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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In your 30s? You missed out on £26,000 and you're not even protesting

The 1980s kids seem resigned to their fate - for now. 

Imagine you’re in your thirties, and you’re renting in a shared house, on roughly the same pay you earned five years ago. Now imagine you have a friend, also in their thirties. This friend owns their own home, gets pay rises every year and has a more generous pension to beat. In fact, they are twice as rich as you. 

When you try to talk about how worried you are about your financial situation, the friend shrugs and says: “I was in that situation too.”

Un-friend, right? But this is, in fact, reality. A study from the Institute for Fiscal Studies found that Brits in their early thirties have a median wealth of £27,000. But ten years ago, a thirty something had £53,000. In other words, that unbearable friend is just someone exactly the same as you, who is now in their forties. 

Not only do Brits born in the early 1980s have half the wealth they would have had if they were born in the 1970s, but they are the first generation to be in this position since World War II.  According to the IFS study, each cohort has got progressively richer. But then, just as the 1980s kids were reaching adulthood, a couple of things happened at once.

House prices raced ahead of wages. Employers made pensions less generous. And, at the crucial point that the 1980s kids were finding their feet in the jobs market, the recession struck. The 1980s kids didn’t manage to buy homes in time to take advantage of low mortgage rates. Instead, they are stuck paying increasing amounts of rent. 

If the wealth distribution between someone in their 30s and someone in their 40s is stark, this is only the starting point in intergenerational inequality. The IFS expects pensioners’ incomes to race ahead of workers in the coming decade. 

So why, given this unprecedented reversal in fortunes, are Brits in their early thirties not marching in the streets? Why are they not burning tyres outside the Treasury while shouting: “Give us out £26k back?” 

The obvious fact that no one is going to be protesting their granny’s good fortune aside, it seems one reason for the 1980s kids’ resignation is they are still in denial. One thirty something wrote to The Staggers that the idea of being able to buy a house had become too abstract to worry about. Instead:

“You just try and get through this month and then worry about next month, which is probably self-defeating, but I think it's quite tough to get in the mindset that you're going to put something by so maybe in 10 years you can buy a shoebox a two-hour train ride from where you actually want to be.”

Another reflected that “people keep saying ‘something will turn up’”.

The Staggers turned to our resident thirty something, Yo Zushi, for his thoughts. He agreed with the IFS analysis that the recession mattered:

"We were spoiled by an artificially inflated balloon of cheap credit and growing up was something you did… later. Then the crash came in 2007-2008, and it became something we couldn’t afford to do. 

I would have got round to becoming comfortably off, I tell myself, had I been given another ten years of amoral capitalist boom to do so. Many of those who were born in the early 1970s drifted along, took a nap and woke up in possession of a house, all mod cons and a decent-paying job. But we slightly younger Gen X-ers followed in their slipstream and somehow fell off the edge. Oh well. "

Will the inertia of the1980s kids last? Perhaps – but Zushi sees in the support for Jeremy Corbyn, a swell of feeling at last. “Our lack of access to the life we were promised in our teens has woken many of us up to why things suck. That’s a good thing. 

“And now we have Corbyn to help sort it all out. That’s not meant sarcastically – I really think he’ll do it.”