People are trapped outside our labour market, and it's hurting our economy

The IEA's Philip Booth examines how the economy is shrinking even with a strong labour market.

Employment minister Chris Grayling might be going on holiday pretty chuffed with himself after the latest employment figures. On the other hand, a lot of other ministers have much to think about as they prepare to sun themselves.

How do we reconcile booming private sector employment with a flat economy? The obvious answer is that productivity is falling. The fact that real wages are falling suggests that this may be true. But why? There are several possible explanations, none of which are mutually exclusive.

  1. Policy uncertainty in the eurozone – and to some extent in the UK – is leading companies to sit on piles of cash instead of investing.
  2. Fewer companies at the margins of profitability are going bust because interest rates are very low and because of forbearance.
  3. The government is spending ten percentage points more of national income than ten years ago. All the evidence suggests that this will lower the growth rate by about one percentage point.
  4. A recent article in the Bank of England Quarterly Bulletin suggested that it was the energy and financial sectors that have particularly sluggish productivity. One reason is declining output in the North Sea. The other reasons are entirely policy induced. It would be difficult to imagine how the government could design a "green" policy that involved reducing carbon emissions at greater cost than the current policy. If I were a "green" economist, I would be livid. The government has designed policy that leads either to less CO2 reduction for a given cost or a higher cost of a given CO2 reduction. All those solar panels really do have very little – or negative – value. In financial services, the government has chosen to impose higher capital and liquidity requirements on banks to try to reduce the risk of financial crises. This lowers the productivity of the financial sector – there will be fewer loans to businesses and individuals for a given capital base. This is a policy choice and the government could choose differently. Its policy is not irrational, but it should understand the consequences.
  5. Our appalling tax and welfare system puts in place huge marginal rates of tax and benefit withdrawal, especially for full-time workers with families. Why train, or search for another job with higher pay if an adequate one can be found quickly? Government policy has made search, promotion, training etc a waste of time.
  6. The same system has probably encouraged people to take pay cuts and thus encouraged labour hoarding in the recession. If somebody gets a £1 pay cut, most of this will be returned to the person taking the pay cut through increased benefits and reduced taxes.

Policies 4 and 6 have certain benefits in a recession. In a sense, the government is providing a generalised job subsidy to families with children. This keeps people in touch with the labour market. However, the long-term consequences could be dire.

The other thing that is deeply worrying is the level of long-term unemployment. Many people are losing touch with the labour market and staying unemployed for long periods. Our labour market is looking more like the French labour market with people trapped outside it. Nearly 500,000 people have been unemployed for over two years.

This is a tragedy and government policy may be responsible. Imagine somebody on the minimum wage of about £6 per hour whose productivity just about justifies this wage. They lose their job. Naturally, they are a little less productive in their second choice occupation. They therefore cannot get a job. Their skills then decline further – they are now even further from getting a job. They may be willing to work for a low wage (and the benefits system encourages them to do so), but it is illegal. The government then comes along and tightens maternity and paternity rights; regulates agency workers; imposes the costs of pensions auto-enrolment; increases employees’ national insurance; the list is almost endless. This all makes the worker’s productivity after costs ever-lower than the lowest wage at which it would be legal to employ the person.

I do not have figures for the UK, but in the US only a small proportion of people earning the minimum wage live in families in poverty (most are spouses working part-time, young people in families, and so on). A low wage job is a step on the ladder – nearly two-thirds of minimum wage employees move above that level within a year.

The government is determinedly removing the ladder of employment for many people with predictable results in terms of long-term unemployment.

Employment is buoyant, but poor policy choices are at least partly responsible for a labour market that, on the one hand, has many people trapped outside and, on the other, contains a large number of people who may answer the question "am I better off than five years ago?" with a strong "no" when it comes to the next election.

A French protest against unemployment. Coming to the UK soon? Photograph: Getty Images

Philip Booth is Editorial and Programme Director at the Institute of Economic Affairs.


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No, single men do not have a “right” to reproduce

The World Health Organisation’s new definition of infertility enshrines a man’s right to do to women what patriarchy has always done to them – own their bodies.

Last year, Katha Pollitt wrote an article for The Nation in which she asked why the left was simultaneously making progress with equal marriage while falling behind on abortion rights. “The media ,” she wrote, “present marriage equality and reproductive rights as ‘culture war’ issues, as if they somehow went together. But perhaps they’re not as similar as we think.”

She highlighted the ways in which the right can afford to cede ground on marriage equality while continuing to deny females bodily autonomy. She is right to do so. While both reproductive choice and gay rights may be classed as gender issues, each has its own very specific relationship to patriarchy.

A woman’s desire to control her reproductive destiny will always be in direct opposition to patriarchy’s desire to exploit female bodies as a reproductive resource. The social institutions that develop to support the latter – such as marriage – may change, but the exploitation can remain in place.

This has, I think, caused great confusion for those of us who like to see ourselves as progressive. We know that the idealisation of the heterosexual nuclear family, coupled with the demonisation of all relationships seen as “other”, has caused harm to countless individuals. We refuse to define marriage as solely for the purpose of procreation, or to insist that a family unit includes one parent of each sex.

We know we are right in thinking that one cannot challenge patriarchy without fundamentally revising our understanding of family structures. Where we have gone wrong is in assuming that a revision of family structures will, in and of itself, challenge patriarchy. On the contrary, it can accommodate it.

This is why all feminists – and indeed anyone serious about tackling patriarchy at the root – should be deeply concerned about the World Health Organisation’s new definition of infertility. Whereas up until now infertility has been defined solely in medical terms (as the failure to achieve pregnancy after 12 months of unprotected sex), a revised definition will give each individual “a right to reproduce”.

According to Dr David Adamson, one of the authors of the new standards, this new definition “includes the rights of all individuals to have a family, and that includes single men, single women, gay men, gay women”:

“It puts a stake in the ground and says an individual’s got a right to reproduce whether or not they have a partner. It’s a big change.”

It sure is. From now on, even single men who want children – but cannot have them solely because they do not have a female partner to impregnate – will be classed as “infertile”. I hope I’m not the only person to see a problem with this.

I am all in favour of different family structures. I’m especially in favour of those that undermine an age-old institution set up to allow men to claim ownership of women’s reproductive labour and offspring.

I am less enthusiastic about preserving a man’s “right” to reproductive labour regardless of whether or not he has a female partner. The safeguarding of such a right marks not so much an end to patriarchy as the introduction of a new, improved, pick ‘n’ mix, no-strings-attached version.

There is nothing in Adamson’s words to suggest he sees a difference between the position of a reproductively healthy single woman and a reproductively healthy single man. Yet the difference seems obvious to me. A woman can impregnate herself using donor sperm; a man must impregnate another human being using his sperm.

In order to exercise his “right” to reproduce, a man requires the cooperation – or failing that, forced labour – of a female person for the duration of nine months. He requires her to take serious health risks, endure permanent physical side-effects and then to supress any bond she may have developed with the growing foetus. A woman requires none of these things from a sperm donor.

This new definition of infertility effectively enshrines a man’s right to do to women what patriarchy has always done to them: appropriate their labour, exploit their bodies and then claim ownership of any resultant human life.

Already it is being suggested that this new definition may lead to a change in UK surrogacy law. And while some may find it reassuring to see Josephine Quintavalle of the conservative pressure group Comment on Reproductive Ethics complaining about the sidelining of “the biological process and significance of natural intercourse between a man and a woman”, that really isn’t the problem here.

“How long,” asks Quintavalle, “before babies are created and grown on request completely in the lab?” The answer to this is “probably a very long time indeed”. After all, men are hardly on the verge of running out of poor and/or vulnerable women to exploit. As long as there are female people who feel their only remaining resource is a functioning womb, why bother developing complex technology to replace them?

Men do not have a fundamental right to use female bodies, neither for reproduction nor for sex. A man who wants children but has no available partner is no more “infertile” than a man who wants sex but has no available partner is “sexually deprived”.

The WHO’s new definition is symptomatic of men’s ongoing refusal to recognise female boundaries. Our bodies are our own, not a resource to be put at men’s disposal. Until all those who claim to be opposed to patriarchal exploitation recognise this, progress towards gender-based equality will be very one-sided indeed.

Glosswitch is a feminist mother of three who works in publishing.