More Tory disinformation on the economy

Now, Iain Duncan Smith is at it.

More misinformation from another cabinet minister at the Tory jamboree in Cardiff. Iain Duncan Smith told the conference that unemployment was less of a problem than some have suggested. "It's short-sighted to say there aren't any jobs at the moment. The fact is, there are around half a million vacancies in the economy at the moment," he said. "It's not the absence of jobs that's the problem. It's the failure to match the unemployed to the jobs there are."

OK, let's take a look at this dumb claim. It is true that there are two and a half million unemployed people and half a million vacancies; so there are five unemployed people chasing each recorded vacancy. But to put that in context, exactly two years ago, there were two million unemployed and 677,000 vacancies -- or one vacancy for every three unemployed people. So, at the very least, it is harder to find a job than it was two years ago, as there aren't enough jobs. Doesn't take a rocket scientist to work that out.

It turns out that capitalist economies need some unemployment to allow for the rebalancing away from goods that people don't want to goods that they do. That means there is an available pool of labour for these new firms to hire from. It is also efficient for an economy to allow people to move between jobs they don't like to ones that they do. That is why we subsidise search. The problem comes when unemployment durations lengthen, as they have recently. Today, a third of the unemployment durations are more than 12 months long, compared with 22 per cent two years ago. Skills deteriorate when no jobs are available, which is why recessions hurt.

A further problem is that there is a mismatch between the skills the unemployed have and those required for the vacancies. There is also the problem that the vacancies are in one place and the unemployed live elsewhere. There are jobs available as experienced brain surgeons in London but the unemployed are 22 years old, with no experience and no qualifications and live in Middlesbrough. Nearly a million of the total stock of unemployed people are under the age of 25. How exactly are they going to fill the vacancies that require experience? The only way to get a job is to have experience but the only way to get experience is to have a job.

Over the past two years, overall employment fell by 210,000 while employment of those aged between 16 and 24 fell by 351,000. In contrast, the employment of those aged between 25 and 34 increased by 171,000, while that of those who are 35 and over fell by 30,000. This doesn't look like a failure to fill available vacancies. The jobs have gone. Plus, the government is reducing funding for training, so that is going to make it harder to solve the mismatch problem. And there is a public-sector hiring freeze. Too many unemployed, chasing too few jobs.

The problem is the lack of vacancies, not the fact that the unemployed don't want to get on their bikes. It is not their fault, as much as you might like it to be. The unemployed are there involuntarily and not by choice. Sorry Iain, back to the drawing board. There just aren't enough jobs at the moment and things are going to get much worse -- and soon.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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Can Philip Hammond save the Conservatives from public anger at their DUP deal?

The Chancellor has the wriggle room to get close to the DUP's spending increase – but emotion matters more than facts in politics.

The magic money tree exists, and it is growing in Northern Ireland. That’s the attack line that Labour will throw at Theresa May in the wake of her £1bn deal with the DUP to keep her party in office.

It’s worth noting that while £1bn is a big deal in terms of Northern Ireland’s budget – just a touch under £10bn in 2016/17 – as far as the total expenditure of the British government goes, it’s peanuts.

The British government spent £778bn last year – we’re talking about spending an amount of money in Northern Ireland over the course of two years that the NHS loses in pen theft over the course of one in England. To match the increase in relative terms, you’d be looking at a £35bn increase in spending.

But, of course, political arguments are about gut instinct rather than actual numbers. The perception that the streets of Antrim are being paved by gold while the public realm in England, Scotland and Wales falls into disrepair is a real danger to the Conservatives.

But the good news for them is that last year Philip Hammond tweaked his targets to give himself greater headroom in case of a Brexit shock. Now the Tories have experienced a shock of a different kind – a Corbyn shock. That shock was partly due to the Labour leader’s good campaign and May’s bad campaign, but it was also powered by anger at cuts to schools and anger among NHS workers at Jeremy Hunt’s stewardship of the NHS. Conservative MPs have already made it clear to May that the party must not go to the country again while defending cuts to school spending.

Hammond can get to slightly under that £35bn and still stick to his targets. That will mean that the DUP still get to rave about their higher-than-average increase, while avoiding another election in which cuts to schools are front-and-centre. But whether that deprives Labour of their “cuts for you, but not for them” attack line is another question entirely. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

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