Wednesday, 29 February 2012

Workfare - bad for capitalism

The issue of unemployed people being made to do unpaid work for their benefits for a number of big companies - mostly retail - has become one of the Con Dem coalition's hottest potatoes.  Public revulsion has led to a number of companies partially or wholly withdrawing from the scheme, and Ministers are plainly so rattled by the opposition that they have resorted to ludicrous rhetoric about "job snobbery" and even claims that the Socialist Workers' Party is behind the opposition to their scheme.

Leaving aside all the moral issues about people being made to do work for their benefits, and the questions around the extent to which these jobs replace paid work (one supermarket chain reportedly sending its paid staff home around Christmas while using its unpaid workforce to do their work), there's a fundamental economic issue here.

Put simply, workfare is just bad economics.

There are three reasons why a rational capitalist should reject workfare.

  • First, at a time of high and growing unemployment and deep recession, it takes demand out of the economy.  While using unpaid labour increases profits, it reduces aggregate demand - especially when one considers that retail jobs are traditionally low paid, which means that retail workers are more likely to spend a higher proportion of their pay. 
  • Second, if you believe in the power of the free market, it's a gross market distortion.  Effectively it means that some of the largest and most profitable companies in Britain are being handed a massive corporate subsidy.  At a time when the media are awash with cheap rhetoric about benefit scroungers - most of it, wilfully or otherwise, without any real foundation in fact - it's profoundly ironic that big and profitable companies, many of whom have already been named as employing sophisticated tactics to avoid paying tax, are receiving subsidy in the form of workers paid for by the state.
  • Third, it does nothing to produce the flexible and skilled workforce that business leaders constantly argue is needed for the future.  There is no evidence at all that mandatory workfare actually leads to long term employment (and the DWP's ambiguity about the extent to which the scheme is mandatory is one of the more curious aspects of the whole controversy); the evidence suggests that it does nothing to create long-term jobs.  Moreover, the lack of opportunity for good non-graduate jobs remains a key problem that workfare simply avoids.

In other words - a good, serious capitalist who wants capitalism to flourish should be the first in the queue to campaign against the Government's workfare programmes.  The arguments are, at heart, simple.  Hence the stupidity of the rhetoric about the SWP - I cannot claim to be an expert on the SWP's programme but I'd be surprised if it included rescuing capitalism from the imbecility of the politicians who claim to promote it (which is, in essence, the Keynsian project)  The only rational conclusion is that workfare has nothing to do with economics and everything to do with ideology.


  1. Small businessmen should be raging against their business neighbours who use workfare. Every workfare worker is one who can't be spending a wage they're earning but aren't being given. That's potential and in many cases actual loss for every other business in the area. Where's the anger from the business community?