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Tag: cost of creating a job

How much does it cost to create a single job in the UK?

Money by Lee J Hayward via FlickrUnderstanding the economy in basic terms

I am just a lowly psychologist and I don’t have any formal economics education. So, I look out for rules-of-thumb that I can remember. And I also try to remember what it ‘felt’ like when the economy was in a particular state. Knowing what a 3% downturn feels like and what a 7% downturn feels like helped me anticipate what a 5-6% downturn in UK would feel like.

I am puzzled though, that in an economy as advanced as UK, the middle classes aren’t more economically literate.

We hear a lot, for example, of how the government will save 3000 pounds or so in Benefits by packing people off to a job. These statements alone make me cock my head in puzzlement. We are in very deep recession. People are on Benefits because they have lost their job.

What is even more puzzling is that people who claim to know, don’t know what it costs to create a job. Where I have lived before, people knew these numbers.  They had them at their fingertips.

Using US investments to estimate the cost of a job

Let’s record some figures  to show you what I mean.

Obama has just announced a USD2bn subsidy to two solar powered firms. One will create 1500 jobs and the other 1600 permanent jobs and 400 temporary jobs.

Let’s keep this simple because we are talking rules-of-thumb.

3000 into 2bn makes 66 000 660 000 . And that is just the Federal subsidy.

Putting that into British money, 660K is more than 500K pounds, but lets keep it simple. Now we have taken a powerful vacuum cleaner to our economy, we will need 500K to make a job (and this is probably an entry level, repetitive job).

500K is 16 to 17 years of benefits. Governments use benefits to bail out an economy precisely because it is cheaper than making jobs.  Jobs cost money and we should know how much.  These numbers should be at our finger-tips.

Where can we make jobs?

And of course, we can’t make jobs if we don’t even know which industries are viable. I suspect this is the greater problem. Our leaders don’t know enough about what will be the future of our economy so they don’t know where to invest.

But let’s not get off the point. For the moment, until I get better numbers, I’ll use a rule-of-thumb as GBP500K  of investment to create one job.

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