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Tuesday, 30 April 2013

The carrot is more effective than the stick.

Universal Credit, will be introduced in four local jobcentres in selected areas of Ashton-under-Lyme, Oldham, Warrington and Wigan.

Iain Duncan Smith tax credits
Work and Pensions Secretary Iain Duncan Smith

There is a fundamental flaw in the economic logic that argues by essentially, cutting benefit payments it will somehow, automatically "force" people back to work. Wrong. The way to achieve the objective of getting people off benefits (and thereby cutting the amount of benefit payments), is to generate the conditions and the environment where work is available. Given that the majority of claimants would rather be gainfully employed, it seems reasonable to assume that people would take up work, were the opportunities there to do so. Clearly, the private sector has had only a marginal effect in the creation of real job opportunities. It therefore follows that the public sector, government in fact, must create demand within the economy to encourage other businesses to expand take on more workers. The economic "accelerator principle" has long been accepted as a valid economic tool. There are those, even in the "comments" sections of the Huffington Post and elsewhere, who argue that governments do not create jobs. Again, wrong. Governments are in a prime position to provide job opportunities a role which the private sector has been woefully inadequate in fulfilling. Contracts, placed by government through local councils, to build social housing for rent together with low cost housing for purchase would address both the problem of housing shortages and lack of job opportunities. Councils across the country hold considerable amounts of "brownfield" sites, together with other parcels of land which are ideal for housing purposes. There are other projects which government could commence for with the expectation of short to medium term employment, rather than very long term proposals such as HS2, scheduled for commencement in 20 years and which may not even “get off the ground” in any case.
The carrot of work opportunity is greater than the stick of cuts to benefits.