Don’t get carried away with headline fall in unemployment

Subtantial progress may not come until 2013

The drop in the latest unemployment figures is good news. It is the first time unemployment has fallen in ten months. But underneath the headline fall is bad news for women and some worrying trends that make substantial progress over the next year very unlikely.

Today’s fall in the overall jobless count masks a continuing rise in female unemployment, now higher than at any point since 1987. Since last month’s figures, there are an extra 8,000 women unemployed and 27,000 more women out of work for more than a year. In total, there are now more than a million women (1,136,000) unemployed, the highest since 1987 and a rise of 100,000 over the last year. Of those, over a quarter (29 per cent) of women (327,795) have been unemployed for more than a year.

Long term unemployment continues to rise, reaching its highest level since 1996. Overall, long term unemployment rose 26,000, the highest level since 1996, to a total of 882,821. While 1,000 men have left long-term unemployment, there are now 27,000 more women who have been out of work for more than a year. IPPR predicts there will be almost a million unemployed for more than a year by the end of 2012. There is a real risk that these people will struggle to take advantage of any upturn in the economy.

While youth unemployment has fallen by 9,000, there are still more than a million (1,033,440) young people (aged 16-24) unemployed, the second highest since comparable records began in 1992. Of those, 263,000 young people (aged 16-24) have been unemployed for more than a year. The Youth Contract has now begun, but it has a huge job to do.

Almost half a million (430,672) people over 50 are now unemployed, up 42,000 in the last year. More than 40 per cent of unemployed over fifties have been out of work for more than a year, up 13,000 over the last year to 189, 593. It’s going to be very tough indeed for over 50s out of work for more than a year to fund new jobs, even when the economy bounces back.

There has also been a rise in part-time work, which rose by 80,000 while the level of full-time employment fell by 27,000. There are now 1.4 million people working part-time because they say they cannot get longer hours.

Public sector employment contracted by 270,000 last year, while private sector employment increased by just 226,000. The resulting gap means rising unemployment. The economy is not being rebalanced by public sector job cuts because growth in the private sector continues to lag. There are actually 19,000 fewer vacancies in the economy than there were a year ago. Looking ahead, there is going to be a rise of 100,000 in unemployment this year, according to IPPR analysis of the latest forecast from the Office for Budgetary Responsibility.

This is already hitting the north of England hard. Over the last year, unemployment is up 22 per cent in the North West (an extra 57,000 out of work) and up 11 per cent in the North East (an extra 14,000 out of work). The chancellor is wasting the opportunity to boost national prosperity by ignoring the economic potential of the north.

The priority for the government must be to prevent long term unemployment, with a job guarantee, and to support women to get back to work, by prioritising childcare. There is light at the end of the tunnel, but that tunnel stretches well into 2013. Before it gets substantially better, it’s going to get worse.

Boarded up shops wait for redevelopment in the Hanley Shopping Centre in Stoke-On-Trent. Credit: Getty

Richard Darlington is Head of News at IPPR. Follow him on Twitter @RDarlo.

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Brexit has opened up big rifts among the remaining EU countries

Other non-Euro countries will miss Britain's lobbying - and Germany and France won't be too keen to make up for our lost budget contributions.

Untangling 40 years of Britain at the core of the EU has been compared to putting scrambled eggs back into their shells. On the UK side, political, legal, economic, and, not least, administrative difficulties are piling up, ranging from the Great Repeal Bill to how to process lorries at customs. But what is less appreciated is that Brexit has opened some big rifts in the EU.

This is most visible in relations between euro and non-euro countries. The UK is the EU’s second biggest economy, and after its exit the combined GDP of the non-euro member states falls from 38% of the eurozone GDP to barely 16%, or 11% of EU’s total. Unsurprisingly then, non-euro countries in Eastern Europe are worried that future integration might focus exclusively on the "euro core", leaving others in a loose periphery. This is at the core of recent discussions about a multi-speed Europe.

Previously, Britain has been central to the balance between ‘ins’ and ‘outs’, often leading opposition to centralising eurozone impulses. Most recently, this was demonstrated by David Cameron’s renegotiation, in which he secured provisional guarantees for non-euro countries. British concerns were also among the reasons why the design of the European Banking Union was calibrated with the interests of the ‘outs’ in mind. Finally, the UK insisted that the euro crisis must not detract from the development of the Single Market through initiatives such as the capital markets union. With Britain gone, this relationship becomes increasingly lop-sided.

Another context in which Brexit opens a can of worms is discussions over the EU budget. For 2015, the UK’s net contribution to the EU budget, after its rebate and EU investments, accounted for about 10% of the total. Filling in this gap will require either higher contributions by other major states or cutting the benefits of recipient states. In the former scenario, this means increasing German and French contributions by roughly 2.8 and 2 billion euros respectively. In the latter, it means lower payments to net beneficiaries of EU cohesion funds - a country like Bulgaria, for example, might take a hit of up to 0.8% of GDP.

Beyond the financial impact, Brexit poses awkward questions about the strategy for EU spending in the future. The Union’s budgets are planned over seven-year timeframes, with the next cycle due to begin in 2020. This means discussions about how to compensate for the hole left by Britain will coincide with the initial discussions on the future budget framework that will start in 2018. Once again, this is particularly worrying for those receiving EU funds, which are now likely to either be cut or made conditional on what are likely to be more political requirements.

Brexit also upends the delicate institutional balance within EU structures. A lot of the most important EU decisions are taken by qualified majority voting, even if in practice unanimity is sought most of the time. Since November 2014, this has meant the support of 55% of member states representing at least 65% of the population is required to pass decisions in the Council of the EU. Britain’s exit will destroy the blocking minority of a northern liberal German-led coalition of states, and increase the potential for blocking minorities of southern Mediterranean countries. There is also the question of what to do with the 73 British MEP mandates, which currently form almost 10% of all European Parliament seats.

Finally, there is the ‘small’ matter of foreign and defence policy. Perhaps here there are more grounds for continuity given the history of ‘outsourcing’ key decisions to NATO, whose membership remains unchanged. Furthermore, Theresa May appears to have realised that turning defence cooperation into a bargaining chip to attract Eastern European countries would backfire. Yet, with Britain gone, the EU is currently abuzz with discussions about greater military cooperation, particularly in procurement and research, suggesting that Brexit can also offer opportunities for the EU.

So, whether it is the balance between euro ‘ins’ and ‘outs’, multi-speed Europe, the EU budget, voting blocs or foreign policy, Brexit is forcing EU leaders into a load of discussions that many of them would rather avoid. This helps explain why there is clear regret among countries, particularly in Eastern Europe, at seeing such a key partner leave. It also explains why the EU has turned inwards to deal with the consequences of Brexit and why, although they need to be managed, the actual negotiations with London rank fairly low on the list of priorities in Brussels. British politicians, negotiators, and the general public would do well to take note of this.

Ivaylo Iaydjiev is a former adviser to the Bulgarian government. He is currently a DPhil student at the Blavatnik School of Government at the University of Oxford

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