How much does a civil servant have to earn for cutting their job to make financial sense?

[Brendan]

With all the talk of public spending cuts I?ve been thinking about this and how and if it is quantified by anyone.

If someone is made redundant they will then become a burden on the state, claim unemployment allowance and their family will need to be housed etc. All this obviously cost money so there must be a point at which it is cheaper to keep someone employed than to get rid of them.

Is this calculated by anyone? Is it something that is taken into consideration?

It?s not something I know anything about but their must also be other things that need factoring in such as the contribution an employed person makes to the economy compared to an unemployed person and the level of savings you could expect someone on a higher salary to have compared to someone on a lower wage.

Anyone know anything about it?

[mockney piers]

Speaks volumes, so to speak. Try [email protected]

I can see where you're coming from though.

[Ladymuck]

It's a really good question Brendan.

Sorry, I don't know the answer, but don't forget to take into account factors such as greater burden on NHS: people made redundant often suffer mental health problems (e.g. depression), and if long-term this may in turn lead to physical illness too.

[nashoi]

One estimate

[Magpie]

Well it depends on how long the person remains unemployed - redundancy (with a reasonable lump sum) and rapid re-employment can be financially beneficial to both the state and the employee.

To some extent the decision has, in practical terms, been taken in many regions of the country where public sector employment accounts for 60 - 70% of the total - ie it is better to employ people than leave them on benefits where there are few alternatives in the private sector.

However, the decision clearly has to be taken on a case by case basis - does it make sense to fire local government workers in ?13k a year in Cornwall, probably not, does it make sense to lose a few middle-management in London/South East - well it may well do so.

Lets not forget that the public sector has added some 700,000 extra workers over the last 10 years or so - not all of them are teachers, nurses and police - a considerable amount are additional, and some would say, unnecessary adminstrative workers.

Finally, why should the public sector be free of pain - private sector workers have experienced pay freezes, cuts and redundancies in the last 2 years - a pay freeze across the public sector seems entirely reasonable. The current economic difficulties in the UK are just as much a function of excessive public debt as they are of excessive private debt.

[DJKillaQueen]

The current economic difficulties in the UK are just as much a function of excessive public debt as they are of excessive private debt.

Brought on by other things of course...like wreckless banking practise.....

On Working Lunch yesterday they talked in depth about what the impact of required public sector cuts might have on unemployment. The estimates ranged from 300,000 to 600,000 former employees (and knock on services) which if born out might just make a mockery of the conservatives desire to cut the benefits bill. So the consensus was that the conservatives would have to limit the cuts to avoid mass lower end job losses in the short term. Most public sector employees are not on even the avarage salary let alone high salaries anyway. Someone with children earning 13k would cost around the same in benefits to keep (when you add the rent and council tax etc) so this is not an easy dilema to solve.

We wait to see the budget for proposed welfare reform but even on this there will be problems. The government can't just cut the level of basic benefits as it wishes. There is a process whereby a review body has to determine what a person needs to live on. Any such review now would find that benefits are actually well below the poverty line given the real terms rise in the cost of living since the last one, gas and electric being the major increased expense. So the only real option the government has is to switch people from more expensive benefits like incapacity to cheaper ones like JSA - hence all the sound bites about IB. But again I think they will be in for trouble there too because the easiest target will be those with mental health problems, and the consequences for those wrongly transferred would be disastrous. At the end of the day, for most people, benefits are extremely difficult to live on and there won't be as much scope for savings there as the government and media seem to imply. I just hope that any cuts don't cut back in some of the excellent specialist agencies that curently exist to help the long term unemployed back into work because that really would be leaving the poorest out to rot.

[Loz]

nashoi,

Interesting article, though as other readers pointed out he talked of cutting public sector pay and then gave the example of a private sector worker, which conveniently left out the cost of employment that would have ruined his article. Down in the comments section, when others made this point, he started getting very rude and abusive! (example: "And stop being an idiot without an ounce of intelligence or ability to argue, let alone comprehend.")

But it does start to sort of answer Brendon's question. His figures came up with a net gain to the govt, for a person earning ?25K, of ?9140. You need to add in the salary (?25K) though you can probably leave out NI, etc, as these go back to the government and nets itself out, but you need to add in 17% (?4250) for public sector pension costs.

So, to employ someone in government has a net cost of ?21110. This does not factor in costs for buildings, lighting, heating, support services (ie HR departments), computer licensing, etc, etc, but those are difficult to quantify on the back of a fag packet.

According to the article, an unemployed person has a net costs to the government of ?12160 (this does not include any redundancy payments, which could be up to 2x salary in the PS). This cost would hopefully be temporary, though in a recession that may not be the case especially as most public sector workers usually jump from one PS job to another. An employment freeze would stop this and force them out to seek work in the private sector - which is the general idea, but may take time.

Not an exhaustive analysis, by any means.

[Brendan]

The point Laz makes about overall employment cost is one of the things that initially got me thinking. I was speaking to financial folk at work and they (in a private sector body with an office in central London) work it out that it costs roughly 1.8 x someone actually salary to employ them. So 25K cost the employer 45K. I?m not sure what the actual cost of employing someone on 25K in the public sector would be. Are their pension and NI contributions different? Are they more likely to be in offices which are owned outright by the government rather than rented? I presume they still use tallow candles for light on Whitehall.

[Magpie]

"The current economic difficulties in the UK are just as much a function of excessive public debt as they are of excessive private debt.

Brought on by other things of course...like wreckless banking practise....."

No - the last government was running a fiscal deficit far before the banking crisis - if they had been more financial prudent during the boom years, then there would not be the same need for spending cuts today. Around half of the current deficit is due to structural issues, nothing to do with the bank bail out or the economic downturn.

[DJKillaQueen]

I think that 12K figure sounds about right as a average. We are in danger though of having too many unemployed and too many people living in poverty. The estimate is that 10 million people of working age do not work (for various reasons)....that's a high figure (although some of them save the economy money in roles as carers etc). The private sector doesn't have anything like that number of vacancies, so the immediate future is not looking good for the unemployed or those the government intends to force onto cheaper benefits. Add to that pensioners living in poverty and the expectation that they should work longer too. Where are the jobs for that?

The irony is that we are likely to see a rise in non taxed earnings, black market employment just at the time when the economy needs those taxes more than ever, as ever more desperate people do what they have to do to make ends meet. William Hague has said that he wants to make the gap between benefits and the minimum wage bigger so that people are always better off in work. So is he going to increase the minimum wage signifcantly? No, he's going to squeeze the already most vulnerable even more. Like most privileged politicians he has no idea of what long term unemployment does to a person and more importantly just how hard it is to get them back into work as the various agencies out there working with the LTU can testify. The same is true of those on IB with for example mental health problems.

If you are an employer and you have ten candidates, are you going to take the person who hasn't worked for 5 years? or the person who might need days off at a whim because they suffer from severe depression? No you'll employ that person changing job, or recently unemployed every time. This has always been a hard problem to solve and the government should be a bit more realistic than it is being. A change in the rules on the number of hours an umemployed person can do voluntary work for would be far more useful to the economy than taking away benefits of a few vulnerable people for example.

[SteveT]

It would seem more sensible to cut their hours to four per day and maintain the same amount of employed at half the wage bill.

The unemployed would be better off working for their income so they maintain the work ethic and structure in life.

The ones on long term benefits should be rigourously checked and jailed with hard labour if found cheating.

I feel quite happy to pay my taxes if I know that the sick, old, infirm, and disabled are being cared for.

I do not feel happy about keeping the lazy work shy variety of individual, who's parents lived off the state and are now training their offspring to follow in their parents footsteps, which we see far too many of and have been proliferating at an alarming rate since the eighties.

[taffers]

While not from East Dulwich, I have to agree with many of the comments here, I was made redundant just over two months ago after 12 years in the same job, and since then I have applied for 215 jobs (done a spreadsheet, as the job centre needs proof), and I have had 8 interviews, as soon as they ask what my last salary was, which was over ?20k, their faces often drop, and I know i won't be getting the job, except in one case, where I was informed I got down to last two out of over just fifty applicants.

I had some feedback from one company following what I thought was a good interview, the HR department advised me that I didn't get the job as the department manager thought I would want a quick promotion and leave her team quickly, so do show keenes or not!

I am applying for mainly customer services/claims handling jobs and admin roles, I have also spoken to the job agencies about picking and packing positions, and they all want people with experience!! I have also applied for a position as a hotel night porter and no joy.

Also after having worked for the last 19 years it is quite depressing being out of work, I spend about 6 hours looking for work, and I have now decided to do some volunteer work, but I will being doing this as admin role for a nearby charity, just to my skills up tp date and my self active, as far as I am aware you can do as much voluntary work as you like as long as you still look for work, and you don't get any money or other benefits.

[DJKillaQueen]

See you are exactly the kind of person I often talk about. The kind of person that the Jobcentre has no idea how to help (mainly because the vast majority of jobs that go through jobcentres are low waged). You have a good working record and are trying very hard to find work but because of market conditions are struggling. Governments never talk about you....because they don't want to admit that there are too few jobs out there, to match the unemployed workforce that we have.

If it is so difficult to find you a job at the moment...how on earth are they going to get the LTU and mentally ill back into work? The group they do constantly attack.

At the end of the day, only employers can change anything, by creating more jobs.

Hopefully you'll find something soon....I wish you the very best of luck.....

[taffers]

Thank you for the kind wishes,

At this moment, I am awaiting a response from a large department store, who are opening a store near where I live, I passed an assessment then had an interview straight away, some people didn't pass the assessment session, so I must have something, but they doing at least one session. This is for an admin job, working some weekends and paying about ?4k less than what I was on. Still if I get it, I can use my redundancy to pay a loan off, which is currently being paid by the insurance.

However, you are very much right in what you say about the LTU and mentally ill. The mentally ill I have a great deal of sympathy for, as I too am feeling very stressed and have some idea of what they are going through, and I have some sympathy for some of the LTU as some of them genuinely want to work.

At this present moment in time, I am having to take Nytol to help me sleep, as I keep waking up, that's when I am able to sleep.

I cannot see how either the Conservatives or the Lib' Dem's think they will get a majority next time round, or Labour for that, but we will see.

Also on reading your last blog, I checked the ad's on the job centre's website, and you are quite right the wages are very low, barely above the legal minimum. So what incentive do I have to apply for a job at barely ?6 ph, when I was on almost ?12 ph. I have worked it out, the minimum i can work for is ?8.48, that is if I get a job quickly, as that is what i will need to earn if I am pay my rent and bills, but if you earn more than ?13,300 you cannot claim working tax credits to help you back in to work.

I am having trouble getting the agencies putting my cv forward to their clients due to minimum wage I can work for, so on some occassions I have been able to find who they work for and write to them directly. I have also found that now I am not at work my former work colleagues, some of whom I called friends, don't want to know me anymore.

The group that should be got back to work first is the short term unemployed, such as the recently made redundant (I inclde those laid off since the recession began) as these are the people who genuinely want to work.

[DJKillaQueen]

I think everyone that wants to work should be helped and that help should start from day one of unemployment, not six months.

Some problems are regional. I keep giving Sheffield as an example but where you have only one job vacancy for every 8 unemployed there is going to be a lot of LTU and most want to work as much as the next guy. The problems are complex and so the solutions need to be tailored to deal those complex problems. But you are quite right that help tends to be focussed at certain groups (with Labour it was 16-24 year olds)....when what is needed is far more investment in helping ALL groups of unemployment and investment in employers to help them grow and create jobs.

We especially need more jobs that provide a 'living' wage (at present a third of all jobs don't). I think the minimum wage needs to rise to ?7 per hour, with additional London weighting, which isn't that far off the minimum you need to live on. Employers will complain but they complained when Labour introduced the minimum wage - which the conservatives also opposed on the premise it would cost jobs - something that has not turned out to be the case. There is nothing more demoralising than working 40 plus hours a week and not being able to at least meet reasonable basic living costs.

And then we need something to keep the unemployed engaged, productive and 'out there', and hopeful. Because there's nothing worse than having no hope. I totally understand the stress that unemployment brings and am very aware of the hardship that prolonged unemployment also brings. A persons life can quite literally fall apart very quickly and yes one of the first things that suffers is social activity. The unemployed cannot afford to go out for a drink, or network or do very much. After a few months of that kind of isolation, is it any wonder that low self esteem kicks in. Depressive illness is something that is not taken seriously enough in this country and many LTU are suffering from it.

I really do hope you get something from the department store. Would be curious to know how many are applying for those jobs though.

[taffers]

You have made some very valid points,as for the admin job I applied at the department store, there were about 25 in the assesment, and only 8/9 were interviewed, and they were holding a similar session after mine, they told us there were 12 admin jobs, so I have a reasonable chance, but not holding my breath. Also I only live a short walk from the site. In total there about 180 jobs, I have also applied for a job as a sales assistant.

I agree about keeping the unemployed active, may be something like, one free session at the local authority sport centre a week. I play squash once a week, and that does help to burn of some stress as I smash that ball in to the wall. My friend who I play against has his own business, but sadly he says he can't afford to take me on, but he has asked his contacts to keep me in mind for any vacancies they may have.

I also agree about socialising and networking, while I still have some redundancy left I can afford a few pints at the weekend, but have decided not to drink, as alcohol is a depressent, and I don't want to make my situation even worse, and I don't fancy drinking OJ all night.

[Jeremy]

There does seem to be a case for a higher minimum wage. Not sure about London weighting though, shouldn't the more expensive living costs in London be addressed by housing benefits?

Keeping the unemployed active... sounds good, but I would suggest something which would be of benefit to the community and teach skills, rather than sports.

[Brendan]

There?s something seriously fuked with your entire society when employed people have to rely on benefits to afford to house themselves.

But that comes down to social equality again which the (insert expletive here) scream about as if it?s threatening their god given superior position. So they?d rather keep it as it is with what is essentially a socialist system necessary to support half the population. Speak to the same people about socialism though and what do you get?

Sorry going off topic their again but everything always leads me back to what a bunch of self serving hypocrites cunts are.

I can't be the only one who sees this. Shirley?

[taffers]

True, teaching the unemployed more skills makes more sense, which is one reason I am going to do some volunteering at a local charity doing their clerical work, and also at the local hospital, for a total of 2/3 days a week, it will keep me active as I have mentioned earlier, I am going stir crazy with vewry little to do.

While I tend to agree about the comment about the employed having to use benefits to pay their rent etc, in my case this is the first time in 19 years I have had to claim benefits, and there are so few jobs out there on what I was earning prior to redundancy, which is why I am applying for jobs earning around ?4 - 5k less than what I was on, I don't want to be on benefits as I have pride and will do whatever is needed to earn a living and pay my way.

[Brendan]

Taffers. Not sure if you?ve explored this option but have you tried temping?

I don?t know what it?s like out on the job market at the moment but as employers with limited funding at the moment we can?t afford to replace posts. Because of this we end up having to get temp support in pretty often as it works out cheaper.

I know it?s not great temping, you may have to do some crap jobs and you aren?t guaranteed anything or any stability but it may help you keep your oar in.

I can PM you the details of the agency we use if you like.

[taffers]

Hi Brendan, yep please do send me the details of the agency you use, while I am not in East Dulwich, they may have an office near me.

I am currently on the books of about 9/10 agencies.

But any help is appreciated.

[DJKillaQueen]

Not sure about London weighting though, shouldn't the more expensive living costs in London be addressed by housing benefits?

They already are. Rents are not the only more expensive aspect to living in London. Similarly the oyster card gives reduced bus travel to the unemployed but I'd like to see that be free.

I would suggest something which would be of benefit to the community and teach skills, rather than sports.

Sport is a known combatent to depression so providing free sports (in addition to other things) to the unemployed (aong with those suffering from depressive mental health problems) would be very beneficial to society. On the issue of skills - there are many skilled people who are unemployed too and that is another area where support fails. The skilled often get very poorly served, usually because the cost of additional specialist training is more expensive than training an unskilled person in something that costs less. It's a rationed resource.

[Jeremy]

DJKQ - What else is more expensive in London, apart from housing? Most things are the same. Transport is in some cases cheaper.

Brendan... we're specifically talking about unemployment here, so the housing benefit rant isn't really relevant. HOWEVER - even if the minimum wage is increased, the social safety net will always have it's place, because a living wage for a single person is not the same as a living wage for a parent with 4 kids. In plenty of other countries, the latter would be left to their own devices.

[DJKillaQueen]

Apart from the obvious of dining, drinking out and entertainment, fresh food also costs on average more. And I think it is reasonable to argue that someone who is working full time should be able to afford to go to a pub ocassionally or go for a family meal.....instead of relying on top up benefits just to make ends meet.

And just because other countries have no or a different safety net is not an argument for saying everything is ok here. A first world wealthy country like the UK should not be having to subsidise a third of it's workforce's wages along with however many millions are unemployed and deemed as too ill to work at all. There is something fundamentally wrong with our economy and the balance of rich/ poor, working and unemployed within it. And all parties admit the growing gaps are not right - on moral grounds as well as economic ones.

[Jeremy]

Beer is a bit more expensive down here, but I think you're wrong on dining and food. A couple of pints a week does not justify weighting the minimum wage! And on a practical level, I doubt it would be workable.

On the second point, you ignored my main argument. Different people have different outgoings, and different needs. Replacing housing benefits with a higher minimum wage would be a one-size-fits-all solution, and completely unfair to those who need the help the most.