{"id":23452,"date":"2013-04-16T18:00:01","date_gmt":"2013-04-16T08:00:01","guid":{"rendered":"https:\/\/billmitchell.org\/blog\/?p=23452"},"modified":"2013-04-16T18:00:01","modified_gmt":"2013-04-16T08:00:01","slug":"british-labour-market-bad-and-getting-worse","status":"publish","type":"post","link":"https:\/\/billmitchell.org\/blog\/?p=23452","title":{"rendered":"British labour market &#8211; bad and getting worse"},"content":{"rendered":"<p>\t\t\t\tThe angst in Britain about the form of the funeral for the Witch goes on. I liked the suggestion of filmmaker Ken Loach who suggested the whole affair be privatised and outsourced with competitive tenders determining the outcome. Hypocrisy rules though and the Conservative government will spend a pretty penny on the effort as a means of presenting her legacy in some good light. They won&#8217;t succeed because people know! With the latest British labour force data due out tomorrow, I was interested to read an interesting forensic study of recent labour market trends in Britain. The official line from the Government is that things are improving and &#8220;see, our policies are allowing those who want to work hard to achieve their aspirations&#8221;. The paper, which I discuss in this blog, tells us that those narratives are not even remotely true. Despite the official summary labour force statistics, once one digs more deeply into the data the trends are bad and getting worse.<br \/>\n<!--more--><br \/>\nIn all the to-ing and froing last week in Britain, I was especially heartened to see the speech from Labour MP Glenda Jackson. She said it how it was. Where were her gutless fellow Labour colleagues &#8211; who seemed to scared to say anything about Margaret Thatcher &#8211; perhaps out of (a false sense of) politeness or perhaps because they know that in many ways they have become like her. They have incorporated her policy narratives into the core of their party.<\/p>\n<p>But go Glenda! &#8220;The most heinous social, economic and spiritual damage upon this country &#8230;&#8221;<\/p>\n<p><iframe loading=\"lazy\" width=\"480\" height=\"360\" src=\"http:\/\/www.youtube.com\/embed\/MoP56k_-H4I\" frameborder=\"0\" allowfullscreen><\/iframe><\/p>\n<div style=\"clear:both;\"><\/div>\n<p>And while we are warming up I thought this reminder from 1981 = the year of the riots in 35 cities across Britain &#8211; The Specials &#8211; <a href=\"http:\/\/en.wikipedia.org\/wiki\/Ghost_Town_%28song%29\">Ghost Town<\/a> &#8211; would be good.<\/p>\n<p>Sing along and get angry (<a href=\"http:\/\/www.thespecials.com\/music\/view\/36\">Source<\/a>):<\/p>\n<blockquote><p>\nThis town, is coming like a ghost town<br \/>\nAll the clubs have been closed down<br \/>\nThis place, is coming like a ghost town<br \/>\nBands won&#8217;t play no more<br \/>\ntoo much fighting on the dance floor<\/p>\n<p>Do you remember the good old days before the ghost town?<br \/>\nWe danced and sang, and the music played in a de boomtown<\/p>\n<p>This town, is coming like a ghost town<br \/>\nWhy must the youth fight against themselves?<br \/>\nGovernment leaving the youth on the shelf<br \/>\nThis place, is coming like a ghost town<br \/>\nNo job to be found in this country<br \/>\nCan&#8217;t go on no more<br \/>\nThe people getting angry<\/p>\n<p>This town, is coming like a ghost town<br \/>\nThis town, is coming like a ghost town<br \/>\nThis town, is coming like a ghost town<br \/>\nThis town, is coming like a ghost town\n<\/p><\/blockquote>\n<p><iframe loading=\"lazy\" width=\"480\" height=\"360\" src=\"http:\/\/www.youtube.com\/embed\/1WhhSBgd3KI\" frameborder=\"0\" allowfullscreen><\/iframe><\/p>\n<div style=\"clear:both;\"><\/div>\n<p>A regular refrain from the British Prime Minister David Cameron, is that the Conservatives are all about aspiration, incentives, so that the British people who want to work hard and improve their circumstances, can.<\/p>\n<p>Conversely, those that seek to &#8220;sponge&#8221; of society will be tracked down with all the available technology and punished for their &#8220;sloth&#8221;. He was in over-drive in the last few weeks about this after George Osborne turned the Phillpot tragedy into a all-out attack on those who rely on income support. The message is that there are jobs for all if you want to get off your tail and get off the dole.<\/p>\n<p>It is ironic that this discussion flared up just as the person who introduced this style of narrative into British society died (and good riddance to her).<\/p>\n<p>For example, in his speech to the National Conservative Convention on March 16, 2013, Cameron could have been channelling the Witch when he said:<\/p>\n<blockquote><p>\nThis is what Conservatives do.<\/p>\n<p>We make Britain stand tall and proud again.<\/p>\n<p>And for us, this global race is not just about GDP.<\/p>\n<p>It&#8217;s about saying to the mum who&#8217;s worried about her children&#8217;s future&#8230;<\/p>\n<p>&#8230; we are building a country where there is a future &#8230;<\/p>\n<p>&#8230; so your kids won&#8217;t have to get on a plane to get on in life, they can make it right here in Britain.<\/p>\n<p>It&#8217;s what this party&#8217;s always been about &#8211; aspiration.<\/p>\n<p>Helping those who really do want to work hard; and get on; and make a better life for their family.\n<\/p><\/blockquote>\n<p>Apart from the fact that many of those in need will never be able to afford an airfare to get away from Britain, even if they wanted to, the claim that there are opportunities in abundance for aspiring hard workers is a myth.<\/p>\n<p>An interesting new study by David Bell and David Blanchflower &#8211; <a href=\"http:\/\/www.dartmouth.edu\/~blnchflr\/papers\/Underemployment_Revisited-19.docx\">Underemployment in the UK Revisited<\/a> &#8211; provides an insight into what lies beyond the rather static unemployment rate in Britain at present.<\/p>\n<p>The British government has been claiming that their policies are not damaging the prospects for British people and have used the fact that the unemployment rate has not risen in recent months as evidence that the economy is on the turn &#8211; for the better.<\/p>\n<p>For example, on February 20, 2013, the Secretary of State for Work and Pensions, a.k.a. IDS put out a press release &#8211; <a href=\"http:\/\/www.conservatives.com\/News\/News_stories\/2013\/02\/Employment_levels_at_record_high.aspx\">Employment levels at record high<\/a> &#8211; which extolled the virtues of his government&#8217;s policy stance.<\/p>\n<p>This was in the context of the December-quarter 2012 employment data, which recorded a significant rise in employment.<\/p>\n<p>IDS said:<\/p>\n<blockquote><p>\nThe UK is now ahead of many its international rivals when it comes to cutting unemployment and creating jobs which is so important as we compete in a global race.\n<\/p><\/blockquote>\n<p>This message &#8211; that &#8220;employment is at record highs&#8221; is consistently transmitted by various British government politicians as a means of deceiving people into thinking that times are not as bad as they feel and that the policy regime is on the cusp of delivering renewed prosperity to Britain. <\/p>\n<p>Before we consider the Bell and Blanchflower paper, some simple fact checks are in order.<\/p>\n<p>It is true that employment is at all-time highs. But then, so is the working age population (that is all those aged 16 and over). If we analyse the changes since the Conservatives took office in May 2010 the figures are not all that flattering.<\/p>\n<p>1. The change in the working age population equals 946,000.<br \/>\n2. The change in the labour force equals 802,000.<br \/>\n3. The change in employment equals 757,000.<br \/>\n4. The rise in unemployment equals 45,000.<\/p>\n<p>In that period, the employment-population ratio has barely changed (a slight increase). In other words, the higher employment reflects a larger population rather than any significant improvement in the labour market.<\/p>\n<p>The following graph shows the employment-population ratio for Britain from 1971. The &#8211; <a href=\"http:\/\/www.ons.gov.uk\/ons\/rel\/lms\/labour-market-statistics\/march-2013\/table-a02.xls\">British Office of National Statistics<\/a> &#8211; refer to this as the &#8220;headline employment rate&#8221; and define it as &#8220;the number of people aged 16 to 64 in employment divided by the population aged 16 to 64&#8221;.<\/p>\n<p>Prior to the crisis, in the last year&#8217;s of the Labour government the ratio peaked at 72.9 per cent. It is now down at 71.1 per cent, which might not seem to be much of a fall (scales on graphs can deceive).<\/p>\n<p>What does that mean in jobs? Without regard to the quality of the employment, the dip in the employment-population ratio of 1.8 per cent amounts to <strong>913 thousand<\/strong> jobs that have disappeared since the current Government took office. That is a massive loss to the British economy.<\/p>\n<p><a href=\"https:\/\/billmitchell.org\/blog\/wp-content\/uploads\/2013\/04\/UK_NPOP_1971_2012.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/billmitchell.org\/blog\/wp-content\/uploads\/2013\/04\/UK_NPOP_1971_2012.jpg\" alt=\"\" title=\"UK_NPOP_1971_2012\" width=\"539\" height=\"324\" class=\"alignnone size-full wp-image-23454\" \/><\/a><\/p>\n<div style=\"clear:both;\"><\/div>\n<p>The focus then shifts onto the quality of the employment being created in Britain, and since here that the work of Bell and Blanchflower is important.<\/p>\n<p>The paper by Bell and Blanchflower demonstrates that the Conservative narrative is misleading and, in fact, the current policy regime is creating a vast pool of underutilised workers who are struggling with ongoing real wage cuts and diminishing opportunities to work the hours they desire.<\/p>\n<p>Bell and Blanchflower ask readers not to quote from the paper because it is due for publication in the coming week.<\/p>\n<p>Respecting that, I will summarise their argument in my own words but the insights come from their forensic examination of the ONS data.<\/p>\n<p>Bell and Blanchflower have produced a new &#8220;underemployment index&#8221;, which attempts to quantify the employment gap in Britain in terms of the extra hours that part-time workers and the unemployed would work if they were not constrained by a shortage of hours offered.<\/p>\n<p>Like elsewhere, Britain is now experiencing a significant increase in underemployment. In Australia, for example, underemployment shot up during the 1991 recession and is now higher than unemployment. Taken together, Australia endures a broader labour underutilisation rate of 12.8 per cent and that is not including the hidden unemployed and other marginal workers.<\/p>\n<p>This is now a problem in all advanced nations but has been largely confined to the Anglo-speaking nations up until the recent recession.<\/p>\n<p>Remember, that to be classified as employed a worker only needs to work one hour per week in the survey period.<\/p>\n<p>All of the indicators of underemployment in Britain have risen since the crisis began. The overall underemployment rate has risen from 6.8 per cent in 2007 to 10.5 per cent in 2012, and further increases will continue to occur.<\/p>\n<p>Underemployed workers are currently employed by desire more hours of work in their current job, or in an extra job, or who desire a new job overall which offers more hours per week.<\/p>\n<p>It is also a fact that, while the official unemployment rate in Britain is 7.8 per cent for the three month period, November to January the most recent data shows that the January figure alone is 8.1 per cent.<\/p>\n<p>As Bell and Blanchflower point out, the November to January average provides little information of the direction that the labour market is moving in.<\/p>\n<p>For example, the unemployment rate in November 2012 was 7.5 per cent. By December 2012 it had risen to 7.8 per cent. And as noted above it was 8.1 per cent in January 2013. The 7.8 per cent is the average of those three months.<\/p>\n<p>Any reasonable assessment is that both the average and the monthly figure in the coming months will rise.<\/p>\n<p>The specific contribution by Bell and Blanchflower in the paper cited, is that they introduce an underemployment index in &#8220;hours space&#8221; rather than in terms of persons.<\/p>\n<p>This allows them to introduce information about the distribution of the extra hours desired by unemployed workers. Using persons-based measures one is either underemployed or not depending on how they fit the defining criteria.<\/p>\n<p>Hours-based measures provide a much more accurate indicator of the extent to which the economy is failing to provide sufficient hours of work to make the preferences of the available labour force.<\/p>\n<p>Some years ago (in 2000), I introduced a similar measure into the Australian debate &#8211; in the form of the &#8211; <a href=\"http:\/\/e1.newcastle.edu.au\/coffee\/indicators.cfm\">CofFEE Labour Market Indicators<\/a>.<\/p>\n<p>You can read the first working paper that we published in 2000 &#8211; <a href=\"http:\/\/e1.newcastle.edu.au\/coffee\/pubs\/wp\/2000\/00-06.pdf\">Beyond the unemployment rate &#8211; labour underutilisation and underemployment in Australia and the USA<\/a> &#8211; which outlined the methodology I developed if you are interested.<\/p>\n<p>Please note we continue to produce this series but haven&#8217;t made the data publicly available for some time although that will change in the coming months. We are experimenting with an improved estimation methodology<\/p>\n<p>Bell and Blanchflower express the unemployment rate into an hours measure, using average hours worked as the relevant conversion factor.<\/p>\n<p>They then take into account the distribution of extra hours desired by the underemployed and combine this information with the unemployment hours measure.<br \/>\nI will leave it to you to examine the detail if you are interested.<\/p>\n<p>The following graph is taken from their Figure 7, which shows the underemployment index and the official unemployment rate from 2001 to 2012.<\/p>\n<p>It is clear that the two series tracked each other closely up until the onset of the crisis.<br \/>\nAfter that time, the deficiency in hours (indexed) has grown significantly faster than is indicated by the movements in the official unemployment rate in Britain.<\/p>\n<p><a href=\"https:\/\/billmitchell.org\/blog\/wp-content\/uploads\/2013\/04\/UK_Bell_Blanchflower_UE_Index_2001_2012.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/billmitchell.org\/blog\/wp-content\/uploads\/2013\/04\/UK_Bell_Blanchflower_UE_Index_2001_2012.jpg\" alt=\"\" title=\"UK_Bell_Blanchflower_UE_Index_2001_2012\" width=\"634\" height=\"413\" class=\"alignnone size-full wp-image-23459\" \/><\/a><\/p>\n<div style=\"clear:both;\"><\/div>\n<p>Bell and Blanchflower note that prior to the crisis in the net underemployment was close to 0 because, while they were more workers wanting to reduce their hours then increase them, the workers that did want to add more hours offset the other cohort (in hours).<\/p>\n<p>While the official unemployment rate has stabilised in recent years, Bell and Blanchflower argue that this does not provide &#8220;sufficient&#8221; evidence that the British labour market is improving.<\/p>\n<p>Conversely, they argue that the rise in the underemployment index signals an increase in excess capacity in the UK economy.<\/p>\n<p>Putting that into percentage terms, Bell and Blanchflower calculate that the broad labour  underutilisation rate in  Britain in 2012, would be 9.9 per cent, rather than 8 per cent as captured by the official unemployment rate.<\/p>\n<p>That is a significantly different outlook.<\/p>\n<p>The other point is that, while the official unemployment rate has been fairly steady, the broader measure of labour wastage has been rising over the period of tenure of the current government.<\/p>\n<p>Bell and Blanchflower also confirm that the rise in underemployment reduces the well-being of the victims &#8211; not as much as the personal and social costs of unemployment &#8211; but the impacts are still considered to be &#8220;highly significant&#8221;.<\/p>\n<p>Bell and Blanchflower also provide evidence to support the view that there has been significant decline in real wages in the UK since the end of 2007.<\/p>\n<p>This point was picked up in recent UK Guardian article (April 15, 2013) &#8211; <a href=\"http:\/\/www.guardian.co.uk\/commentisfree\/2013\/apr\/15\/underemployment-corrosive-unemployment-on-rise\">Underemployment can be as corrosive as unemployment &#8211; and it&#8217;s on the rise<\/a>.<\/p>\n<p>The UK Guardian brings into relief the:<\/p>\n<blockquote><p>\n&#8230; comparison with the spectre who has haunted Britain for the past week. Because while Thatcher consigned huge swaths of manufacturing workers to the scrapheap, she never oversaw the kind of general working immiseration hinted at in these figures. Like her, David Cameron promises that if you want to work hard and get on, you can, but now the figures are against him. This spells bad news for him in 2015.\n<\/p><\/blockquote>\n<p><strong>Conclusion<\/strong><\/p>\n<p>The Conservative spivs all over the world are trying to camouflage the damage that the dysfunctional policy regimes are causing.<\/p>\n<p>I was asked today during an ABC radio interview about the rapid rise in disability support pension recipients over the last few years what impact that had on how we measure labour wastage.<\/p>\n<p>I pointed out that DSP numbers are highly cyclical and the anecdotal evidence is that the medical profession take pity on workers who have some affliction and no chance of finding work in a highly constrained labour market.<\/p>\n<p>Governments tend to look the other way in downturns because they know that the unemployment rate would be much higher if these workers were forced to remain in the labour force.<\/p>\n<p>The brutality of neo-liberal governments is revealed when the economy starts to grow again and these recipients are singled out as being malingerers.<\/p>\n<p>The point I made in the interview that is relevant for the blog is that the public have little understanding of the data. It is a educational imperative, as a precondition for informed debate, that more understanding is achieved.<\/p>\n<p>If the British people understood what lay below the single summary statistics that make headlines in each data release they may well take a different political position and expel dangerous neo-liberal governments.<\/p>\n<p>That is enough for today!<\/p>\n<p>(c) Copyright 2013 Bill Mitchell. All Rights Reserved\t\t<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The angst in Britain about the form of the funeral for the Witch goes on. I liked the suggestion of filmmaker Ken Loach who suggested the whole affair be privatised and outsourced with competitive tenders determining the outcome. Hypocrisy rules though and the Conservative government will spend a pretty penny on the effort as a&hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[67],"tags":[],"class_list":["post-23452","post","type-post","status-publish","format-standard","hentry","category-uk-economy","entry","no-media"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/23452","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=23452"}],"version-history":[{"count":0,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=\/wp\/v2\/posts\/23452\/revisions"}],"wp:attachment":[{"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=23452"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=23452"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/billmitchell.org\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=23452"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}