Good news on jobs?

Wednesday 15 October 2014

Good news or bad on jobs?

Carole2Something doesn’t add up in today’s unemployment figures. At 73% the employment rate is now close to its all-time high of 73.2% in 2004-05 but this announcement comes just days after a warning that the Government won’t collect as much income tax as it expected. How can this be?

The answer lies in growth. Everyone’s talking about growth in the UK economy but not  the growth in low-paid employment - and that’s what lies behind both the fall in unemployment and the reason why, just days ago, the Office for Budget Responsibility was warning that income tax receipts are likely to fall short of the government's target for this financial year.

Yes there are more jobs but many of them are low-paid – paying below the £10,000 threshold for paying income tax - and we know that young women are particularly affected by low pay.  Among those who have only had minimum wage jobs in the last ten years, almost four in five (79% or 110,000 workers) are women.

Women are generally more likely to be in low pay than men and younger people fare worse than older people.

All of this notwithstanding, shouldn’t we still welcome the fall in unemployment and, in particular, the drop in the number of young people out of work?

Yes, unemployment is falling and, yes, the numbers of young people without jobs is falling faster but these figures ignore the fact that many more people are not engaged in the labour market than are unemployed. These are the so-called “economically inactive”.

I noticed that the BBC described the economically inactive as “people choosing not to seek work” and listed examples as students, long-term sick and those retiring early. Choosing not to seek work suggests an element of choice that isn’t there if, for example, you cannot work because of caring responsibilities. The reality is that we simply don’t know why people are economically inactive because no one has bothered to find out. However, given that the percentage of economically inactive 18-24s (29%) is much bigger than it is for those aged 25-64 (19%), it is unlikely that early retirement will be the biggest reason.

Women under 25 are the most likely to be economically inactive and women in general are more likely to be economically inactive than men.

When it comes to youth unemployment - covering 16-to-24-year-olds – the total has fallen by 88,000, which is obviously welcome, but, with 733,000 young people unemployed that’s still 13.9% for this age group compared with 4.5% for the rest of the population.

I’m not saying we shouldn’t be pleased to see unemployment below two million for the first time in almost six years and for there to have been such a big annual drop but let’s look beyond those headlines and understand that we still have a very long way to go in creating jobs for young people and in ensuring that the jobs that we do create pay a reasonable wage.