Odd job UK: booming black market economy is propping up jobs figures


The “jobs enigma” of 2012, that saw unemployment fall despite the gloomy economic outlook, is likely to continue next year, according to the Chartered Institute of Personnel and Development (CIPD).

Its prediction underlines the biggest puzzle to emerge from the protracted downturn: Why, when the economy is flatlining, is the number of people out of work falling?

The Government points to Britain’s flexible labour market, with workers prepared to put jobs before pay rises and accept part-time work or short-term contracts.

Privately, however, some ministers wonder whether there is another reason: that more people are working in the black economy because it has become harder to draw state benefits without being “hassled” by Jobcentres and having to make more effort to find work.

Another factor could be the stigma attached to claiming, as ministers, led by the Chancellor George Osborne, contrast strivers who work hard for their families with scroungers who stay in bed and choose “a life on benefits”.

Despite predictions that unemployment would rise to 3 million in the double-dip recession, it stands at 2.51 million and has fallen by 130,000 in the past year. Experts are divided as to why.

“The Government is driving people off benefits, making it harder and harder to claim, so many people are working on the side,” said a former Downing Street economic adviser.  Academics insist Britain is not turning into a “nation of tax-dodging Greeks”, saying such an effect is marginal. They insist the fall in those claiming out of work benefits is explained mainly by companies “hoarding” labour and workers taking whatever work is available or becoming self-employed.

There is no official figure for Britain’s hidden economy, in which companies avoid paying VAT and workers do not pay tax, but the loss to the Treasury has been estimated at £2bn a year.

David Gauke, the Treasury minister, sparked a media frenzy in July when he said it was “morally wrong” to pay tradesmen such as builders, plumbers and cleaners in cash.

Since then, ministers have been reluctant to talk about the black economy. Privately, some suspect it is growing as a result of tougher checks and penalties on the jobless. One Whitehall estimate is that one in three people who stop claiming Jobseeker’s Allowance (JSA) switches to working in the “informal economy”.

Department of Work and Pensions (DWP) figures reveal that almost two thirds of claimants placed on mandatory work activity (MWA) do not start it because they find a job, stop claiming benefits or simply do not turn up. Of the 90,000 people referred to the scheme, only 33,000 started. More than 6,200 have lost their benefits for not taking part.

Of course, this could mean people were working while claiming in the first place.

Jonathan Portes, director of the National Institute of Economic and Social Research, who has analysed the programme, believes it may drive people off JSA for short periods, but that some merely switch to the more generous employment and support allowance for the sick and disabled – costing the Government more but keeping the jobless figures down.

The DWP insists three-quarters of those who go on the scheme say it improved their personal confidence, and the same proportion felt “positive” at the end of the placement.

A study by the University of Kent found that the stigma of claiming is “an important factor” in the non take-up of benefits and tax credits.

Paul Gregg, a Professor of Economic and Social Policy at Bath University, said: “This was our first recession with a genuinely flexible labour market. The significant fall in real wages has pushed people into low paid and part-time work and self-employment.”

Arts and Entertainment
Lena Dunham
booksLena Dunham's memoirs - written at the age of 28 - are honest to the point of making you squirm
Arts and Entertainment
A bit rich: Maggie Smith in Downton Abbey
tvDownton Abbey review: It's six months since we last caught up with the Crawley clan
Frank Lampard and his non-celebration
premier leagueManchester City vs Chelsea match report from the Etihad Stadium
Have you tried new the Independent Digital Edition apps?
ebooksAn unforgettable anthology of contemporary reportage
Jacqueline Bisset has claimed that young women today are obsessed with being 'hot', rather than 'charming', 'romantic' or 'beautiful'
Arts and Entertainment
Jake Quickenden sings his heart out in his second audition
tvX Factor: How did the Jakes - and Charlie Martinez - fare?
premier league
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave crime series
Mario Balotelli celebrates his first Liverpool goal
premier leagueLiverpool striker expressed his opinion about the 5-3 thriller with Leicester - then this happened
people'I hated him during those times'
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
Arts and Entertainment
Female fans want more explicit male sex in Game of Thrones, George R R Martin says
tvSpoiler warning: Star of George RR Martin's hit series says viewers have 'not seen the last' of him/her
Dame Vivienne Westwood has been raging pretty much all of her life
peopleMemoir extracts show iconic designer 'felt pressured' into going out with Sex Pistols manager
Life and Style
fashionAlexander Fury's Spring/Summer 2015 London Fashion Week roundup
Arts and Entertainment
Lauryn Hill performing at the O2 Brixton Academy last night
musicSinger was more than 90 minutes late on stage in Brixton show
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
people''Women's rights is too often synonymous with man-hating'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Head of Marketing and Communications - London - up to £80,000

£70000 - £80000 per annum: Ashdown Group: Group Head of Marketing and Communic...

Nursery Nurse

Negotiable: Randstad Education Manchester: Level 3 Nursery Nurse required for ...

Nursery Nurse

Negotiable: Randstad Education Manchester: L3 Nursery Nurses urgently required...

SEN Teaching Assistant

Negotiable: Randstad Education Manchester: We have a number of schools based S...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam