The State, Enterprise and the Mystery of the Unemployment Figures

The claim that the Tory and Liberal Democrat Coalition is reducing or refiguring the size of the state and that this will free-up enterprise Britain is frequently trotted out by the Tory LibDem Coalition itself and by the Tory press. austerityposter

Half of this statement is true. Osborne, Cameron and Clegg are introducing measures that are ‘cutting the state’ and this can be seen not only in the NHS where marketization is well under way but areas such as legal aid.
However, the other half of the claim – that this is freeing-up enterprise Britain – is not true. The Coalition’s austerity policy has created an economy that has flat-lined, at best, for the past three years. The economy has not grown, private investment is low and living standards for all but a minority – guess which? – have fallen by around 8%.

The Coalition claims that evidence of the fact that Britain’s enterprise culture has been freed up can be found in the ‘resilient unemployment figures’. Over the same three year period, the unemployment rate has risen from 5.8% to 8%. Not many people would describe an increase of more than 25% in unemployment as evidence of ‘resilience’. Notwithstanding this serious situation, Osborne and Cameron are fond of claiming that unemployment has not risen as much as the Coalition’s critics predicted that it would whilst tactfully ignoring facts such as that youth unemployment has increased substantially over the period of their office and now stands at just shy of ONE MILLION. (Centre for Social Inclusion, June 2013)

There are many reasons why the unemployment rate looks better than predicted: underemployment, part-time work, zero-hours contracts and by massaging official statistics.

Underemployment: Workers are deemed to be underemployed when they are willing to supply more hours of work than their employers are prepared to offer. Expressing the number willing to supply extra hours as a share of the workforce gives an estimate of the underemployment rate. According to the National Institute for Economic and Social Research (May 2013) this rate has risen from 6.2 per cent of the UK workforce in 2008 to 9.9 per cent in 2012. Essentially, this means that whilst people are not unemployed neither are they fully employed yet they are recorded as ‘employed’. Four employees accepting a cut of 25% in their hours is the equivalent of making one person unemployed.

Part-time work: Latest official figures from the Office for National Statistics show that an 8.07 million people work for fewer than 25 hours a week – the highest figure since records began in 1992. One in seven of them would like to work longer but can’t find the job, while others only remain in part-time employment because they can’t afford to retire. These workers are deemed employed for statistical purposes.

Zero-hours contracts: A Zero-hours contract is where a person is not contracted to work a set number of hours, and is only paid for the number of hours that they actually work. They have to ‘standby’ in case of work and this makes financial planning and scheduling other work opportunities very difficult and child-care arrangements almost impossible. Vince Cable, the Business Secretary, has acknowledged that zero-hours contracts are ripe for misuse by employers. There are presently 76,000 people aged between 16 and 24 employed on Zero-hours contracts. This figure is TWICE the number that pertained when the Coalition took power. The Government estimates that a total of around 200,000 are currently ‘employed’ on such contracts. People on zero-hour contracts are deemed employed and appear as such in the employment statistics.

Massaging Official Statistics: The Office for National Statistics and the Labour Force Survey provide high quality data for public use. However, employment data is notoriously complex and open to misrepresentation. The Coalition is highly proficient at masking just what is going on. Chancellor George Osborne makes the case that the private sector is replacing public sector jobs with private sector jobs. Most people would think that this means that the private sector is actually ‘paying the costs of employment.’ This, however, is not the case when it comes to those who use the Job Centres to find work. Those jobseekers placed on the Community Action Programme and Work Programme and Mandatory Work Activity Scheme lose their jobseeker’s allowance if they do not participate in the schemes. In accordance with international guidelines, all people in government supported training and employment programmes are defined as being in employment. Such people are deemed as ‘employed’ and appear as such in the statistics. The private sector does not pay for them. The taxpayer does in the form of tax credits used to bridge the gap for families that can’t live on what they earn.

What the Tories and Liberal Democrats do not seem to be able to grasp is that being economical with the truth – in this case regarding unemployment – is not a game called, ‘What can we get Away With?’
They are dealing with people’s lives – your life, your family’s lives and my life too.

Don’t let them forget it!

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