Unemployment solution?


I sent this to the ML first, before realizing this was around.
An idea for helping business to hire unemployed people
The system works something like this

Allow business to claim and extra $1 for every $1 they spend on income
for an unemployed person. The extra $1 would have a limit of what ever
that person would have received in unemployment payments ( to make it
easy, say their max payment over the last 12 months). And that the
deduction can be claimed for a min 2 - 3 months for a max of 12 months

So If john smith was unemployed for 3 months and he got a job at xyz
@ $600/w . and his max weekly unemployment payment was say $300/w

Then company XYZ could claim the usual $600 of tax as an expense and
also claim $300 / w extra.

This would last for 3 months as that is the min period and also John
smiths max period on unemployment

Somebody replied on the mailing list - who pointed out this site existed (thanks Peter). Seems like I gave the impression that the person is still unemployed.

(cut paste of reply)
The business would have to hire the person, normal employment, but the
company gets to claim extra deductions from the tax system.

So company XYZ hires john smith, normal employee, normal work, normal pay.
John smith takes home normal pay, the company pays his wages, but
because he was unemployed the government alloys for an extra payment

Business complain the cost of hiring people is to expensive … etc etc etc …

Most business don;t want to expand because of cost, i think this would
allow business to hire people at a reduced cost for upto 2-3 months.
if the works there then they keep them. if not, they go through the
normal process of making somebody redundant. John smith has real life
work experience.

I think the newstart payment that would have been paid to john smith
because xyz didn’t want to hire any one because of cost, can be used
to entice XYZ to hire john smith…

I guess people / business could scam the system, by firing and then rehiring employees every 3 month to make sure they get the 3 months min help out, but I presume you could stop that …

Germany did something like this during the global financial crisis as a way to preserve manufacturing jobs. It seems to work quite well. Costs blow out if every hiring by every business is subsidised that way but you can set limits. Germany’s scheme was time limited so it expired once the crisis passed. You could also set a parameter limit so it applies only for hiring (say) the long-term unemployed.

To keep the hireling beyond the 3 months there would also have to be enough demand, so deeper economic conditions have to be there. Also, the claiming on tax will only work if the business is profitable enough to be paying significant tax on which to be credited. And the profitable ones are probably not the ones which can’t meet the costs of hiring. An alternative could be to pay the unemployed person as a government employee for a few months.

A more consistent economic model might be to offer tax rebates if they are taking on staff and training them in an accredited or nationally recognized skillset.
The value of this is that to the government there is no upfront outlay merely a reduction in tax revenue from that business which should be offset by an increase in income tax from the newly minted employees.
The more accreditation and training a business can prove they provided for an employee the greater the tax rebate which for a short period will make the untrained unemployed a gold mine for businesses to employ. At least in the short term.
The other issue to consider is that many businesses may take employees while there is a tax credit for employing them and once the rebate is removed may fire the person no longer having the financial incentive to keep them. While 3 months employment is better than nothing its not ideal.
Perhaps the rebate may be stepped down over a period of 6 months rather than having a full effect for 3 months and then a sudden cut off.
Month 1 %100
Month 2 %75
Month 3 %50
Month 4 %25
Month 5 %12.5
Month 6 %6.25
Month 7 %0

This means that a staff members value to a company is given ample opportunity to offset the diminishing tax benefits of their employment.
Oh and an important gotcha is that this should only apply to full time permanent employment at award or above award wages it would be counter-productive if companies started using 6 or 3 month contract staff to achieve a disproportionate amount of rebate and would terminate the staff after an allotted period to take on a new batch of unemployed for the rebate.