Unemployment will scar us for years

The figures make it look as if unemployment is going down, but they hide a multitude of sins and as usual it is the poorest that suffer the most

 

Share

Unemployment still matters. Fortunately the unemployment rate has been trending down in the UK, from 7.9 per cent in May 2010, to a high of 8.4 per cent at the end of 2011, to the latest estimate of 6.9 per cent. The number of unemployed has fallen by 414,000 over this period.

But those positive moves hides a multitude of sins. First, the unemployment rate of those under 18 is 21.7 per cent and 17.2 per cent for those ages 18-24. There are still 881,000 unemployed youngsters under the age of 25, of whom 600,000 are not in full-time education. Second, the unemployment rate of Pakistanis is 17 per cent; 18.6 per cent for Bangladeshis; and 15.9 per cent for Black/African/Caribbeans. Third, long-term unemployment has risen. In the latest data, 807,000 had been unemployed for at least a year, of whom 244,000 were under 25. Fourth, the groups that experience high levels of unemployment are hit by a double whammy; even when they get jobs they are often underemployed, many being forced into part-time and temporary jobs when they want full-time.

The charts, using data from the Organisation for Economic Co-operation and Development, put this rise in long-term unemployment in international context – measured as the percentage of the unemployed who had durations of a year or longer out of work. The first chart shows that France, Germany and the UK had comparable long-term unemployment proportions in the early 1990s, with that proportion falling sharply under Labour from 1997-2007 but rose again from around 2008. The US rate rose sharply from 2008 but, in contrast to the UK, started to fall sharply from 2011. The second chart shows the most recent estimates for the second quarter of 2013 and shows that long-term unemployment is markedly higher in the euro area, especially Greece and Italy.

The harmful consequences of high levels of unemployment, especially long term, is made clear in a stimulating new book by Tom Clark which illustrates the consequences of the Great Recession, uncovering drops in life satisfaction, frayed community connections and changing patterns of suicide.

In every case the toll is highest in poor neighborhoods, due not only to unemployment, Clark argues, but also to the precarious, unreliable jobs proliferating in the recovery. The book’s thesis is that scarring will blight individual and family life for years to come, especially those from minorities. Clark contends that “long-term unemployment is another blight which hammers some communities more than others. It seems plausible that societies which neglected so many of their citizens during the good times might be particularly prone to throwing them to the dogs in hard times”. Working life, he argues, especially at the bottom end of the workforce, has become “laced with worry”.

At the extreme, the once-clear distinction between the employed and jobless has now become blurred, with, for example, the spread of zero-hours contracts.

This story appears to also extend to the rapid recent growth in self-employment, which is up by nearly 600,000 since the Coalition took office. Is this a rise in entrepreneurial spirit? Probably not. A new study from the Resolution Foundation helps us to shed light on the growth of self-employment in the UK. The authors found that 8 per cent of unemployed people moved into self-employment prior to the recession whereas 11 per cent did post-recession, which the authors estimate accounts for a quarter of all the recent growth in self-employment.

Recent growth in self-employment has been spread across regions of the UK, with increases everywhere apart from in Northern Ireland since the onset of recession in 2008.

In nearly half the regions of Great Britain (the West Midlands, the South-west, the North-west, the North-east and Scotland) the self-employed grew more than employees.

In a survey that Ipsos Mori conducted for the study, the term “entrepreneur” was not a label two-thirds of respondents would assign to themselves. In addition, the proportion of self-employed people who do not employ anyone has risen from 77 per cent in 2005 to 83 per cent in 2013 and many are too small to even register for VAT.

The authors find that those starting out as self-employed since the recession, who began by working part-time, has increased much more than it has for employees. The authors conclude that self-employment growth is not correlated with strengthening labour markets at the regional level, and observe that self-employment has frequently held up or grown in places where employee jobs have fallen and unemployment has risen.

Resolution also found that only 30 per cent of self-employed people are contributing to a pension, compared to 51 per cent of employees. Of special note was their finding that self-employed weekly earnings are 20 per cent lower than they were in 2006-07, while employee earnings have fallen by just 6 per cent. The drop, the authors note, has been seen across genders and industries but is particularly notable among people of prime earning age (35 to 50), whose earnings are 26 per cent lower. As a result, the typical self-employed person now earns 40 per cent less than the typical employed person. The authors conclude “on earnings, self-employed people have experienced a chronic fall, with earnings decreases felt across the board”.

Recall that the self-employed, as well as workers in firms of under 20 employees, are excluded from the average weekly earnings, which is the national statistic on wages, suggesting that claims of rising real pay growth in the UK economy are an upward, biased estimate. It doesn’t appear that there has been a new burst of entrepreneurial spirit in the UK.

React Now

  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Ashdown Group: Trainee Consultant - Surrey/ South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

Ashdown Group: Recruitment Consultant / Account Manager - Surrey / SW London

£40000 per annum + realistic targets: Ashdown Group: A thriving recruitment co...

Ashdown Group: Part-time Payroll Officer - Yorkshire - Professional Services

£25000 per annum: Ashdown Group: A successful professional services firm is lo...

Day In a Page

Read Next
Nicola Sturgeon could have considerable influence over David Cameron in a hung parliament  

General Election 2015: What if Cameron were to end up in hock to the SNP?

Steve Richards
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before