Rebalancing act

Stewart WoodStewart Wood on the government’s failure to deal with unemployment and the changing world of work

The downturn that followed the 2008 Crash has been the most severe since the Great Depression, and the most protracted since the Industrial Revolution. Yet there is a conventional wisdom about the crisis that has taken root – that although it is a growth crisis and a living standards crisis, it is not an employment crisis.  

That is misleading.  It is true that the headline unemployment rate, though too high, has remained remarkably stable, despite an extremely poor record on growth over the period. But it would be complacent in the extreme to point to the headline rate, or to the new private sector jobs created, and think that is the end of the story.  

We may not have a crisis of the proportions of Spain, or Greece, but youth unemployment here is now at an all-time high – just under one million. This sits alongside a continuing rise in long-term unemployment, with 900,000 people out of work for over a year. 

The Coalition’s response has been to scrap our Future Jobs Fund, and introduce a new welfare-to-work scheme.  Last year, this ‘Work Programme’ not only missed its targets, but its success rate in placing the long term unemployed was lower than the expected rate had there been no programme at all.  

The lack of urgency from Ministers is baffling. Protracted spells out of work have lifelong effects on well-being (including physical and mental health) and rack up huge costs to the taxpayer. And for millions of those in work, pay, conditions and security of employment have changed significantly for the worse. Workers in Britain have experienced unprecedented cuts in real-terms pay of 6% since the Crisis. 

One consequence has been the rise of in-work poverty. Over 6 million people in poverty are in working households, including two thirds of poor children. Related to this is the growth in under-employment. One in ten are now unable to work the hours that they need to make ends meet.  Add to this those who would like to work additional hours in their existing jobs, and there are a million more under-employed workers than five years ago. For millions, having a job is insufficient to keeping their heads above water.  

The composition of employment is also undergoing significant change, with a marked shift away from longer-term, more secure work to shorter-term, more precarious work.  

First, the number of temporary jobs has gone up by 76% since 2008. Second, there is a substitution away from full-time work, falling by 545,000 since 2008; while both part-time employment and part-time self-employment has risen by around 280,000. Third, we have seen a dramatic rise in the incidence of zero-hours contracts, with estimates at more than 200,000. Such contracts are often used to abuse the vulnerable. 

These developments should give us cause for concern whatever our political affiliation, because the effects will impose significant costs on society. The Trussell Trust says many of the 300,000 people using its food banks are low-income working families. And the size of the UK’s payday lending industry has increased in size by 150% since 2008. 

It is hard to see how Britain can compete internationally with an economy increasingly characterised by lower-wage jobs in more precarious conditions. A model of competition based on a deregulatory race-to-the-bottom will not work.  We will only succeed if we build a higher road to economic success.

To bring about more sustainable employment, we should in the short term introduce a Compulsory Jobs Guarantee to get the young unemployed into work. The Work Programme should be reformed to have better integration with the Employment and Support Allowance tests.  And, perhaps most importantly of all, the government should realise that it is not powerless to get the economy motoring again. 

In the longer term, we need to think about how we reshape the way our economy works.  Better jobs have to be created in the context of different kind of higher-skill, higher-wage economy.  It means reforming our banking system, and re-examining the rules that generate short-termism in too many of our biggest companies. And we should use the power of State procurement to say that any company that wants a contract with government must offer training and apprenticeships to its workforce.  

The world of work in Britain today is rebalancing in ways that are making lives tougher and more insecure for millions. It is bad for social cohesion, bad for our economy, and undermines our competitiveness.  If we really want a break from this, we have to abandon an approach to economic management that sees wealth creation as the preserve of the wealthiest, and which mistakenly seeks to succeed by giving lower taxes to the best off and less protection to the majority of workers.  That way lies national decline, not national success.

Lord Stewart Wood of Anfield is Minister without Portfolio in the Shadow Cabinet and a frontbench Labour Peer

Published 27th June 2013

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