John Major boasted at the Conservative conference in October of contracts from Fujitsu, Daewoo, Nissan, Black & Decker, NEC and Siemens: "These companies didn't invest in a socialist Britain. They set up here because it's a Conservative Britain." In the light of yesterday's announcement from Chunghwa it would appear that his vision of Enterprise Britain is paying off. A deregulated labour market - otherwise known as low wages and temporary contracts - seems to be attracting foreign investment and generating new jobs. Second only to the US in attracting foreign investment, Britain attracted around pounds 7bn in 1994- more than any other European country. More than 3,500 US companies have invested here, and more than 40 per cent of Japanese investment in Europe is based in Britain. The top 2,500 foreign-owned companies employ a total of 2 million people.
Cheap labour in Britain, compared, for example, with Germany, is one factor attracting inward investment by international firms that want a foothold in the European Union. But according to a study of inward investment published by the economic consultancy London Economics earlier this year, other important attractions are the English language and the international strengths of the City of London. And as the jobs become increasingly highly skilled, a well-qualified workforce will matter more.
The problem with John Major's Enterprise Britain strategy - generating jobs through inward investment - is that its impact is marginal compared to the huge changes taking place in the rest of the British economy. Low wages, low business taxes and cutting labour regulation are not succeeding, so far, in generating big increases in employment in any sector of the economy. In the two years of recession between 1990 and 1992, a million jobs disappeared overall. In three years of growth up to the spring of 1995, employment expanded by only 150,000.
Inward investors have helped to slow the decline in manufacturing industry in Britain over the past two decades, not only by building new plants but also by importing their management and production techniques. According to London Economics, inward investment accounted for 25 per cent of British manufacturing sales in 1990, and for one manufacturing job in six. However, jobs in the manufacturing sector overall are still in serious decline. In 1992, in the depths of the recession, there were 5 million jobs in manufacturing in Britain. Three years of economic growth later, 200,000 more manufacturing jobs have been lost. Foreign firms are stemming the decline, but they are not turning it around.
So where are the new jobs in Enterprise Britain? Just as in the Eighties, many of the new jobs created in the past few years have been in banking and finance and personal services. For all the headlines about cuts in the high street banks, jobs in the financial sector have gone up by 200,000 in the past three years. The cheerful bank counter staff may have been replaced by service tills, but elsewhere in insurance and financial services jobs are growing. And the communications industry has also proved a fertile breeding ground for new jobs. In fact, foreign investment has made some contribution here too. More than one fifth of all inward investmentbetween 1985 and 1991 was in financial and business services, and nearly a half was in the service sector.
Gone are the "jobs for life"; the new jobs are more likely to be jobs for six months. For there are 290,000 fewer full-time permanent jobs today than there were even at the bottom of the recession in 1992. On the other hand, part-time and temporary work are booming. There are 130,000 more part-timers and 320,000 more temporary workers than there were three years ago. And these are not just working mums. Two-thirds of these new part-time jobs have gone to men. Whether they be highly paid computer analysts on six-month contracts, or casual labour at the local pub, there are almost as many people in temporary work today as there are in permanent full-time jobs.
This need not be all bad news. A well-qualified computer analyst finds herself in great demand, and can pick and choose her next contract with ease. According to the Government's Labour Force Survey, most part-time workers, men as well as women, do not want a full-time job, perhaps because they need to be home in time to pick children up from school.
The people who do worst out of the Nineties labour market are the unskilled and those whose partners are also out of work. Graduates get jobs. Nine out of 10 people with degrees are in work. Look instead at those who never managed to get O-levels or GCSEs and the figures are much more depressing. Fifty-nine per cent of people with no qualifications had jobs in 1992 at the bottom of the recession. Today only 55 per cent are in work.
Research by Paul Gregg and Jonathan Wadsworth of the London School of Economics shows that families are increasingly divided into two-earner and no-earner households. If your spouse is out of work, the chances are that you will be unemployed, too. The benefit system must bear much of the blame for the concentration of unemployment in the same households, for if one family member gets a part-time job, other benefits for everyone else are withdrawn, and the whole family can end up worse off.
So the new jobs of the Nineties are not the high-profile ones based in foreign factories in Scotland or Wales, building the cars and televisions of the future for Taiwanese or Japanese masters. They are largely in personal and financial services, they are high-skilled jobs, and they are increasingly part-time or temporary. Even the inward investment jobs that have been generated are likely to be based in London and the South-east - 68 per cent of foreign-owned companies are located there according to a survey by accountants KPMG, compared with just 4 per cent in Scotland. Policies to promote job growth through low wages and government grants to attract inward investment are at best stemming the flow of manufacturing job losses. Taiwanese contracts are important - but they will not help the unqualified find work in a high-skill market, and they will not help families overcome the obstacles in the benefit system. The Far East is all very well, but to solve these problems, John Major needs to look closer to home.Reuse content