There is no longer a "jobs puzzle": Britain's labour market improvement has stagnated

Unemployment has stalled – and other statistics are even worse.

A mesofact is a piece of knowledge which changes slowly. The term was coined by Samuel Arbesman, who describes it as lying somewhere between a fact which stays the same – like the height of Everest – and a fact which is constantly in flux – like the weather. The example Arbesman gives is of the population of the world; when I was a child, I learned it was 6 billion people. When my mother was a child, it was around half that. Yet it isn't a fact which changes fast enough that we bother rechecking every time we state it; and so the truth runs away from us.

It's a similar risk to the one I brought up in April, about the risks of imprecision. It may be easier to estimate things like the cost of welfare fraud to the economy as "small" or "large"; but if you present merely qualitative values, then the ability to continuously refine them if they change in small increments is lost. It's hard enough to keep track of the fact that the world's population increased by a billion in the last ten years; it would be that much harder to work out when it went from "large" to "very large".

I am reminded of this by yesterday's unemployment figures. It seems that there is a mesofact developing, which is that unemployment is falling quickly. It's been a puzzle in British economics for a while: there is job growth, but no economic growth. Why is that?

We've given various suggestions here, raging from productivity collapse to underemployment; and today, the BBC's Stephanie Flanders offers the possibility that it's due to falling wages.

But I worry that Britain's economic commentariat are struggling to explain a fact which just is no longer the case. Take a look at the unemployment rate since February 2008:

You can clearly see the steady decline which prompted the debate. Between Nov 2011 and Nov 2012, the unemployment rate fell nearly continuously, from 8.4 per cent to 7.7 per cent. Against the background of an economy which was stagnant, and sometimes actually contracting, that was a mystery.

But for the last six months, that fall has halted. Unemployment is actually sitting at 7.8 per cent in the latest release, for the three months to April, 0.1 per cent higher than its low. There is no mystery. Our economy is weak, and so is our labour market. Unemployment is stuck at over two per cent above its pre-crisis norm. That's a disaster.

There is one important statistic where the narrative of continued, slow, improvement does shine through; that's the vacancy rate, the number of people unemployed for every vacancy:

It stands at 4.9 people, the lowest since February 2009. That's good news; but talking about the vacancy rate exposes another flaw in government thinking. Whenever the rate is substantially higher than one, discussing unemployment as a personal failing is utterly nonsensical. If every job available was filled instantly, there would still be over 2 million people unemployed.

So why even bother with policies like the Work Programme, which aim to increase the employability of people without jobs? The vacancy rate shows that the most important thing to do is increase the supply of jobs, not increase the employability of unemployed people.

Speaking to Work Programme providers, they highlight a different aim of the scheme. Rather than targeting unemployment in general, the point of skills-based training is to get people in long-term unemployment back into work – even if that means they take a job which would otherwise have gone to someone who has been unemployed for a shorter length of time.

But that's where the worst news of all in yesterday's release comes in. Because since the government began its workfare blitz, the proportion of unemployed people out of work for over a year has gone up:

If you need a reminder of how scarring long-term unemployment is, just remember this paper from April:

The first thing employers look at is how long you've been out of work, and that's the only thing they look at if it's been six months or longer.

The labour market isn't getting better. And on the most important measure of all, it's getting much, much worse.

Stephen Hester, just the latest unemployed Briton. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.