Wednesday, February 11, 2009

Professional meltdown

The Times reports that the government are to introduce schemes to help unemployed professional "white collar" workers who are losing their jobs in unprecedented numbers as this recession bites deeper.

White-collar workers visiting Jobcentres will be redirected to specialist recruitment agencies or offered new three-month college courses to refresh their skills, The Times has learnt.

Although I think that the idea to provide "specialist" help to the professional classes is quite probably correct, I also believe that the true significance of this is being missed. Professional, white-collar workers pay more in taxation. A significant decline in professional employment will lead to a considerable drop in the government's tax revenue.

In previous recessions the numbers of job losses were similar, but they were predominantly workers at the lower end of the wages scale. Although this was still a catastrophe for those workers, it was less of a problem for the government. First, because the drop in tax revenue was more manageable and secondly because when recovery begins re-employment starts with the lower paid - so a government can "ride out" the drop in tax revenue knowing that an equilibrium will soon be re-established.

This is different. Even assuming that this is just a recession and not a depression (unlikely in my opinion), if the recovery starts, for example, towards the back end of this year (extremely unlikely in my opinion) then even with an increase in employment there will not be enough of an increase in tax revenue to make up the loss of revenue from the professional classes.

Add on to that the massive debt liability that Gordon Brown has saddled us with and I think we can expect a rough few years.

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