Labour’s proposal to use the government’s $40 billion in buying power to create jobs and back local businesses by requiring suppliers to make job creation in New Zealand a determining factor for contracts might be good politics but it’s bad policy.
The government, like any other entity, should be guided by price and quality when buying goods and services.
Unless businesses can adding job creation while competing on both of those factors, the requirement is a subsidy by another name.
If a future Labour-led government pays more, or accepts lower quality, to purchase from a business which creates more jobs it will not be not using public money wisely.
It will be spending more than it needs to and to do that it has to take more tax, some of which will come from businesses with which those subsidised might be competing.
It could also lead the businesses which get the subsidies into difficulty when the government funding runs out and they find themselves with more staff than they can afford.
All jobs aren’t equal. Those created by government requirement are more expensive and less sustainable than ones created by businesses through their own efforts.
“We wouldn’t be chasing around the unemployment number [every] three months to three months – what we want to do is reinforce and encourage the industries that are doing well to invest, employ more people and grow.”
English said it was “not that easy” for the Government to create jobs, and any intervention would be unlikely to get value for money. . .”
The Wellington Chamber of Commerce is taking legal action against the City Council over its decision to require contractors to pay their staff the so-called living wage.
Labour’s policy is in the same feel-good- theory, bad-policy-in-practice territory.
The best thing a government can do for employment is keep a tight rein on its spending and enact policies which enable businesses to prosper which will give them the confidence to employ more people without a subsidy.