Economic value of job creation?

[mandelbrot]

Just want to try to get a handle on this, and not expecting a calibre of discussion appropriate to the proper forum...

What would be the economic value of say 10,000 new jobs in the economy?

By this I mean, the effect of 10,000 people coming off the live register and into, say, fairly basic minimum wage or slightly above, jobs?

There would be a saving on the whole range of state supports these people were depending on, and then there would be the multiplier effect of the additional money they would be spending in the domestic economy... increased VAT, USC, PRSI, some income tax.

Just spitballing I'd expect it would be between a quarter and half a billion... (10,000 jobs @ 18k p.a. is 180m and 10,000 off the live register at anywhere from 10k to 20k p.a.), even if the actual output produced by the jobs added nothing to the economy (like a call centre servicing the UK), that wouldn't matter.

Which leads me to wonder, are we doing enough and investing enough to try to attract new jobs, of whatever type into the country, by whatever means necessary? The return on any investment would appear to be very good, even if it's investing borrowed money.

Am I being overly simplistic or what?

 

[Chris]

The problem is where is the €180m going to come from to pay for these people. If it is by private investment then all is well and good. If it is through the state then this is very bad. The reason is that the state has to take that money from somewhere, bit like taking money out of one pocket and putting it in the other, or writing yourself a cheque.

As you mention, how do you get that private investment? The best thing the state can do to encourage companies to invest in their existing or new businesses and add more staff is to get out of the way. Too many industries have huge barriers to entry through regulations protecting the big players, taxes and other council fees are so high that many businesses have to downsize or close, and the minimum wage is too high for many companies to be able to expand or come here in the first place.

Ireland's corporation tax is a perfect example of what happens when you lower the state imposed costs of doing business.

 

[mandelbrot]

The problem is where is the €180m going to come from to pay for these people. If it is by private investment then all is well and good. If it is through the state then this is very bad. The reason is that the state has to take that money from somewhere, bit like taking money out of one pocket and putting it in the other, or writing yourself a cheque.

As you mention, how do you get that private investment? The best thing the state can do to encourage companies to invest in their existing or new businesses and add more staff is to get out of the way. Too many industries have huge barriers to entry through regulations protecting the big players, taxes and other council fees are so high that many businesses have to downsize or close, and the minimum wage is too high for many companies to be able to expand or come here in the first place.

Ireland's corporation tax is a perfect example of what happens when you lower the state imposed costs of doing business.

Oh God no I don't mean State created jobs; I mean grants or subsidies or concessions or whatever way it needs to be dressed up to facilitate FDI or high potential domestic business.

If say it costs the state 50m - 100m to attract 10k jobs' worth of investment, we'd get a fantastic return on it.

 

[T McGibney]

Oh God no I don't mean State created jobs; I mean grants or subsidies or concessions or whatever way it needs to be dressed up to facilitate FDI or high potential domestic business.

If say it costs the state 50m - 100m to attract 10k jobs' worth of investment, we'd get a fantastic return on it.

Jobs created by "grants or subsidies or concessions" are, by definition, State created jobs.

The state has wilfully overseen the loss of tens of thousands of jobs since 2008 by increasing the tax burden on business and consumers (most notoriously by the rise in the standard VAT rate) and by failing to take action to:
- scrap upward-only rent reviews,
- reduce local authority rates & stealth charges to realistic levels,
- cut red-tape and associated compliance costs.

In this light, any parallel initiative to 'create' jobs is pointless.

 

[Yachtie]

When the whole Target thing came out, I roughly worked out that the state would have been better off by writing off the outstanding taxes than paying the job-seekers to 400 employees for the year, if the company was truly viable and the €100-odd thousand in VAT were the real issue.

I haven't followed this to the end so I don't know what the final score was but my logic was along the lines:

400 (employees) x €180 (JSA) x 52 (weeks) = €3,744,000.00

If 100-odd k in unpaid VAT was the real number, it was less than 0.3% of the cost to the state to give those people a basic benefit for a year.

 

[Yachtie]

I would like to add that I don't think that creating 10,000 jobs would be 'that' difficult. I run a small business and always need people. The nature of the business is that if I am honest, I can guarantee a job for up to 3 months because that's how much work I'd have in the pipeline. Another project may come up in the mean time and I may be able to keep on the employee on the rolling contract basis but I can't guarantee it. You wouldn't beleive how many times I have been turned down by people looking for work NOT because they are lazy or don't want to work but because it took them months to start getting their JSA / JSB that they don't want to risk having to go through the same rigmarole if work I can offer dried out in three months. If it was easier to take people off the live register and put them back on (Revenue-On-Line?), a lot more people would be 'falling in and out' of jobs but at least they wouldn't cost the state anything.

 

[mandelbrot]

When the whole Target thing came out, I roughly worked out that the state would have been better off by writing off the outstanding taxes than paying the job-seekers to 400 employees for the year, if the company was truly viable and the €100-odd thousand in VAT were the real issue.

I haven't followed this to the end so I don't know what the final score was but my logic was along the lines:

400 (employees) x €180 (JSA) x 52 (weeks) = €3,744,000.00

If 100-odd k in unpaid VAT was the real number, it was less than 0.3% of the cost to the state to give those people a basic benefit for a year.

There was a lot more to it than that though Yachtie, the CG's simply don't close down businesses of that size over a debt that size. Maybe you should have followed it through to the end of its run in the news:

"Initially, there was widespread sympathy for the haulage boss from both the public and his workers, who staged sit-in protests in Target Express depots across the country.
However, by Wednesday a receiver had been appointed to the company and the mood among the workers changed as they began questioning the company's finances.
In a press release, staff said they believed that "management have been misrepresenting the situation in this regard in the media".
The following day, court-appointed liquidators [broken link removed] said the company was "hopelessly insolvent" and also revealed that Mr McBrien's freight firm owed €600,000 in workers' social insurance contributions and [broken link removed] to Revenue." (http://www.independent.ie/national-news/target-express-boss-guaranteed-16m-of-loans-3216966.html)


The 600k in PAYE/PRSI referred to above is presumably separate to the arrears that the CG's had been chasing... It appears they were in a hole that was only getting deeper, robbing Peter to pay Paul, and the Revenue have a responsibility to ensure the integrity of the tax system, not to be a lender to businesses - how fair would it be to Target's competitors who put themselves to the pin of their collars to stay fully compliant, at risk of going out of business themselves and being undercut by a company who are financing their working capital out of fiduciary taxes...

 

[Leper]

I'm not the greatest guy when it comes to mathematical calculations regarding unemployment, state of the economy, projected profit, economies of scales, dis-economies of scales, rate of inflation, mood of the country, economic think-tanks etc.

But, I know one thing, 10,000 new jobs is not to be sniffed at. If they are there, grab them whether they are for 3 months or 3 decades. Due to lack of know-how I cannott answer the question Mandelbrot posed.

But, I can throw in the following (if I'm off on my usual tangents, please forgive me):-
1. The Civil Service is virtually closed to new jobs.
2. The traditional annual available jobs in the banks no longer exist.
3. Jobs in the ESB, Telecom, Health Boards (nearly 100% of every graduating nursing class emigrate within a fortnight of qualifying). Years ago P&T (Telecom) used to take on thousands of job applicants yearly, not anymore for years).
4. Farming has gone high tech, no need for as many farm labourers etc.
5. Call Centres offer limited jobs, but as soon as they sprout roots the whole shebang is moved to Asia.
6. Insurance no longer is a safety net.

From where I stand (not far off full time retirement) I cannot see a decent future for Ireland or its people and I firmly believe this down-turn/recession has now become our norm and will be Ireland's norm forever. I regret saying this and am fully aware that what I am saying is negative and politicians would queue up to blow me out of the water. If anybody else is in that queue please feel free to blow me out of the water, but not politicians, I am not capable of believing one word from them.

 

[Yachtie]

There was a lot more to it than that though Yachtie, the CG's simply don't close down businesses of that size over a debt that size. Maybe you should have followed it through to the end of its run in the news:

"Initially, there was widespread sympathy for the haulage boss from both the public and his workers, who staged sit-in protests in Target Express depots across the country.
However, by Wednesday a receiver had been appointed to the company and the mood among the workers changed as they began questioning the company's finances.
In a press release, staff said they believed that "management have been misrepresenting the situation in this regard in the media".
The following day, court-appointed liquidators [broken link removed] said the company was "hopelessly insolvent" and also revealed that Mr McBrien's freight firm owed €600,000 in workers' social insurance contributions and [broken link removed] to Revenue." (http://www.independent.ie/national-news/target-express-boss-guaranteed-16m-of-loans-3216966.html)


The 600k in PAYE/PRSI referred to above is presumably separate to the arrears that the CG's had been chasing... It appears they were in a hole that was only getting deeper, robbing Peter to pay Paul, and the Revenue have a responsibility to ensure the integrity of the tax system, not to be a lender to businesses - how fair would it be to Target's competitors who put themselves to the pin of their collars to stay fully compliant, at risk of going out of business themselves and being undercut by a company who are financing their working capital out of fiduciary taxes...

That's fair enough. As I said, I didn't follow it through as I got bored with it (as soon as witch hunt of Sean Quinn's suporters was mentioned) and other stuff got in the way. My example was lead by the basic principle that it's a lot easier and cheaper to maintain an existing job than to create a new one.

 

[Chris]

Jobs created by "grants or subsidies or concessions" are, by definition, State created jobs.

The state has wilfully overseen the loss of tens of thousands of jobs since 2008 by increasing the tax burden on business and consumers (most notoriously by the rise in the standard VAT rate) and by failing to take action to:
- scrap upward-only rent reviews,
- reduce local authority rates & stealth charges to realistic levels,
- cut red-tape and associated compliance costs.

In this light, any parallel initiative to 'create' jobs is pointless.

I fully agree, what we should be seeing is government doing less not introducing another policy. Every time government encounters the unintended consequences of their actions they jump to additional actions rather than repeal the actions that are the cause of the problem.
I agreed that it would not be too difficult to attract investment if it were made a lot easier for domestic and foreign businesses to set up or expand. The question is whether politicians wi actually do what is necessary.

 

[Purple]

But, I can throw in the following (if I'm off on my usual tangents, please forgive me):-
1. The Civil Service is virtually closed to new jobs.
2. The traditional annual available jobs in the banks no longer exist.
3. Jobs in the ESB, Telecom, Health Boards (nearly 100% of every graduating nursing class emigrate within a fortnight of qualifying). Years ago P&T (Telecom) used to take on thousands of job applicants yearly, not anymore for years).
4. Farming has gone high tech, no need for as many farm labourers etc.
5. Call Centres offer limited jobs, but as soon as they sprout roots the whole shebang is moved to Asia.
6. Insurance no longer is a safety net.

From where I stand (not far off full time retirement) I cannot see a decent future for Ireland or its people and I firmly believe this down-turn/recession has now become our norm and will be Ireland's norm forever. I regret saying this and am fully aware that what I am saying is negative and politicians would queue up to blow me out of the water. If anybody else is in that queue please feel free to blow me out of the water, but not politicians, I am not capable of believing one word from them.

Other than agriculture few of the jobs on your list actually created wealth. I agree that low value-add, low to medium skilled jobs will become more and more uncommon but that’s a good thing, not a bad thing. We have a booming export sector in both indigenous and multinational sectors. The agri-food sector is also doing very well. We need to identify what we are god at, what we can create a brand around, and we need to sell it based on quality at a premium offering. Food and agricultural products are where we have the best chance of doing that.
All the government have to do is get out of the way.

I fully agree, what we should be seeing is government doing less not introducing another policy. Every time government encounters the unintended consequences of their actions they jump to additional actions rather than repeal the actions that are the cause of the problem.
I agreed that it would not be too difficult to attract investment if it were made a lot easier for domestic and foreign businesses to set up or expand. The question is whether politicians wi actually do what is necessary.

That’s not politically expedient and, coupled with the fact that wealth creation is seen as a bad thing by most of our media and political classes it’s very unlikely to happen.

 

[Sunny]

We have a booming export sector in both indigenous and multinational sectors. The agri-food sector is also doing very well. We need to identify what we are god at, what we can create a brand around, and we need to sell it based on quality at a premium offering. Food and agricultural products are where we have the best chance of doing that.
All the government have to do is get out of the way.

One of the reasons why the agri-food sector is doing so well is because of the involvement of the Government Agencies. Their involvement in marketing, quality assurance, research, market supports, opening access to export markets etc is crucial.

Again, one of the reasons why the Mutinational sector is here and doing well is because of the actions of the Government and their agencies.

I am all for the Government making it easier to do business but to suggest that they should just get out of the way and don't have a role to play is a bit over the top.

 

[Purple]

One of the reasons why the agri-food sector is doing so well is because of the involvement of the Government Agencies. Their involvement in marketing, quality assurance, research, market supports, opening access to export markets etc is crucial.

Again, one of the reasons why the Mutinational sector is here and doing well is because of the actions of the Government and their agencies.

I am all for the Government making it easier to do business but to suggest that they should just get out of the way and don't have a role to play is a bit over the top.

The government is getting out of the way of multinationals when they reduce the tax burden they have to shoulder.
They are getting out of the way of small businesses by helping them through the regulation that the state had put in place.

I do agree though that many export focused agencies do very good work. I have found the overseas offices of Enterprise Ireland to be excellent (they guys based here in Ireland are generally of a much lower standard and far less engaged).

 

[Sunny]

The government is getting out of the way of multinationals when they reduce the tax burden they have to shoulder.
They are getting out of the way of small businesses by helping them through the regulation that the state had put in place.

And by removing all the grants, tax breaks etc that are in place as well.

 

[Purple]

And by removing all the grants, tax breaks etc that are in place as well.

Grants yes, but taxes are a barrier so a tax break is the same as removing that barrier.

 

[Sunny]

Grants yes, but taxes are a barrier so a tax break is the same as removing that barrier.

Not really. If you want to reduce the tax 'barrier', reduce the tax rate. Giving a tax break for certain activities like R&D but not for others like producing carrots is no different to giving grants for certain types of activities.

 

[Leper]

Other than agriculture few of the jobs on your list actually created wealth.

Not true Purple in the old days of almost guaranteed jobs in telephone exchenges, banks, civil service etc. These days however, what you said is true.

I can remember 200 to 300 jobs in a telephone exchange (telephone operators) being moved from a city centre location back in the 80s. Dunnes Stores did not want to lose the lunch-time potential of mass shopping and for several weeks gave out vouchers to attract the relocated telephonists back into the city centre for their lunchtime trade, I kid you not.

Roll on the clock 30 years and no longer do we have the mass employment in the Post Office, Banks, Telephone Exchanges, Nursing etc. It does not augur well for Ireland's future.

 

[Purple]

Not true Purple in the old days of almost guaranteed jobs in telephone exchenges, banks, civil service etc. These days however, what you said is true.

I can remember 200 to 300 jobs in a telephone exchange (telephone operators) being moved from a city centre location back in the 80s. Dunnes Stores did not want to lose the lunch-time potential of mass shopping and for several weeks gave out vouchers to attract the relocated telephonists back into the city centre for their lunchtime trade, I kid you not.

Roll on the clock 30 years and no longer do we have the mass employment in the Post Office, Banks, Telephone Exchanges, Nursing etc. It does not augur well for Ireland's future.

The associated jobs were moved from one location to another. The bottom line is that none of that activity brought income into the country.

 

[Chris]

One of the reasons why the agri-food sector is doing so well is because of the involvement of the Government Agencies. Their involvement in marketing, quality assurance, research, market supports, opening access to export markets etc is crucial.

Again, one of the reasons why the Mutinational sector is here and doing well is because of the actions of the Government and their agencies.

I am all for the Government making it easier to do business but to suggest that they should just get out of the way and don't have a role to play is a bit over the top.

But how does government finance these activities? By taking money from the the very businesses it is "helping". If you taxed these businesses less, and reduced other government imposed costs, then these businesses would be perfectly capable of pooling resources to promote their products abroad. And they would have the incentive of doing so in a cost effective way, which the government does not have.

To say that government is helping these businesses and were it not for government then they would be doing a lot worse is like someone breaking your leg, then handing you a crutch and claiming that without him you would not be mobile.

Trade takes place when two people or organizations exchange something. As soon as government steps in the freedom to and flow of trade is disrupted and negatively affected.

Not really. If you want to reduce the tax 'barrier', reduce the tax rate. Giving a tax break for certain activities like R&D but not for others like producing carrots is no different to giving grants for certain types of activities.

I agree with this. It shouldn't be up to government to decide what sectors or businesses need to be helped through grants or tax breaks. If a tax break is good for one sector then it is good for all. I believe that all tax laws should affect all organizations in the same way.

 

[Sunny]

Not exactly true Chris. The government has access to foreign Countries that companies don't. An Irish farmer is not going to get his beef into China unless the Chineese Government allow it. Do you expect the farmer to lobby the Chineese Government? Do you expect a few Irish farmers to head off to Asia to explain and market why Irish beef is better than British or Brazillian without any support?

Ask people in agriculture if the State bodies don't play an extremely important role in increasing exports. As for paying for these bodies, it is not tax that has to pay for it. If these agencies generate enough sales for Irish farmers and companies that they couldn't generate themselves, then they pay for themselves.