May 26, 2010
As various unions are currently disputing the job cuts being imposed by the Government. I think this Government needs to recognise an unemployed person will cost them 3 times more than an employed person. Consequently, the Focus should be on Sustaining jobs, both private and public. The goal is minimize the dole queue as much as possible. The unions need to compromise to minimise the numbers of jobs being cut. The Government need to find the balance between cutting jobs and the reduction in tax revenues.
Yes, when you enforce these jobs cuts in these Departments, ranging from teachers to bus drivers, it will reduce your expenditure for these departments, but it will also mean reduction in tax revenues. Obviously the amount of income tax received will decrease, but it also affect other indirect taxes like VAT, as teachers and bus drivers are made redundant, they are less likely to make any unnecessary purchases. Consequently 1,000 teachers being made redundant could hurt the Government\’s finance more, as the drop in tax revenue could be so significant that it outweigh any savings that they made through these cuts. Cutting jobs is only short-term perspective, the Government needs to examine this further to understand the impact on all their tax revenues, because their forecast for these tax revenues could be overestimated.
As a matter of recommendation, the Government should not cut these jobs so drastically for a number of reasons. Firstly, even if the Government\’s finance suggest a cut of 1,000 teaching positions is required, it may be better to make this cut, over 3 or 6 months. Basically over a duration of time, why?
The impact of such large cut could be too dramatic for the rest of the economy as it is struggling to absorb the effects of the recession. But if the effects from these cuts are very significant, it could convert a recession into a prolonged depression.
Secondly, by staggering the job cuts, it can assist the Government in their forecast of tax revenues, like a cause and an effect experiment. So, if the Government gets to the point where the job cuts no longer make any significant savings, as the effect in the reduction of tax revenues outweights its benefits, the Government can halt the process.
Thirdly, with the current recession, it would seem to show the Government have some solidarity in doing their best in minimising job cuts, and that their decision has been a measured process, and not a blunt sledgehammer approach.