Hamish McRae: Within the jobless data, some fascinating stories of change

Economic Life: Some people may have been forced to be self-employed, rather than choosing it

There is a big story told in the latest unemployment and employment statistics, and a number of smaller ones. The big story is that the modest fall in unemployment and the modest rise in hours worked suggest that the economy is still growing, albeit slowly. The rise in private-sector employment is just about keeping pace with the fall in public-sector employment, although many of the new jobs clearly are part-time rather than full-time.

Click HERE to view graphic

This is a mildly encouraging message, for it is consistent with what intuitively seems to be happening: despite Europe, despite the squeeze on real incomes, despite high oil and commodity prices, the economy is managing to grow. Were any of those headwinds to slacken, growth should pick up more pace. But it is only mildly encouraging for the country as a whole, and not really at all comforting for people still unable to find work. There is a long way to go.

But the detailed stories are interesting too, because they tell us a lot about the ways in which jobs are changing and will continue to change as the years go by. One of the most obvious is how employment is rising among immigrants and falling among Britons. It is not very helpful to go into the "are foreigners stealing our jobs?" debate because the phenomenon is much more complicated than the headlines suggest.

But the numbers are fascinating because it does not matter whether you take nationality or country of birth as your criterion, employment increased by between 160,000 and 210,000 for foreign workers over the past year, while it decreased by a similar amount for Britons (see graphic). Those are big numbers and they need to be examined in detail to see what is happening.

Another fascinating aspect is the shift from full-time workers to part-time, again something that needs a lot more work. We don't really have much of a handle as to the extent to which the shift is voluntary, or at least quite welcome, and to what extent it is forcing on people a harsh downshifting of hours, income and expectations. To know what is really happening you have to see what happens through the full cycle: as demand for labour recovers, will the proportion of part-time workers fall, or is this part of a permanent shift towards more flexible working? It is probably the latter, but let's wait for the evidence.

Another shift is the rise of people working beyond 65. Just under 9 per cent of all people in this age group are still working, so of course the proportion aged 65-70 still at work must be much higher still. The absolute number of workers aged 65 and over fell slightly in the last three-month period to 877,000, but that is still over 100,000 more than were at work in the same period in 2010. Again, we don't know to what extent this increase is voluntary and to what extent it is forced on people by inadequate pensions, but it must be a bit of both and it is a trend that will surely continue.

But the shift I find most interesting of all is the growth of self-employment. Two years ago there were 3,873,000 people listed as self-employed. Now it is 4,131,000, having risen steadily in every period. That is more than ever before in our history. As a proportion of the working population it is now past its previous peak, as the final graph shows.

Over the same period total public sector employment has come down from 6,323,000 to 5,942,000. There is of course some way to go but it is perfectly plausible that in another five years' time the two lines will cross over at about 5 million. I have been trying to pin this down but I think were that to happen – were more people to work for themselves than work for the government – this would be the first time since the Second World War.

That, if you think about it, would be remarkable. Now, you have to be careful drawing conclusions, because we don't know the reasons for this without a huge amount of digging. Some people may have been forced to become self-employed, rather than choosing it as a great liberation. The trend may be associated with the shift to non-British or foreign-born employment noted above. Some of the shift may simply be driven by tax and labour market regulation. But one thing is clear. A country with more self-employment than state jobs is different from the one we have been used to. It is potentially almost as radical as the shift from manufacturing to services.

Some will welcome this as a sign that we are moving towards a more self-reliant society, rather than a state-directed one. Others will take the opposite view. But it would certainly change things. Politics become different. Pensions have to be different. Workplace regulation becomes different. The tax system becomes different.

Policy towards employment becomes different too: if self-employment is rising steadily, even through this difficult period, what should the Government be doing to encourage its growth? If you want to try to revive a struggling region, should you try to bring in an outside employer, or should you encourage people to create their own jobs?

Actually you should do both, but schemes to help the self-employed to build their businesses do not offer ministers the same photo opportunities as cutting the ribbon on a new factory does.

So these microeconomic stories – as opposed to the macroeconomic story about the growth of the economy and the level of overall unemployment – seem to me to be in many ways more important. They tell us about how one key aspect of our society is changing, what people do for a living, rather than whether we are, as a community, some modest amount richer or poorer than we were three months earlier. But we should not lose sight of the macro story, and for once those unemployment numbers were a bit better than feared.

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