Unemployment falls sharply but the living standards crisis continues

Joblessness fell to 7.4%, the lowest figure since May 2009, but total pay rose by just 0.9%, a real-terms cut of 1.2%.

In the form of today's unemployment figures, Christmas has come early for David Cameron. Joblessness fell by 99,000 in the last quarter to 2.39 million (7.4%), the lowest level since May 2009, while employment rose by 250,000 to 30.09 million (although the rate, at 72.0%, remains below its pre-recession peak of 73.1%). The coalition now has an unarguably good story to tell on jobs, something we can expect Cameron to make much of at the final PMQs of the year today. 

But these headlines figures mask some worrying trends. Total pay, including bonuses, rose by just 0.9%, a real-terms cut with inflation at 2.2% over that period. In the public sector, pay fell in nominal terms by 0.3% (and will continue to fall in real-terms until at least 2015-16 due to George Osborne's pay cap). 

As well as enduring a living standards crisis, with the longest fall in wages since 1870, the UK is also suffering from a crisis of underemployment. There are now a record 1.47 million people working part-time because they can't find full-time jobs. 

The squeeze goes on

Source: ONS

The Tories remain confident that wages are a "lagging indicator" and that higher output will translate into higher salaries. As Osborne remarked after the publication of the most recent GDP figures, "If Britain is growing then the finances of Britain’s families will start to grow." 

For Labour, this optimistic analysis proves that the Conservatives have failed to grasp that the crisis is not merely cyclical but structural. The link between higher growth and higher wages has been severed and will not be easily repaired. Ed Miliband’s team point to the pre-crash period, when incomes for millions of low-and middle-income earners stagnated even in times of strong growth, as evidence that the market can no longer be relied upon to deliver for the majority. In an economy as unequal as Britain’s, any gains quickly flow to the top. If, as forecast, wage growth returns next year, it will be of the unbalanced kind seen in April, when high earners collected their deferred bonuses in order to benefit from the reduction in the top rate of tax (the one month since May 2010 in which real incomes rose).

If Labour is right, it is hard to see the Tories winning the credit they hope for the recovery. Confronted by Miliband's "cost of living" offensive, their instinct remains to shift the debate back to the macroeconomy. But they should be wary of relying on this line of attack. To most voters, after all, living standards are the economy. 

Unemployment fell by 99,000 to 2.39 million, the lowest level since May 2009. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Sooner or later, a British university is going to go bankrupt

Theresa May's anti-immigration policies will have a big impact - and no-one is talking about it. 

The most effective way to regenerate somewhere? Build a university there. Of all the bits of the public sector, they have the most beneficial local effects – they create, near-instantly, a constellation of jobs, both directly and indirectly.

Don’t forget that the housing crisis in England’s great cities is the jobs crisis everywhere else: universities not only attract students but create graduate employment, both through directly working for the university or servicing its students and staff.

In the United Kingdom, when you look at the renaissance of England’s cities from the 1990s to the present day, universities are often unnoticed and uncelebrated but they are always at the heart of the picture.

And crucial to their funding: the high fees of overseas students. Thanks to the dominance of Oxford and Cambridge in television and film, the wide spread of English around the world, and the soft power of the BBC, particularly the World Service,  an education at a British university is highly prized around of the world. Add to that the fact that higher education is something that Britain does well and the conditions for financially secure development of regional centres of growth and jobs – supposedly the tentpole of Theresa May’s agenda – are all in place.

But at the Home Office, May did more to stop the flow of foreign students into higher education in Britain than any other minister since the Second World War. Under May, that department did its utmost to reduce the number of overseas students, despite opposition both from BIS, then responsible for higher education, and the Treasury, then supremely powerful under the leadership of George Osborne.

That’s the hidden story in today’s Office of National Statistics figures showing a drop in the number of international students. Even small falls in the number of international students has big repercussions for student funding. Take the University of Hull – one in six students are international students. But remove their contribution in fees and the University’s finances would instantly go from surplus into deficit. At Imperial, international students make up a third of the student population – but contribute 56 per cent of student fee income.

Bluntly – if May continues to reduce student numbers, the end result is going to be a university going bust, with massive knock-on effects, not only for research enterprise but for the local economies of the surrounding area.

And that’s the trajectory under David Cameron, when the Home Office’s instincts faced strong countervailing pressure from a powerful Treasury and a department for Business, Innovation and Skills that for most of his premiership hosted a vocal Liberal Democrat who needed to be mollified. There’s every reason to believe that the Cameron-era trajectory will accelerate, rather than decline, now that May is at the Treasury, the new department of Business, Energy and Industrial Strategy doesn’t even have responsibility for higher education anymore. (That’s back at the Department for Education, where the Secretary of State, Justine Greening, is a May loyalist.)

We talk about the pressures in the NHS or in care, and those, too, are warning lights in the British state. But watch out too, for a university that needs to be bailed out before long. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.