose own country has turned its back on the technology will actually come to fruition.

There is a real need for jobs on Ynys Môn, but there is a real danger in the apparently unqualified welcome given by many politicians to this scheme.  That danger is, simply, that they will count their chickens too soon and take their eyes off the ball, if that’s not mixing too many metaphors.  Assuming that these jobs are ‘in the bag’ would be the greatest disservice that anyone could do to the people of the island, since if (or when, as I tend to believe) the project collapses, there would be no plan B.

People should be vary careful about believing the siren voices of the short-termists who seem to be claiming that the island’s problems are about to be solved.

Jobs based on a different future, please

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Last week’s news that the Labour Party in Wales would support the move of Trident to Milford Haven if Scotland becomes independent caused a flurry, but was hardly a surprise.  It’s entirely consistent with Labour’s position on nuclear weapons over many years.

But the underlying reasoning behind the move by the First Minister is really nothing to do with the argument about nuclear weapons per se.  It is, rather, based on a much simpler logic which runs something like this:

·        Wales needs jobs

·        ‘This project’ provides jobs

·        Wales should welcome ‘this project’.

One could substitute almost anything for ‘this project’; and in that sense, Carwyn Jones’ position on Trident isn’t that different from the position of many other politicians on other projects – such as Wylfa B or the Severn Barrage for instance.  The logic is exactly the same.

There is scope for debate, of course, about how many real jobs ‘this project’ provides.  The only certainty is that the numbers will be overstated by supporters of the project, and will inevitably include a number of jobs to be filled by those relocating with the project.  And whilst the debate about the number of jobs is far from irrelevant, it has more to do with whether any particular project represents value for money than with the underlying principle.

And it’s the consideration of the principle which is missing from the logic above.  It’s easier to see a principle in relation to Trident than it is for a number of other projects, but that simply underlines the fact that different people draw the line in different places.  Rather then admitting that the real issue is where to draw the line, most politicians seem to fall back on criticising anyone who opposes ‘this project’ as being anti-jobs – and it was notable that that was exactly what Jones did last week, in his side-swipe at Plaid over Trident.

I’m clear that I want to see a demilitarised Wales (and world, come to that, but let’s start with that part for which we bear the most direct responsibility), and that Trident, or any other variety of WMD, doesn’t fit with that view.  (Just as I’m also clear that I want to see an energy policy based on renewables, and that Wylfa B doesn’t fit with that view.)  That means that there are some projects to which I would be opposed, no matter how many jobs they would bring.  Ultimately, I want to see employment in Wales based on creating a new future, not on simply perpetuating the status quo.

To argue that we should ignore such questions – and all the strategies produced by government – in pursuit of jobs, in whatever field, is to avoid taking responsibility for building a different kind of future for our country and the world.  Politicians who argue otherwise are simply reacting to and managing ‘what is’ rather than building ‘what should be’.

Fiddling at the fringes

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According to this story yesterday, job losses in the Welsh public sector could be up to 26,000, and each job loss in the public sector could be matched by a job loss in the private sector, pushing the total cost to the Welsh economy up to around £3.65 billion.  I assume that to be an annual figure, although it wasn’t stated as such, and nor was there much by way of clear justification of any of the other figures.  I’m not sure how confident we can be, as a result, in the precise figures, but there are some key general points that do emerge.

The first is that cutting spending in the public sector is not neutral in its effect on private sector employment.  There is a direct knock-on effect as the public sector places fewer contracts and buys fewer goods and services.  It’s a relationship which should be obvious, really, and I don’t understand why those who are so keen to cut the public sector quickly and deeply don’t understand that relationship. 

The result is that, even if we assume that the private sector is going to create jobs to take up the pool of labour created by public sector cuts, the total number of jobs needed is much higher than simply those cut from the public sector.  And that’s just to stand still, without doing anything about the high levels of unemployment which were there to start with.

The second thing that struck me about the report was the quote from the IoD representative, who claimed that “the private sector was doing its best to create jobs to compensate for public sector cuts”.  I’m not convinced about that.  For how many organisations in the private sector does the question of ‘creating jobs’ feature in the mission statement, strategy, or objectives?  Not many, I suspect. 

Private companies exist to make money for shareholders, not to employ staff, and part of the reason that the economic system is badly broken is that there has been an obsession with ‘efficiency’ as companies try to produce more goods and services more cheaply – generally for less effort using fewer employees.  Whilst it’s true that the expansion of private companies can create jobs, that’s a side-effect – it’s not the aim.  Suggesting otherwise is mere spin.

The third point is the repetition of the canard that the problem with the Welsh economy is that we are “over-reliant on the public sector”.  That’s an ideological belief rather than a statement of fact.  There is no magic number for the percentage of the economy which belongs in one sector or the other, and it really doesn’t matter, in terms of GVA, whether a particular activity is carried out by the private sector, by the public sector, or by the private sector as a contractor to the public sector. 

(I’d accept that there are questions about whether the public sector has historically been as ‘efficient’ as the private sector.  That’s a subject for another day, but the point is that there really is no inherent reason why the public sector should be any less productive or effective than the private sector.  And there have been, in the past, plenty of examples of profitable businesses in the public sector – until they were sold off.) 

Who owns enterprises is irrelevant from a GVA perspective, but we’re stuck in the Thatcherite mode of believing that only private profit can drive an economy, and that the state should only concern itself with the provision of a limited range of services.  It’s a paradigm which patently isn’t working, yet governments and oppositions alike only offer us more of the same.

On the same page as that story was the report about Cameron stating that “getting debt under control is harder than envisaged…”.  The only thing that surprises me is that he or anyone else would be in any way surprised at that.  Increasing the numbers of unemployed people reduces tax revenue and increases benefit expenditure, leading to the government needing to borrow just as much as if they had stuck to Labour’s plans.  They’re effectively just spending a similar amount of money in a different way.

Labour seem to take some satisfaction from that, but they really shouldn’t.  The difference between the two parties' approaches is little more than fiddling at the fringes.  £6billion may sound like a lot of money, but it’s really neither here nor there in the grand scheme of things.  But within the current paradigm, fiddling at the fringes is the best we’re likely to be offered by conventional political parties.  None of them is offering a real alternative.

Where's the meat

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Both the BBC and the Western Mail give us a preview of Carwyn Jones’ speech to a Welfare to Work Convention in Cardiff today.  The impact of the UK Government’s welfare reforms seems to be getting a large chunk of his speech.

I’d agree with him that the ‘reforms’ are going to have a disproportionate effect on the most vulnerable, and I think he’s right to defend the Welsh Government’s record on issues such as prescriptions.  And I can see how some of those policies being pursued in Wales can foster and encourage social inclusion; free transport for older and disabled people, for instance, can enable them to participate in activities which would otherwise be beyond their reach.

I wonder though how free prescriptions and bus passes really promote ‘social mobility’ as he seems to be claiming.  And, not for the first time, I wonder whether ‘social mobility’ is the right objective anyway – it’s not the movement of individuals between levels which we need so much as an evening out of the levels.

But the thing that really struck me about his speech as reported is the dearth of firm alternative proposals.  He talks about “monitoring developments closely”, and establishing “a ministerial ‘task and finish’ group responsible for assessing and monitoring the cumulative impact of all the welfare changes”; he refers to the government taking “its responsibilities seriously to meet this challenge” and being “progressive” and says that he would “never shirk away from tackling issues that could have detrimental implications to Welsh Government policies, services and Welsh citizens”.

There is, though, little of substance by way of positive action.  There is a recycling of the claim that they will “create 4,000 new jobs a year in Wales for the next three years”, which is in reality little more than offering a series of 6-month placements to 2000 people at a time.  It’s not a bad idea in itself, but it’s been hyped to be more than it is.

Overall, the speech is more rhetoric than programme.  I’m sure that other parties will use that to demonstrate, yet again, a lack of ambition.  That’s probably not entirely unfair, but the lack of firm proposals also reflects the Welsh Government’s lack of real power on economic issues.  Criticism of a lack of ambition by the governing party suggests that the solution is as simple as changing the governing party.  It really isn’t that simple, and suggesting that it is diverts attention from the real issue of how we develop a serious economic alternative.

Wants and needs

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To listen to the voice of the ‘business community’, one might think that one key element on the road to full employment and economic growth is as simple as freeing business from ‘regulation’ – and in particular, allowing them to pay lower wages, have staff work longer hours, and limit employees’ rights as much as possible.  I can see how any individual business would see all of those things as enabling it to produce more for less and thus increase profits. 

At first sight, it’s no surprise therefore that the collective voice of business expresses this sort of view to government.  It should be though, because what individual businesses want, in order to compete against each other, isn’t necessarily what the economy as a whole – and all the businesses in it – really need.

The approach is grounded in looking only at the cost side of the equation, and only from the narrow, micro, point of view.  It’s a natural tendency, because costs are easier to control, but it isn’t the whole picture.

On the income side, businesses actually need customers with money to spend and time to spend it.  I sometimes wonder if every individual business trying to reduce its own labour costs to gain competitive advantage isn’t making the implicit assumption that the consumers of their products and services will be the ‘overpaid and unproductive’ staff of their competitors.  In effect, attacking pay and hours to compete only works as long as everyone else doesn’t do the same thing.

There is another implicit assumption being made as well, which is that as some businesses become more ‘productive’ and thus free up labour, then other businesses will expand, or be started, to take up the slack.  That’s an assumption which underlies the whole economic policy of both government and opposition.  And, albeit with a greater or lesser degree of success at different times, it’s proved a valid assumption, to an extent, over the long term. 

The fact that it doesn’t currently seem to be happening doesn’t necessarily mean that it won’t happen in due course, but it is at least possible that, this time, it won’t.  What happens then?  What’s Plan B?

The government and opposition alike would have us believe that the lack of investment at present is down to a failure of banks to lend.  And I'm no fan of banks, but there's a danger that they're just a soft target.  There is plenty of evidence that a lot of businesses, particularly the larger ones, are sitting on enormous pots of cash.  That would mean that it’s not a lack of cash which is holding back investment, but a lack of opportunities to invest profitably.

The political assumption is that any Plan B would essentially revolve around either public authorities investing in infrastructure, or else cutting taxes to put more money in people’s pockets so that they can go out and spend.  The evidence suggests that, of the two approaches, the former would be more effective, even though any jobs created are likely to be of temporary duration, partly because putting more money in people’s pockets at present is more likely to lead to a paying down of debt than an increase in spending.

However, if we assume for a moment that putting more money in people’s pockets would actually work, why the assumption that the only way to do that is to reduce this tax or that tax?  Paying higher wages by sharing the rewards more equally could potentially have the same effect, as could employing more people to reduce all the unpaid overtime worked by an increasingly stressed labour force.  (That would also give people more leisure time to spend the extra money as well.)

Reducing productivity and paying higher wages is counter-intuitive, of course.  We’ve been brainwashed into thinking that ever increasing productivity and cost reduction are inherently good things, just because they seem to make sense at the micro level.  But at the macro level, they only make sense as long as the assumption that something else will take up the slack remains valid.  Otherwise, those increases in productivity have to pay for the unproductive slack.

In that case, a real and radical Plan B involves a fundamental re-think about the basis on which the economy is run, and a move towards a more co-operative rather than competitive approach.  An economy, in short, which is built around the needs of the whole of society rather than around the wants of the minority.

They used to say that ‘What’s good for General Motors is good for America’, but it seems to me that, in economic terms, ‘What’s good for the whole is good for the parts’ is much more likely to be true in the long run than ‘What’s good for this part is good for the whole’.

When is a job not a job?

Tweet The answer, of course, is when it’s ‘created’ by politicians.  The only ways that governments can directly ‘create’ jobs are by increasing public expenditure and employing people directly, or by establishing profitable state-owned enterprises.  Neither the UK Government nor the Welsh Government seems likely to do either of those things any time soon, so claims that they are creating jobs need to be treated with considerable caution.

That didn’t stop both governments launching schemes yesterday under which they are both claiming to be creating large numbers of jobs.  I wouldn’t seek to deny that both schemes have their merits; but I don’t think that the headline claims stand up to examination.

Perhaps it’s partly down to my definition of what a ‘job’ is.  For me, if a government claims to have created 10,000 jobs over its life, then, all other things being equal, I’d expect there to be 10,000 more people employed at the end of the government’s term than there were at the outset.  For governments, however, creating 10,000 jobs seems to mean that over the government’s life, 10,000 people will have had a job at some time or another, not necessarily concurrently, and not necessarily for any length of time.

So the Welsh Government’s scheme, headlined as creating 12,000 jobs for young people over three years, actually boils down to 12,000 people having a six month placement at some time during the next three years.  There is – and can be – no guarantee that a single one of those people will still have a job at the end of the placement, or that there will be any more people in work in Wales at the end of the three years than there are now.

Then we have the UK Government’s scheme.  The numbers look more impressive but when one compares the size of Wales and England, they really aren’t that different in scale.  And, again, there’s absolutely no guarantee of any jobs at the end of the programme.

One supporter of the UK coalition, Peter Black, gamely tries to draw a distinction between the two schemes under which the UK Government has got it right and the Welsh Government has got it wrong.  But there are more similarities than differences between the schemes; both are based to a significant extent on extended periods of work experience.  The underlying principle, that of making people ready for work and putting them at the front of the queue is the same.  And the underlying failure of both – that they do nothing to ensure that there will be any jobs for which to queue – is the same as well.

Chris Dillow has an interesting piece today when he suggests that, regardless of what governments do, we are in for a lengthy period of sustained high levels of unemployment, based on the fact that the level of economic growth needed to avoid that is simply not attainable.  It’s a depressing analysis, but he makes a good argument for the prediction, even if it isn’t one which he or I would wish to see fulfilled.

I’d even argue that, in trying to get more people into the labour market by encouraging mothers back to work and by forcing older workers to wait longer for their pensions, the government is actually making the task of attaining full employment harder, not easier.  Add to that the continued drive for increased labour productivity, and the availability of ever-larger and cheaper work forces in other countries, and the task starts to look well nigh impossible.

A more radical approach would be to share more evenly both the work available and the rewards for performing it, in a fundamental re-think of the way our economy works.  I’m not expecting to hear either government produce proposals for doing that though.  Much easier to just recycle claims about ‘creating’ jobs and hope people will believe them.

But where's the ploughshare factory?

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Many of the jobs being lost as a result of the cutbacks at BAE systems are the sort of skilled engineering jobs which are key to maintaining a manufacturing capacity at a time when so many manufacturing jobs have been exported to the Far East as a result of untrammelled globalisation.  And the job losses will be a heavy blow for the individuals and communities concerned.

The losses are, however, an inevitable result of cutbacks in military expenditure, which underlines two important points.

The first is that cuts in public expenditure don’t only affect jobs in the public sector.  Listening to some members of the government, one would believe that it’s only the ‘bloated’ (one of their favourite words) public sector with its ‘gold-plated’ (another favourite term) pensions and conditions which is being cut, and that cuts to the public sector are entirely necessary to restore the public finances.  In practice, there is a much higher degree of interdependency between the sectors than that.

And the second is that it is not possible to cut back on military spending without there being an impact on jobs and the economy – and I say that as one who has regularly and consistently called for a scaling down of the UK’s military expenditure.  ‘Swords into ploughshares’ is a two-part process; the second part is as important as the first, but is completely missing from government strategy.

I can understand the reaction from trades unionists and politicians, which has been to criticise the cutbacks and seek protection for the jobs, but it’s the wrong reaction.  What we need isn’t protection of jobs producing military hardware, but a planned and managed switch of those jobs into peaceful manufacturing.  Looking only at one side of the equation is short-sighted.

Poverty and targets

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The first half of John Osmond’s piece yesterday on ClickOnWales made for depressing reading.  At the risk of over-simplifying or misrepresenting his argument, he suggested that governments seeking to achieve reductions in the level of fuel and child poverty will find that the greatest impact for the lowest cost will be on those for whom the least needs to be done to lift them out of poverty, and thus that any reduction in numbers in poverty will be because the most marginally poor have been helped rather then the most severely poor.

I found it a compelling argument, and I agree with his conclusions that the governments in Cardiff and London are unlikely to achieve their targets, and that the result of any success in reducing the numbers in poverty is likely to be that those left in poverty will be those who are in the most severe poverty today.

John goes on to talk about two particular initiatives which he thinks would do more to help.  Both are aimed at economic development leading to the provision of jobs which would enable families and individuals to escape from poverty.  I certainly don’t disagree that people with decent jobs are less likely to be in poverty than those without; and any actions which increase the supply of well-paid jobs will undoubtedly help to address the problem.  (I’m not going to comment on the detail of the proposals here, although I do have some reservations about the idea of the Cardiff City Region.)

Whilst economic growth would certainly have been seen as the answer in traditional economics, I’m not convinced that it is a sufficiently comprehensive answer to the problem in a world where we have to accept finite limits on resources and therefore on growth itself.  We cannot avoid considering how the benefits of economic activity (and thus access to, or lack of access to, resources - which in a sense is what wealth and poverty are) are shared.

If resources are infinite, it is easy to see how increasing total wealth can lift everyone out of poverty; but once they are recognised as not only finite, but also already over-exploited, then excessive wealth for some will almost inevitably lead to poverty for others, particularly on any relative, rather than absolute, definition.  Serious action on poverty must, at some point, address the disparities of wealth within society.

Mixed Messages?

Tweet Last week, Dylan Jones Evans posted on an internal WAG document which seemed to be indicating that grants would, after all, still be available for inward investment projects, which is not quite entirely in accord with the impression given when the ERP was launched. Having seen the document to which he was referring (thanks to Dylan for sharing that), it seems to me that it backs up the interpretation which he placed upon it. That interpretation is given further credence by the article by David Rosser in yesterday’s Western Mail.

Leaving aside the issues of politics, spin, and mixed messages (which are unfortunate to say the least), the real question surely has to be whether what is proposed is right or not. When I gave a broad welcome to the ERP, I made the point that, whilst in principle the withdrawal of grants for businesses seemed to be the right thing, we do need to be careful about whether Wales will lose its edge as a result, particularly in the case of those businesses which have a choice of location. That’s exactly the point which the CBI make, of course.

It’s an issue on which I’m something of an agnostic. On the one hand, using grants to attract jobs carries the danger of different parts of the UK (and the wider world) getting into a bidding war to see who can give most public money to a private business. On the other, we want the jobs, and not being prepared to engage in the realities of the market place might be short-sighted.

And it still leaves the question of whether inward investment will therefore get a better deal than indigenous investment. Or even worse, whether local companies will threaten to locate any expansion plans elsewhere so that they too can be treated as ‘mobile’.

The basic principles underlying the ERP still seem sound to me, but ultimately it will be judged by results.

Universities, graduates, and jobs

Tweet It looks as though a significant number of young people who want to go to university, and who have obtained good enough A level results to do so, are going to be disappointed this year when they find that there are not enough places available for them. And it won't simply be a case of those who obtain the lowest grades being excluded either - depending on the choice of university and subject, many of those rejected could actually possess better grades than many of those accepted.

It raises big questions about how many places should be provided at universities, and how they should be filled.

It seems to me that there are two fairly rational ways of determining how many places should be provided in total. The first is to look at the number of people who want to have a university education, and who meet the minimum requirements; the second is to look at the number of jobs requiring graduates, and only provide enough places to meet that demand. We are actually doing neither of those things; we are setting the number of places based primarily on the cost of providing them.

I make no secret of the fact that I favour the approach of providing the education for all those who want it and meet the minimum requirements. A better educated population has advantages well beyond the merely economic.

But I also think we need to get away from the idea that there are 'graduate jobs' and 'non-graduate jobs'. Of course there are some jobs where a particular degree qualification is an absolute requirement – medicine is the one which immediately springs to mind. But in many cases, employers restricting their openings to graduates are doing so unnecessarily. It's sometimes little more than a lazy way of sifting and grading people.

As a concrete example, I remember having a bit of a battle with HR professionals many years ago when I wanted to recruit non-graduates as computer programmers. We were having difficulty getting the numbers we needed, and I just didn't see that a degree was as relevant as having the basic aptitude and ability. I won the battle, and the people I went on to recruit turned out to be, on the whole, just as effective as the graduates.

Many graduates themselves are already having to recognise that if they want to restrict themselves to jobs labelled as being for graduates, then they are restricting their career chances. And many of those being rejected by universities this year will be every bit as able and competent as those accepted, but will be available for work three years earlier than their successful schoolmates. Employers who ignore that pool of talent will be doing themselves no favours in the long term. Judging people on their abilities and experience rather than on possession of a particular piece of paper may be harder to do; but those employers who are prepared to do it will find they have access to a wider range of talent.

Setting unrealistic expectations about the opportunities available to people just because they are graduates; excluding people from consideration just because they aren't; and deciding how many graduates to turn out for financial reasons rather than based either on demand for skills or demand for places are all misguided ways of looking at the benefits of higher education both to individuals and to society as a whole.