The creation of German-style “mini jobs”, which enable workers to earn up to E400 per month tax-free, is being explored by the Treasury in a bid to reduce long-term employment.
But according to one German think-tank, the flexible contract system, which was introduced 10 years ago, should be treated with scepticism as it has only served to make the employment situation worse.
Under the mini-jobs scheme, workers are exempt from having to pay tax and national insurance if they earn less than £314 per month, while employers pay an easy-to-administer flat rate of wage taxes, insurance and pension contributions.
A Tory MP and ally of Chancellor, George Osborne, told the Financial Times that the idea was being given serious consideration. “What I can tell you is that this is being looked at in government. There are lots of ideas that are being looked at as part of the deregulation drive, and this is one of them.”
Although Liberal Democrats were critical of the radical proposals to overhaul employment law suggested by Tory donor and venture capitalist, Adrian Beecroft, it was intimated that they were watching what was happening with the mini-jobs scheme carefully.
“It’s definitely something the chancellor is keen on,” one official said. “It is not true we are opposing it. We will look at the options. It is something the Treasury is working up.”
But a statement from the LibDem business secretary Vince Cable’s department was not quite so enthusiastic. “This proposal is a German solution designed to deal with particular issues in the German labour market, driven by their relatively high taxes on labour,” it said. “This is quite different to the situation that exists in the UK.”
Although German unemployment is at almost record lows, many mini-jobbers receive low hourly wages as the country has no uniform minimum wage. As a result, experts have criticised the scheme for entrenching a new class of working poor in industries such as cleaning, hotels and restaurants.
Holger Bonin, a labour market expert at Germany’s ZEW think-tank, said: “It was sold as a way to bring the long-term unemployed back into the labour market. Employers would get to know an employee and then hire them on a permanent basis. But that hardly ever happens.”
In fact, the long-term unemployed now find it harder to get full-time posts as they are being “divided up into mini jobs” and simply “don’t exist any more”. As a result, “one should be very sceptical about introducing such a system”, Bonin added.
