Unemployment is still too high – so why don't people care?

Unemployment of 7.8% ought to have people in the streets. Yet the only thing we hear is a collective sigh of indifference.

For more than three years, unemployment has been at levels we haven’t seen since the mid 1990s. However, as many commentators have noted, there is little evidence of public sympathy for those experiencing the consequences of stagnant labour demand. A poll for Prospect earlier this year found strong (although not majority) support for cutting benefits to the unemployed. The British Social Attitudes survey shows that while in 2001 88 per cent of respondents said the government was mainly responsible for ensuring the unemployed had enough to live on, only 59 per cent thought this in 2011. And the coalition’s strategy of presenting increases in welfare spending as a consequence of the previous government’s profligacy rather than the economic crisis seems to have found a receptive audience. 

In terms of public attitudes, unemployment seems to be unusual. How do we explain this? A common response is to look for explanations in underlying values or ideology: more individualism, less solidarity, a greater concern with personal responsibility, workers being duped by capitalist propaganda – take your pick. But there are some other reasons to expect unemployment to have a muted impact on public opinion, rooted in experience and expectations rather than values or ideology. 

The risk of becoming unemployed is low for most people in employment

If you are currently in employment, what is the risk that you will lose your job and become unemployed in the next three months? ONS publishes experimental statistics on movements between different labour market positions (employment, unemployment and economic inactivity). The latest data shows a risk of moving from employment to unemployment of 1.4 per cent per quarter – in other words, 98.6 per cent against becoming unemployed. The risk is non-negligible but prior to the recession, it was 1.2 per cent, so we’re talking about an increase of 0.2 per cent.  

This may seem surprising given that the unemployment rate is so much higher now, but it’s important to remember that the unemployment rate doesn’t measure the risk of becoming unemployed, and still less the risk of a currently employed worker becoming unemployed. It tells us what proportion of (economically active) people are unemployed at a point in time.

(As a thought experiment, imagine a situation where unemployment is high but nearly everyone who is unemployed has been out of work for more than a year: the risk of becoming unemployed in the near future would be very small, however high the unemployment rate was.)

Analysis by Paul Gregg and Jonathan Wadsworth (in The Labour market in winter, Oxford 2011) indicates that the risk of unemployment due to job loss is lower now than in the last two major recessions (although it’s worth bearing in mind that, even then, only a small minority of the employed were affected). The reduction in the risk compared to previous recessions may help explain apparently low current levels of public concern. People in employment may, rationally, see unemployment primarily as something that happens other people. This will tend to make their attitudes to the unemployed more dependent on their altruism than on any sense of being personally implicated. And it may leave people more open to the suggestion that unemployment is due to some personal failing rather than to slack labour demand.

Job loss is not the main cause of unemployment

It is natural to think of unemployment primarily in terms of people losing their jobs, but people also become unemployed because they have entered the labour market from some form of economic inactivity and failed to find work. Over recent years this has been no less important a source of flows into unemployment than job loss, and apart from the sharp peak in job losses at the onset of recession, it has been more important since 2008 (see chart). While flows from employment to unemployment are still high compared to pre-recession years, more people are becoming unemployed because they have failed to establish (or re-establish) a foothold in the labour market- primarily people leaving education, but also parents moving back into the labour market to supplement loss of earnings by partners and people affected by new benefit conditionality regimes.

 

Source ONS Labour Market Flows November 2012

With the partial exception of people affected by benefit conditionality, weak labour demand remains the explanation for the increase in all flows into unemployment, from all origins. But because the risk is falling somewhat less on existing workers than on those entering the labour market, employed workers may be less likely to relate unemployment  to their own experience. Again, the chances that employed people will see unemployment as a collective risk to which they are themselves exposed is reduced, not because of false consciousness or a shift in underlying values but simply because that is not the situation they face.

In earlier recessions job losses not only made a somewhat larger contribution to unemployment, many of the losses  were highly salient in public consciousness due to high-profile industrial restructuring affecting unionised workplaces – factories, docks, mines – reinforcing the sense of unemployment as a national issue of concern to everyone. That brings me to my final point. 

Unemployment is massively concentrated in certain types of occupation

The risk of unemployment is not evenly distributed over the workforce: generally, people in lower paid jobs experience more spells of unemployment even in the good times, and they are also more exposed to risks in the bad times, because they are more likely to be in sectors hit by falling demand and because employers are less likely to "hoard" their labour in the hope of an upturn than they are for higher-paid workers. The unemployment rates for different occupations give us a sense of the difference in risk exposure: former workers in elementary occupations have an unemployment rate of 12 per cent on the most recent data, compared to 3 per cent for those in managerial occupations.  

Another way of capturing the concentration of unemployment is by comparing different occupational groups’ shares of total employment and of unemployment, as in the table below. Dividing the share of unemployment by the share of employment gives us a simple measure of concentration – for managers and professionals, the share of unemployment is half of the share of employment, but for sales and customer services jobs, it is 1.6 times employment and for elementary occupations it is 2.3 times employment. The groups with disproportionately high unemployment are a sizeable minority of the workforce, 26 per cent: but that is still a minority and those with disproportionately low unemployment are a much larger group – 45 per cent (the three columns on the right and left hand sides of the table). 

As in previous recessions, manufacturing workers are among those bearing the brunt of low labour demand, with unemployment at 1.4 times their share of employment. But these workers form a much smaller share of the workforce, and of the general public, than in the 1980’s or early 1990’s. Unemployment increasingly takes the form of workers in low-paid and relatively precarious jobs not seeing their contracts renewed (if they have contracts at all), rather than finding their unionised factory is shutting down.

So if we want to understand why the public shows less sympathy for the unemployed than we might expect, there are some suggestive leads in the current and historical labour market data. If people are inclined to think of unemployment in terms of workers losing jobs , recent trends don’t fit the paradigm very well . The potent symbols of unemployment as a national issue – whole industries shedding labour, older workers losing jobs they had worked in since leaving school and communities losing their main source of employment at one fell swoop – are far from typical of current unemployment. And if personal interest plays any role in driving public concern – in other words, if people are not complete altruists – currently employed workers may quite rationally see unemployment as someone else’s problem. The overall effect of these changes may be to make unemployment a far more distant contingency than in the last two major employment downturns- and the distance is not just a matter of perception, but of objective risk.

If this attempt to explain public attitudes in terms of risks, expectations and public salience is right, there are positive and negative implications. The negative (for those on the left – reverse the sign if you’re on the right) is that the coalition may not need to worry too much about its remarkable record of stagnating  unemployment: enough of the public is far enough away from the risks to maintain the ugly fiction that unemployment is primarily a personal failure. On the positive side, the sort of deep-seated changes in public values or ideology – away from solidarity and equality, towards devil-take-the hindmost individualism – which worry so many on the left may be a misinterpretation of the evidence.  I’ve tried to suggest why people might react differently to a rise in unemployment without fundamental changes in values. The UK public may be no less nice or nasty, tough or tender than they were thirty years ago: they may just be, on balance, further away from the problem. 

Photograph: Getty Images

Declan Gaffney is a policy consultant specialising in social security, labour markets and equality. He blogs at l'Art Social

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No, the Brexit vote wasn't just about immigration

The data shows that most voters want a fairer society. Labour must fight for this in the Brexit negotiations. 

The result of the UK referendum to leave the European Union has shaken the political establishment to its core. As I have argued since then, it should be a wakeup call to all political parties.

Some have also argued that the referendum result is having international repercussions, with the election of Donald Trump to the White House cited as "Brexit Plus Plus". With the imminent election in France, and Germany’s later this year, responsible analysts are trying to understand why people voted the way they did and what this means. Too often, there are knee jerk explanations without any evidentiary justification to back them up. 

Analysis of who voted to leave shows the majority of people who voted to leave live in the South of England, and 59 per cent were from the middle classes (A, B, C1). Only 21 per cent of people in the lowest income groups voted to leave.

Analysis of why people voted as they did is more complex. This includes an increase in Euroscepticism particularly from older, middle class voters; concerns about globalisation and the impact on jobs; inequalities and being left behind; and new voters who didn’t vote in the 2015 General Election, for whom immigration was a concern. When this analysis is overlaid on analysis of that election, some themes emerge. The attitudes and values of the majority of the British public are firmly rooted in the desire for a fairer society, based on principles of equality and social justice. Although immigration played a part in the election and referendum results, perceived competence, being "left behind" and disillusionment with the direction of change were the key drivers.

Whether people voted to remain or leave, they did so because they believed that they and their families would be better off, and the majority who voted believed they would be better off if we leave the EU. Labour accepts and respects this. We have said that we will vote for Article 50, but we intend to hold this Tory government to account to ensure we get the best possible deal for the country.

In his speech last week, Jeremy Corbyn set out the issues that Labour will hold the government to account on. We have been absolutely clear that we want tariff-free access to the single market, to ensure that Britain continues to trade openly with our European neighbours, and to protect the cost of living for families struggling to get by. Getting the best deal for the UK means that we must continue to have a strong relationship with our EU neighbours.

Under my work and pensions portfolio, for example, we know that 40 per cent of pension funds are invested outside of the UK. If we want to guarantee a dignified and secure retirement for our pensioners, we must ensure that savers can get the best returns for the investments they make.

We also know that many of the protections that have until now been offered by the European Union must continue to be guaranteed when we leave. Provisions that secure the rights of disabled people, or that protect worker’s rights are an essential part of British society, enhanced by the EU. These cannot be torn up by the Tories.

Defending these rights is also at the heart of our approach to immigration. The dire anti-migrant rhetoric from some parts of the media and certain politicians, is reprehensible. I reject this scapegoating, which has fear and blame at its heart, because it is not true. Blaming migrants for nearly seven wasted years of Tory austerity when they are net contributors of over £2bn a year to the economy is perverse.

Of course we need to respond when public services are coming under pressure from local population increases. That’s why Labour wants to reinstate the Migration Impact Fund that the Tories abolished. We also need to ensure new members of communities get to know their new neighbours and what’s expected of them.

We believe that migrants’ broader contribution to British society has too often been obscured by the actions of unscrupulous employers, who have exploited new arrivals at the expense of local labour. A vast network of recruitment and employment agencies has developed in this country. It is worth hundreds of billions of pounds. Last year over 1.3m people were employed in the UK by these agencies. In 2007, 1 in 7 of these people came from the EU. We should ask how many are recruited directly from the EU now, and offered precarious work on very low wages whilst undercutting local labour. Labour will put an end to this practice, in order to protect both those who come here to work and those that grew up here.

Importantly, however, we cannot let our exit from the EU leave us with skill shortages in our economy. Our current workforce planning is woeful, particularly for the long-term. We need to reduce our need for migrant labour by ensuring our young, and our not so young, are trained for the jobs of the future, from carers to coders. Again, the Conservatives have undermined people’s chances of getting on by cutting college funding and the adult skills budget.

Unlike the government, Labour will not shirk from our responsibilities to the nation. Our plans for Brexit will respect the referendum result, whilst holding the Government to account and delivering a better future for all our people, not just the privileged few.

Debbie Abrahams is shadow work and pensions secretary.