Mini-jobs: Will they help?

A new legal category of work might help people into unemployment.

The creation of "mini-jobs", which allow people to take on work without paying tax or national insurance, is being considered by the Treasury as one of a package of measures to make it easier to create employment.

The idea – being promoted by some influential Conservative MPs – is modelled on a scheme in Germany, in which employees can earn up to €400 a month (about £314) without giving up any of their salary, and employers pay only a flat rate to cover pensions, social insurance and wage taxes, making administration simpler.

People can hold several mini-jobs up to the €400 a month tax-free limit, with the only impact on their income being the reduction of unemployment benefit over a certain threshold. Between €400 and €800, workers pay tax on a sliding scale.

As discussed in an ex-ante appraisal of Germany’s 2003 mini-jobs reform by the DIW Berlin, the plan is essentially a subsidy on low earnings so as to increase employment in low wage markets and to ease the long-term unemployed into the labour market.

Firstly, on the supply side, it is argued that welfare recipients are unlikely to enter the labour force when the already low wages they have access to are further depressed by social security contributions. Secondly, on the demand side, DIW argue that:

Given limited downward wage flexibility in the low wage sector due to binding minimum wages, SSC have to be borne at least partially by the employer of low-skilled workers, thus reducing their employment.

The Free Enterprise Institute, which has spearheaded the appeal for "mini-jobs" in the UK, has praised the German reform for lowering youth unemployment, increasing turnover in the jobs market, and increasing temporary work by two per cent in ten years. The report goes on to lament the fact that temporary workers account for just six per cent of the UK labour force, in contrast to Germany’s 15 per cent.

While the merits of increasing temporary employment are at best contentious, German commentators have criticised the mini-jobs model for creating "a massive disincentive for the unemployed".

Rather than bridging the gap between the labour market and the marginalised, they argue, mini-jobs have further ostracised the peripheries of the labour force by trapping them in low-wage jobs that offer no margin for progression. It is held that the subsidies, by inflating the value of low-wage jobs (as is intended) will lead people to substitute longer-term, more stable sources of income with mini-jobs. This, one can argue, while soothing unemployment in the short run, can have hazardous effects for income inequality, as well as stifle the development of a skilled labour force. Similarly, employers will be encouraged to fragment existing full-time jobs into series of mini jobs, thus extending the potential evils of the reform beyond those that are currently excluded from the labour market.

Consequently, the subsidy (as predicted by the aforementioned DIW paper) may reduce tax revenue without actually reducing welfare subsidies. This is confirmed by Johannes Jakob of the Federation of German Unions, who contends that the most viable option consists in combining welfare with a tax-free mini-job.

While the initiative may induce some people to temporarily seek employment, it is likely that mini-jobs will prove an expensive and structurally venomous distortion of the labour market.

John Lennon in a Mini Cooper. Well how would you illustrate mini jobs? Photograph: Getty Images
Photo: Getty Images
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Can non-voters win the next election for Labour?

Any Labour leader who pins their hopes on getting non-voters to the polling station will be defeated in 2020. 

Question: how can non-voters win the 2020 election for Jeremy Corbyn?

Short answer: they can’t.

This isn’t an anti-Corbyn point, by the way: they also can’t win a general election for Yvette Cooper, Andy Burnham or Liz Kendall. There is no route to a parliamentary majority for any of Labour's leadership candidates which doesn’t involve addressing the concerns of Conservative voters.  Why not?

Well, there’s the obvious point that you can’t only raise your own turnout. Take, say, Barack Obama’s successful presidential bid in 2008: yes, he increased turnout among young graduates and ethnic minorities, contributing to his victories in traditionally Republican-leaning states like North Carolina and Florida. But he also increased turnout among Republican voters, losing by a bigger margin in Tenessee, Arkansas, Louisana, Oklahoma and West Virginia than John Kerry did in 2004.

The problem for British politicians attempting to emulate the Obama strategy is that Britain is less diverse than the United States.  British constituencies are, for the most part, what sociologists call “socially crunchy” – so if you increase turnout among, say, ethnic minorities and young graduates, but turn off, say landlords and middle-managers, there are very few seats where you will feel the benefits but not the punishment. (In fact, most of the seats where this is the case Labour already hold.)

Then there’s the bigger problem. Non-voters aren’t actually all that different from voters. After the election, the Trades Union Congress commissioned Greenberg Quinlan Rosner Research to find out what had gone on. Here’s why non-voters and voters didn’t opt for Ed Miliband’s Labour party here:

As you can see, there is not a vast gulf between the two groups. (“Other” by the way, includes responses like “They weren’t leftwing enough”, "They sold the gold", "Iraq" and so forth.) Even if you assume the 35 per cent of “Don’t Knows” actually mean “I was waiting for a real Labour party”,  and that a more radical Labour party  would attract all of them, look at the worries that people who went on to back Labour despite them in 2015 had:

It’s hard to see how a more “traditional” Labour approach on public spending, welfare, and so on wouldn’t also lose voters from Labour’s existing 2015 bloc. But what about, say, the Greens and the SNP?

It is just possible that the 20 per cent "Other" in the SNP is all "Labour weren't leftwing enough" but it seems likely that at least some of it is "I want to leave the United Kingdom". But even if we take all of that 20 per cent, we're still talking Labour gais in Scotland of fewer than ten seats. Now let’s look at people in social grade DE, semi-skilled and unskilled manual workers, what you might categorise as Labour’s “traditional” core:

Look familiar? Now, here’s what Ukip voters and Tory voters made of Labour in 2015:

That’s not to say that the next Labour leader shouldn’t aim to increase turnout. It’s just to say that there is no evidence at all that policy prescriptions that turn off Conservative voters will have a more natural home among people who didn’t vote – quite the reverse.  Whatever happens, if the next Labour leader wants to win the next election, they are going to have to win over people who thought "they would make it too easy for people to live on benefits", and that "they would spend too much and can't be trusted with the economy". The next Labour leader – whoever they are – is going to have to try to win over people who voted Tory in 2015. This is one of the few times in politics where there really is no alternative.

 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.