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Are the employment figures quite as rosy as they seem?

The UK employment and unemployment figures for the period May to July 2017 were announced yesterday and on the surface, the news is very good. The employment rate was 75.3 per cent, the highest since comparable records began in 1971. The number of people unemployed was 1.46 million, with the rate of unemployment being 4.3 per cent.

Rosy graph

The fact that the UK economy is operating at close to full employment is of course to be welcomed. But one cannot avoid the sense that there is something of a disconnect between this 'full employment' story and the anecdotal evidence of people's experiences of trying to find work. Recall how in 2013 it was reported that 8,000 people had applied for three full-time and five part-time permanent jobs at a new branch of Costa Coffee in Nottingham.

This disconnect becomes more understandable when we take into account the following:

  1. The employment figures may include 'disguised unemployment', a term coined by the economist Joan Robinson. This occurs when people find there is no demand for the skills in which they have been trained, so they seek and take work which does not require those skills.
  2. The employment figures include the underemployed. The most recent figures from the Office for National Statistics (covering the period April to June 2017) show that 2.459 million people are 'underemployed' and wish to work more hours.

These phenomena are not apparent in the headline employment rate.

It should also be borne in mind that, under international guidelines, people are counted as employed if they work for one hour a week or more. So a self-employed person or a person on a zero-hours contract who works for just one hour in a given week would be regarded as employed.

There is one large structural change which makes comparisons between now and the early 1970s problematic. In 1970/71, there were 621,000 people in higher education in the UK whereas in 2015/16 the figure was 2,283,000. Most of these students (but not all) would be regarded technically as 'economically inactive' and would therefore not enter into the calculation of the unemployment rate.

Jim Clifton, Chair and CEO of the company Gallup argued recently that "the biggest problem facing the world is an inadequate supply of good jobs. Every leader in every institution and organization must consider this in every decision he or she makes every day." The Coming Jobs War (New York: Gallup Press, 2011), p.186. He has a very good point.

Published 15 September 2017

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