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PROSPER MAGAZINE: DIGITAL EDITION

FEATURE

EMPLOYMENT OVER THE DECADES:

THE STATS, FACTS, FIGURES AND FUTURE

Prosper took a look at employment over the decades with the help of economist, Dr Steven McCabe.

In the current climate, we hear a great deal about unemployment which, currently still stands at 3.9%. The rate of unemployment or, as it might be alternatively be viewed, the lack of employment is complex. A national rate of 3.9% is a pretty bald statistic.

 

Data from the Office for National Statistics (ONS) that for the period April to June 2020 indicates that “an estimated” 1.34 million” people are unemployed. As the graph below demonstrates, in historical terms, since the 2008 financial crisis, the so called “credit crunch”, we’ve enjoyed a period in which employment has been rising:

What this graph clearly shows, is that the 1970s, though characterised by economic problems caused by an oil crisis and labour disputes, was a decade of relatively stability in terms of employment.

 

For those who can remember, manufacturing was still, to a very large extent, labour intensive. For those who wanted jobs, there was no real problem. What did cause problem for business, was inflation.

In an age when the even achieving the Bank of England target for inflation of 2% is proving a stretch, it is sobering to remember that much of 1970s was characterised by double digit inflation.

 

How inflation was ‘cured’ is well documented; the use of unemployment in the early 1980s by the Thatcher administration. Crucially, this massively reduced employment opportunities in manufacturing when the UK economy shifted emphasis to service sector. 

 

There is a myth that it was Margaret Thatcher who destroyed manufacturing. This is not true.

 

As the following diagram demonstrates, manufacturing’s decline as a proportion of gross domestic product (GDP) has been a long-term affair that was already taking place before the Thatcher government came to power in May 1979. Indeed, the decline of 2.5% over the 1980s is not especially dramatic. 

What is beyond dispute is that the replacement jobs for ‘traditional’ industries, abundant though they may be, do not offer the same terms and conditions.

 

We have a lopsided economy in which much of what we make is high quality and, crucially, assists in contributing to the balance of payments.

 

Relatively easy to access to credit, combined with cheap products from the Far East, particularly China, created an economy that, as most recent data shows, is largely made up of services.

 

As the House of Commons Economic Indicators, Number 02787 (published August 12th 2020) makes clear, services are overwhelmingly the largest part of the UK economy; “in 2018, they accounted for 80% of output, production for 14%, construction, for 6% and agriculture for 1%.” 

Given the outcome of the general election last December, the Conservative Party were elected with an 80 seat majority with a mandate to complete the process of passing the Withdrawal Act, formally enabling the UK’s departure from the EU, and promise to ‘level up’ parts of the country in which citizens feel ‘eft behind.

 

We would have expected the trend of historically high levels of employment to continue. Latest ONS data shows the UK rate of employment to be 76.4% (80.2% for men and 72.8% for women).

Any euphoria that may have been felt that the uncertainty caused by Brexit was coming to an end was short-lived. There is still the not insignificant issue of the outcome of the ongoing free trade negotiations between the UK and EU.

 

The vista of ‘no-deal’, with all the attendant consequences for key sectors of the British economy, is still very possible. This would undermine efforts to increase employment in the West Midlands in which, in particular, the automotive sector depends on seamless supply chains. 

However, as we’re experiencing on a daily basis, a virus from China, unheard of before the beginning of this year, has proved how fragile our existence can be. Equally importantly, Covid-19 has had a hugely negative impact on the economy of every country that has implemented ‘lockdown’.

 

Though arguments will continue as to what was done, when and its effectiveness, lockdown was essential to slow the rate of infection of COVID-19, to reduce the burden on the National Health Service and, of course, reduce the rate of death.

Notably, the UK has ended up in a worst of all worlds state. It has suffered the highest rate of excess deaths in Europe. And ONS data published on Wednesday 12th August shows the UK economy has been hit in a way making even the impact of the global financial crisis of 2008 look relatively benign.

 

In the second quarter, (April to June), the UK economy declined by a whopping 20.4%. This is the largest quarterly drop since comparable records began in 1955. The UK’s performance in Q2 is the worst of the G7 countries. 20.4% is worse than any of the other 27 EU members. 

What does this tell us about the future with respect to employment? 

It would be foolish in the extreme to suggest that there will be a rapid recovery. This will take time.

 

Let’s remember that the range of initiatives brought in to by Chancellor Rishi Sunak to assist payment of workers and the self-employed as well as businesses, were intended to be temporary. The assumption was that the economy would suffer a very profound but sharp ‘V’ shaped dip. 

By now we should have been reflecting on how bad things could have been. 

Data published by the Office for National Statistics indicate that 730,000 jobs have been “lost from company payrolls” since March due to COVID-19. What is of concern is that many of the estimated 9.5 million workers on ‘furlough’ (Coronavirus Job Protection Scheme) may be made redundant when it is wound up at the end of October. 

There is no way to ‘sugar coat’ what potentially could be a developing disaster for employment in the UK. Perceived wisdom indicates that we are likely to see, at best, levels of unemployment that will match the effects of the 2008 GFC.

 

Many believe that we could see unemployment that’s as high as the early 1980s and early 1990s. Pessimists claim that unemployment may even exceed its highest level of the 1980s of almost 12%.

One thing is certain. There will, eventually, be an end to the current crisis. New opportunities will emerge. New businesses will be created to supply demands for an economy that has been rebooted and in which priorities have shifted.

 

This is what savvy entrepreneurs will seek to achieve. Jobs will be created in industries to make this country more resilient and less reliant on the long supply-chains that have been exposed during the current crisis. 

Sadly, though, this will take time and there is likely to be much personal suffering for those who, through no fault of their own, lose their jobs. 

It is to be sincerely hoped that we get back to the record levels of employment experienced prior to the crisis caused by Covid-19. Unfortunately, it could take a couple of years.

 

Crucially, it is to be hoped that the new jobs created are high quality and decently paid rather than continuing the use of zero-hour contracts that have created what is known as ‘the precariat’.

We must maintain hope that there will be better times after the crisis.

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