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Why the Labour Party approach to unemployment is wrong

The UK Labour Party has announced plans to help the long term unemployed back into work,

The party has pledged £1bn to enable employers to meet the cost of hiring the 130,000 people who have been out of work for more than two-years…. Under Labour’s plan, the long-term unemployed would be offered 25 hours of work a week at the national minimum wage for six months.

The cost of this will be met, they say, by limiting tax relief on pensions for those earning in excess of £150,000 a year. It would be spent on subsidies for placements in the private and voluntary sector.

This whole approach falls into the ‘push’ category of policies, as opposed to ‘pull.’ The thinking is that government has to fund jobs itself, rather than making it easier for jobs to be created by demand. An alternative approach would reduce taxes on small and new firms, and free them from many of the regulations that are part of the hidden costs of employing people. The jobs thus created would be real ones supported by market needs, rather than those which exist only because government is funding them. There are some cases, and this is one, where government should not be entering the ground with money in hand, but clearing the ground and making space for others to move into.

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