Mass unemployment returns

Very soon there will be a couple of million involuntarily idle people. There will also be a rash of derelict sites as vacant commercial buildings are demolished to avoid the business rate. There is a connection between the two.

Whilst Britain’s flexible labour market has been much vaunted, there has no attempt to make Britain’s land market flexible. On the contrary. Increased demand creates a shortage and prices go up, but if demand is decreased, eg due to recession, the price of land does not fall to market-clearing levels. Soon, therefore, we shall see a rash of derelict sites and boarded-up buildings. They will stay derelict for long enough to allow the buddleias to grow into big shrubs. Owners tend to prefer to  wait for the upturn than accept the going rent or price.

The usual explanation for recession is “lack of demand”, but human demand for goods and services is unlimited. If people are willing to work, the potential supply is present. But work can only be carried out on land. Every street trader knows that the right pitch is essential. But if land is locked out of use, then labour is locked out of employment. It is that simple. Idle land means idle men, as was pointed out in the 1910 election poster.

Added to this is another consideration. For every £ a worker receives in take-home, an employer must pay a further amount of about 85p to the government, nominally PAYE income tax, and employer’s and employee’s NI. In effect, these act as a heavy payroll tax, and explain the paradox of how Britain became a high labour cost/low pay economy. This needs to change. The taxation of labour has to stop.

And to get vacant, hoarded land into use requires a further tax reform, the introduction of an annual ad valorem tax on the rental value of land, to discourage owners from holding onto it whilst locking labour out of work.

The implication is that we do not have to endure prolonged recession and unemployment. It is a policy choice.

See here for a detailed explanation.