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FULL employment
FULL employment

The economic debate is shaping up around a holy trinity – the cost of living, the rate of growth and the level of unemployment.

The first is being thrashed out in the energy debate. The second is a perennial media circus. The third is now so familiar that I fear we often fail to understand its complexities.

For a start, we are too used to viewing unemployment as a solely economic measure.

Public debate tends to neglect its human impact – the shorter life spans of the unemployed, the higher risk of depression and other mental illnesses, the harm long-term or even multi-generational unemployment does to social cohesion.

To have millions out of work is undoubtedly a disaster in terms of lost economic potential, but it is also a disaster in terms of lost human potential, and heaped up human misery. A campaign to reduce it ought to be a crusade as much as it is a question of stimuli, spreadsheets and levers in the Treasury and the Bank of England.

Here are the headlines we are all accustomed to hearing on unemployment:

  • More people are in work than ever before
  • Unemployment continues to fall
  • The number claiming Job Seeker’s Allowance continues to fall

So far, so much good news.

But are they a full representation of the picture? And what does the data tell us about the work still to come in reaching full employment?

Are you feeling lucky?

The first thing to note is that, despite the huge harm done by the recession, we have been relatively fortunate compared to previous downturns. Previously, far more jobs would have been lost outright.

Take this graph from the ONS, for example, which compares GDP and employment rates from 1979 to 2010. Each red shaded area marks a recession – in the latest, the red line of employment dips far less than one might have expected from past experience:

Jobs Recessions

This suggests that while the recession disease may not be preventable, modern economic medicines have at least managed to reduce the harm it does to a nation when it strikes.

Why?

At least in part it’s because the modern labour market is more flexible than in the past – rather than just laying some workers off, many employers listened to their staff and cut everyone’s hours instead. Notably, many private sector unions also proved more flexible and more reasonable in the face of an undeniable threat to jobs. (The negative interpretation is that with falling productivity in the workforce, employers need to pay more people just to get the job done – in reality it’s a mix of the two factors).

So the picture we face is less grim than it could have been. But it is still far from pretty.

The proof of the pudding

Yes, we have the highest ever number of people in work in Britain. But that’s because the population continues to grow – the unemployment rate is still higher than it was during the pre-crash 2000s. It’s something to be proud of, that we have a growing population and a growing number of jobs which many of us fill, but it remains the case that the number of jobs falls short of the number of people.

The merciful market flexibility which prevented hundreds of thousands of people losing work altogether created a different, though less severe problem, too: under-employment. The proportion of people in work but wishing to work more hours was 6.8 per cent in 2007, and is currently at around 10.6 per cent. According to the latest Labour Market Statistics bulletin, this summer there were 1.45 million people working part-time because they could not get full-time work.

Of course, it isn’t the case that everyone who works part-time wants but is unable to find a full-time job. This is most vividly seen in the gender divide – a third of male part-time workers are underemployed, compared to only 13.5 per cent of female part-time workers. Just as with zero hours contracts, the picture is more subtle than doom-mongers claim – many people don’t want to work full time for personal or family reasons.

It remains a fact, though, that many others want to do more work but are not supplied with the opportunity.

The hardest to help

Among those who have no work at all, there are two groups who should cause us the greatest concern: the young and the long-term unemployed.

They aren’t just cases of suffering and lost economic potential, they pose a serious challenge to reducing unemployment further. Any Government that wants to break the scourge of unemployment – or, for that matter, to save large amounts of the welfare bill – must tackle these harder to solve cases as well as just the relatively low-hanging fruit.

They are the people at the greatest risk of being left behind – the people who find it hardest to get into (or back into) work. With either a lack of experience of the workplace, or a lengthy interruption in their careers, they are often perceived to be more costly or more of a risk for employers who might take them on. Those issues only grow the longer they are out of work, and youth unemployment is all too often a feeder group for the ranks of the long-term unemployed.

For those not in full time education, the youth unemployment rate stands at 19.1 per cent of the economically active population. The rate has fallen in the latest figures, but only very slightly.

It is notable that youth unemployment was on the rise even before the recession struck, suggesting structural problems affecting the workforce as well as simply the cyclical effect of the downturn. Some have suggested that is down to problems with the education system, some that it is down to people retiring later and thus increasing the supply of experienced workers competing with the young for jobs, and some that it is down to the minimum wage making young workers unaffordable.

Whatever the cause, taking on youth unemployment is key to reducing the total – young people are far more likely to be out of work than the wider population.

Like youth unemployment, long-term unemployment is also falling somewhat but remains high overall. 900,000 people have been out of work for over a year, the majority of whom – 467,000 – have been unemployed for over two years.

The problem tends to be more cyclical than youth unemployment, with a sustained recovery tending to mop up most of those who have been unemployed for a long time – eventually. But eventually is not good enough, particularly when it is people’s lives (as well taxpayers’ money) that is at stake. Long-term unemployment is, for obvious reasons, the type that does the most medical and social harm to those who suffer it.

We would be irresponsible to assume that previous patterns will simply repeat themselves – particularly in what the Institute of Directors has called a relatively “jobs-lite” recovery.

Fixing the problems

That is the motivation behind Iain Duncan Smith’s announcement at Conservative Party Conference of new measures specifically targeted at those who have been through the Work Programme and are still unemployed. Hot-housing jobseekers in finding and applying for jobs, and demanding daily attendance, are intended both increase the chance of finding a job and to get claimants back into the regular habits of the workplace.

Privately, Government sources admit that there is a secondary purpose of demanding regular attendance, which is identifying the minority who are actually working in secret while still signing on, but this is a side benefit rather than the main aim.

Employment and unemployment are far more complex than is commonly assumed. Just as it is true to say that the overall jobs picture is getting better, it is true to say that we still face serious problems – particular in harder to solve cases. ConservativeHome will be exploring more of these issues, and some potential solutions, in our jobs series this week.

While there are reasons for concern, there is hope, too.

We have seen the way in which modern working practices can save jobs, even in a dire recession.

There have been other successes which have gone unnoticed. For example, the Government are succeeding in getting people off long-term sickness and back into the workforce.

It always seems a travesty that the welfare system saw the number of people deemed physically incapable of work remain stubbornly high even while healthcare improved and heavy industry was replaced by a less physically demanding economy. Since 2010, 250,000 such people have been brought back into the economically active population.

By getting a quarter of a million back into the workforce without a corresponding rise in unemployment, the Government have shown that we don’t have to meekly accept a model which put people on the scrapheap rather than find work they can do.

That is a success which helps to transform our economy and the lives of large numbers of people – extending the same radicalism to the millions who are still unemployed is the next big mission.

107 comments for: Unemployment: what’s the true picture?

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