2000s >> 2006 >> no-1225-september-2006

Cooking the Books 2: “Mass unemployment”

The government’s Welfare Reform Bill is currently going through Parliament. It provides
for people on incapacity benefit and single mothers to be harassed to take some crap job or have their benefit cut. New claimants are to be treated even more harshly. This is par for the course. Cutting back on welfare payments has been the policy of all governments,
whether Labour or Tory, since the post-war boom came to an end in the 1970s.

The Green Paper which preceded the Bill, bearing the Orwellian title of “A New Deal for Welfare: Empowering People To Work”, sets out the problem as seen by the government:
“In the 1980s and 1990s the welfare state failed those who most needed its help, instead of combating mass unemployment, the welfare state alleviated its worst effects and diverted people onto other benefits.

Instead of helping people into work, it locked them into long-term dependency. By 1997, there were almost 5.5 million people on benefits, 3 million more than in 1979. The number of people claiming unemployment benefits had risen by 50 per cent, while the number claiming lone parent and incapacity benefits had more than tripled.”

This assumes that, if only they had tried, the (Tory) governments of the 1980s and 1990s could have combated “mass unemployment” by somehow creating new jobs as an alternative to paying unemployment and incapacity benefits. But governments can’t create jobs at will.

The Green Paper says that total employment in Britain is now at a record high “having risen by 2.3 million since spring 1997” (when Labour took over). This is indeed what the statistics show but “employment” doesn’t have the meaning which the unwary might assume of full-time employment. It includes part-time employment however short (even one day a week), the self-employed and family members who help them, and people on training courses.

The statisticians divide the population of working age (16-64 for men, 16-59 for women) into three groups: people in employment, the unemployed and the economically inactive. The latest figures, released by the Office for National Statistics on 12 July, show that in the three months to June there were 28.9 million (74.6 percent of working age population) in employment, 1.65 million (5.4 percent of economically active working age population) unemployed and 7.85 million (21.1 percent of working age population) inactive (see
http://www.statistics.gov.uk/cci/nugget.asp?id=12 ).

The government has set itself the aim of achieving “an employment rate equivalent to 80 percent of the working age population”. A look at the above figures shows that this would be the equivalent of reducing unemployment to zero. But this is not how the government aims to achieve this.

Their plan is to reduce the number of economically inactive by at least 2.3 million:
“To achieve our aim, we will reduce by 1 million the number on incapacity benefit; help 300,000 lone parents into work; increase by 1 million the number of older workers.”

This is all very well but where are the jobs to come from? The latest ONS figures give the number of job vacancies in the three months to June as just under 600,000. Gordon Brown believes that by encouraging “enterprise culture” the Labour government has created the conditions which have allowed businesses to expand and take on more workers and that, if it continues this, more jobs will be created.

What is more likely to happen is that the employment rate will go up a little (with a contribution from people going on government- funded training courses) but not to 80 percent. Instead, the unemployment rate will go up as a result of people on incapacity
benefit being transferred to “job seekers allowance”. The government won’t be too
displeased with this as they will have saved on welfare payments, since unemployment
benefit is lower than incapacity benefit. But it will also, unintentionally, reveal that the
“mass unemployment” of the 1980s and 1990s never really went away.

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