On efficient investments

George Monbiot's set of suggestions for the positive goals of the UK anti-austerity protest has come under some fire. But it does point out a rather noteworthy bit of analysis from Richard Murphy on the real costs and benefits of employing public sector workers:

Put it another way: 92% of the cost of cutting a £25,000 a year job when we have less than full employment is paid by the state.

In that case it is abundantly clear that paying to keep people in work pays – especially and even particularly if what they do has long term benefit that saves cost into the future. That cost saving – for instance from green efficiencies - has only to be £2,000 for it to be entirely worthwhile creating a job out of government spending to keep this person in work.

And that is before any account is taken of the social costs of being in employment, which are substantial in terms of reduced crime, improved educational outcome, better health, and more besides.

Now, Murphy's analysis is based on a single example, and I'd be highly interested if there's a way to look at the numbers in more detail. But at the very least, Murphy offers a useful starting point to counter the usual biased set of options where tax cuts are seen as having infinite collateral benefits which justify ignoring obvious up-front revenue losses, while public-sector spending is seen as nothing but a cost. And if it's indeed true that nearly the entire cost of employing a public worker is effectively returned to the public even before the worker's contribution on the job is taken into account, then the case for cutting jobs looks to fall apart completely.