Sunday, 22 June 2008

Job creation - UK style

Look under the surface of UK employment numbers, and something quite disturbing creeps out. Since 1978, the economy has generated almost 3 million new jobs. Superficially, that is an impressive achievement. Look a little closer, this figure hides enormous structural changes, which seem unsustainable over the medium term.

Starting with the job losses; since 1978 (-1 BT, Before Thatcher), 4 million manufacturing jobs have disappeared. Around another 800,000 also evaporated in largely blue collar activities like agriculture, energy. construction and fishing.

The job gains were centred in three areas; a) retailing, hotels and restaurants; b) financial services, and c) the public sector. Finance now employs one worker in five, while the public sector added over 2 million new jobs since 1978 winter of discontent.

These numbers emphasize a growing vulnerability. The UK is an economy largely based on shopping, money lending and public employment. In order to sustain these types of employment, the economy needs people to buy more things, borrow more money and pay more taxes. More borrowing and taxing hardly adds up to a formula for success.

Taken together, these three requirements seem contradictory. UK consumers need disposible income to buy stuff, but more borrowing and taxation, over time, reduces disposible income. Certainly, a spurt of borrowing will temporarily raise expenditure, but once those interest payments start to kick in, expenditure must fall.

Perhaps I am being too pessimistic. Maybe, there is still demand for more bankers, perhaps taxation can edge up a little further to pay for one more teacher and another nurse.

However, I feel it is more likely that the UK growth model has reached its limits. The economy is about to enter into another painful period of structural adjustment where finance sheds jobs, real wages fall, and some of those low skilled manufacturing jobs, which formed the backbone of the 1970s economy, begin to return.


Anonymous said...

1 in 5 work for a bank - just making the money go round.

Mark Wadsworth said...

Alice can you give us a link to the source, the ONS website is tricky to navigate?

Further, the category is 'Finance and business services', most of this may be crap shoving money round in ever decreasing circles; or people helping businesses make their way through the jungle of red tape; but some of this is proper jobs.

Alice Cook said...


This chart is from social trends, vol. 38. chart 4.9


Alice Cook said...



Anonymous said...

The public sector statistic makes sense to me.

My experience working in a university is that the ratio of academics (i.e. those who do the teaching and research) to support staff has changed from 1:0.48 to 1:1 over ten years.

The support staff include certain vital functions (registry, finance, library) but increasingly social engineering projects (e.g. seeking to lower drop-out rates, which has absorbed a lot of money and achieved no visible change) and an awful lot of window-dressing and ineffective 'quality' processes which increasingly absorb resources and staff time on metaspeak about institutional goals, low-grade 'staff development' sessions, publicity people who assemble bundles of press-cuttings and require self-praising glossy brochures of inward-facing support departments, etc. etc.

This is an 'apparatchik' culture which is common to the police, central and local government, schools and the NHS. With so much money being pumped out of the public purse on these unproductive functions, I suppose the government has no choice but to try to claw back as much of it as possible in indirect taxation, as well as inflicting the same on everybody.

Manufacturing processes have become enormously efficient, but the UK does not dominate any world market in anything - unlike Japan+Asia, where production for the whole world in certain sectors is increasingly centralised, with massive cost savings.

There's an inevitability in the rise of bureaucratic work to spread around the fruits of highly efficient industrial production - but without a substantial manufacturing base, eventually the UK currency will slide against Asian currencies and the cost of living will rise significantly.

B. in C.

Anonymous said...

B. in C, a well-written comment.

Markbaldy said...

Everything this government says is pure spin = lies.
There is ALWAYS a hidden agenda or double meaning - whether it be reasons for wars, tax hikes in the name of environment etc...
The low unemployment figures we are fed are fantasy... just like the "official" (= manipulated) inflation figures.
Unemployment is about 4 million if we include those on incapacity benefit (circa 3 million).
The government says they are getting people off incapacity benefit, but those are just WORDS to appease "Britains hard working families" - nothing more.
Anyone with a brain knows that whole populations in former South Wales mining villages (as an example) cannot be unfit to work - there are no jobs so it is convenient to keep these people on a list other than "unemployed".

Anonymous said...

a short P.S. to mine above, Alice: a Vice-Chancellor of my acquaintance has called the massive increase in student numbers 'hidden unemployment'; a former head of Ofsted has emphasised that many degrees in second-rank universities offer little by way of good academic training or vocational expertise. So one could add to the account of 'public sector drag' several strands HE funding which simply keep many thousands off the unemployment numbers.

B. in C.

electro-kevin said...

Why should low-skilled manufacturing jobs return here ?

Labour costs in Eastern Europe undercut ours enormously. We cannot compete so long as we have all-encompassing welfare.

Our speciality is that we don't specialise.

The English are adaptable. Englishness is now a diaspora spreading throughout the world where their ideas and innovations are best valued.

Unlike here where all the wrong people are promoted and rewarded.

powerman said...

Growth in unproductive public sector employment ?

We spend a lot of money keeping people in their late teens and early twenties off the unemployment stats by putting them through watered down arts and social science degrees. Then we create non-jobs where they can put this 'education' to use.

It's a self-perpetuating cycle.

Have you ever examined the career backgrounds of New Labour politicians before they entered politics. There's an awful lot of failed lawyers and social science academics.