Dublin Opinion

Michael Burke has a great post on employment and unemployment trends in the UK Economy over on Socialist Economic Bulletin, but first to the fun bit. The documentary filmmaker Adam Curtis has a new series out on BBC 2 called All Watched Over by Machines of Loving Grace.

I only caught the last 10 minutes of the first one, but it looks good.

Curtis is best known for The Power of Nightmares, The Century of the Self and The Mayfair Set, Pandora’s Box, The Trap and The Living Dead.

However, Michael is talking about the recent rise in employment in the UK, and how he thinks this rise will be shortlived. This is because employment is a lagging indicator of activity: “it is often the case that unemployment will continue to rise even after a recovery has begun.” And so to will unemployment continue to fall even when an economy is starting to nosedive.

But there is something odd going on in the UK. As Michael explains

“A number of analysts have noted that the rise in unemployment in this recession has been more muted than in either the Thatcher or the Major recessions - when the unemployment rate rose by 5.6% and 3.2% respectively. The increase in the unemployment rate in this recession was 2.1%, with the Office for National Statistics providing the official assessment that this is particularly striking as the loss of output in this recession of 6.4% is nearly as large as the other two combined (7.1%) .

A crucial difference is politics. The policies of both the Thatcher and Major governments’ were to engineer a rise in the unemployment rate in order to drive wages down and profits up.”

Michael then points to this excerpt from an interview with Alan Budd, until recently the head of the Office of Budget Responsibility in the UK and former economic advisor to Margaret Thatcher. He’s explaining his fears about Tory economic policies in the 80s which suggest that, just maybe, these policies were put in place to “engineer a rise in the unemployment rate in order to drive wages down and profits up”.

It’s taken from Adam Curtis’ film Pandora’s Box, and the comment from Budd is referred to in David Harvey’s Brief History of Neoliberalism.

Michael argues that the rise in employment is a lag indicator of the growth due to the stimulus put in place by the Labour government. But this benefit is unlikely to last long. The UK economy is already stagnating under the Tory cuts, so unemployment should increase once these effects are felt, given the lagtime. But why is unemployment so far so muted considering the scale of the recession compared to previous recessions under the Tories. He explains that the rise in unemployment in the UK actually began in the second half of 2005, which is much earlier than the rise in unemployment that occured in the previous recessions and this may help to explain the more muted results.

“From mid-2005 onwards overall employment growth failed to keep pace with the natural growth of the workforce over the period. This applied to nearly all categories of employment, including public sector health, education and administration jobs, which grew a little over 2% between mid-2005 and the beginning of the recession in the 2nd quarter of 2008. This was approximately one-third of the pace required to prevent a rise in unemployment. The three exceptions to this general picture were real estate jobs (but not finance jobs) which grew by 20% over the period and manufacturing and private sector administration jobs, which both saw outright falls in employment.

In short, parts of the private sector were shedding jobs in order to boost profitability. The rest of the private and the public sector were not growing fast enough to absorb these or the natural growth in the workforce. This rise in unemployment was taking place an exceptionally long period before the recession began. This may help to explain why the decline in jobs was more subdued when the recession actually did begin.”

It’s something to consider when looking at the very limited ambitions of FG/Labour’s “Jobs Initiative”. Spending a paltry 500 million euros is money well spent as a smoke screen when you know that it will do damn all to actually reduce unemployment significantly and therefore is unlikely to tamper with the sterling work of driving wages down and keeping profits up.