Sunday, March 24, 2019

False economies

Total employment has increased by more than a million in the past two years. Growth has been strongest among 50-to-64-year-olds, with a 682,000 increase for women and 506,000 for men.

David Bell – a former adviser to the Scottish parliament on employment and economics professor at Stirling University – says the extra number of women in jobs is probably linked to the sharp increase in the retirement age to 66, equal with men.

Steve Machin, head of the London School of Economics Centre for Economic Performance, says more people of pensionable age are staying in the workforce: “The rise in labour force participation of older people is very striking for women, and most likely links to the values of state pensions being eroded.”

John Philpott, former chief economist at the Chartered Institute for Personnel and Development. “We have record employment numbers primarily because we have more people. Immigration has generally been the main determinant of growth in employment numbers, while welfare-to-work policy has been more important to the rise in the employment rate. Working migrants increase both employment and population.”

The Office for National Statistics (ONS) last week published employment figures for the three months to January which showed that more than 90% of new jobs were full-time.

 “That doesn’t mean they are high-quality jobs,” says Machin. “Many people say they would like to work more hours if they were available, strongly suggesting underemployment. Also, many solo self-employed and those on zero-hours contracts say they are doing the job because it was the only one they could get, not because it offered more flexibility.”

Philpott says immigration and welfare policies mean lots of “poor jobs” have been created alongside better-paid full-time roles: “The relative oversupply of workers to ‘poor jobs’ tends to push wages in those jobs down, though for most workers the minimum wage has at least been rising faster than average wages.”

The Bank of England believes the rate of unemployment  should mean bigger pay increases. 

Bell points out that the public sector was restricted to a 2.8% rise, and wage growth by industry was mixed: “There were falls in construction and wholesaling, retailing, hotels and restaurants. Indeed, the increase is largely driven by finance and business services, probably strong end-year bonuses in the City.”

Workers in industries hit by the sterling depreciation induced by the referendum have seen both wages and training fall. “Record employment is a good thing,” says Philpott, “but few of us who campaigned against mass unemployment in the past would have wanted to see the road to full employment lined with food banks.”

“Prospects for productivity and wages do not look promising,” says Machin. “Investment in physical and human capital is falling sharply. And this is likely to be magnified more in the case of a no-deal Brexit.”

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