PublicOrgTheory

It should be interesting to see how the UK’s plans to stimulate employment work out:

Under the latest plans, the government will put £400m, nearly half of the £1bn contingency fund it set aside in last November’s pre-budget report, to reward firms who hire someone who has been out of work for more than six months, according to a Downing Street aide.

The Department for Work and Pensions and the Department for Innovation, Universities and Skills will administer the scheme over a two-year period starting in April, and the DWP said it would also be funding £100m of the project through savings the department was making through the government’s VAT cut. An aide said yesterday: “This is genuinely new money.”

The government’s scheme will give Jobcentre Plus staff the power to award up to £2,500 to a firm that hires someone unemployed for more than six months. New training places will also be funded, and volunteering that may help the jobless secure employment at a later stage will also be given extra money.

I am in no way qualified to guess what an economist might say about this incentive, nor what inevitable externalities will show up in the plan.  It seems like they have the money and urgency, but £2,500 isn’t a lot of money to most employers.  Recruitment and onboarding tend to be expensive for new employees, perhaps more so after six months on the bench.  That same incentive applied to retaining existing staff might be more effective.  That’s merely speculation, though.  The results of this experiment should show up in the coming months.