The feel-bad faction

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The Independent Online
Many people find something mysterious about the recovery. Why, if the economy is growing as healthily as it is, are people not more grateful, and why do they not express that gratitude in the traditional manner, by favouring the government of the day? Where is the feel-good factor?

Much nonsense has been written on the subject, perhaps inevitably; it is not easy to describe an absence of sentiment. Now the TUC has gone on its own snark hunt and come up with a new answer.

The falls in employment over the past two years are not, it says, what they appear. Many of the new jobs are part-time and temporary. Furthermore, they have been concentrated in the south of England, creating a new regional divide. "Regional insecurity", whatever that may mean, is growing and "unless these insecurities are reduced, the feel-good factor will prove elusive." The answer? Public spending. A "major increase" in targeted regional and urban development programmes to create "at least" 300,000 new jobs.

What is wrong with this analysis? Well, first, the trends described are not new. The shift to more flexible forms of employment has been going on since the Sixties. Second, it is wrong to suggest that the Nineties recovery has not generated new full-time jobs. In the year to last autumn, there was a rise of 120,000 people in full-time employment. The same recovery period a decade ago showed a fall of 100,000 full-timers.

Furthermore, regional disparities in unemployment have reduced significantly over the past 15 years. And while it is fashionable to talk of growing job insecurity, our own surveys show that two years ago 23 per cent of firms reported that their employees feared redundancy in the next year, but the figure is now down to 11 per cent. Individual employees have understood the changed economic prospect, even if their trade unions have not.

The principal reason why people are not more cheerful about this recovery lies elsewhere. Real personal disposable income rose by barely more than 1 per cent last year. Pay increases were almost entirely eaten up by inflation and higher taxation. Such increase in consumer spending as there was came from a reduction in the savings ratio.

On the whole this is a good thing. The first priority in the recovery was to get the PSBR back under control. That is now well under way and next year, even if the Chancellor does not cut taxation, wage increases will at least reach individuals' pockets, without the Treasury picking them first.

Of course the labour market is changing. Technological change and new types of competition are driving that process. We need to find ways of adapting to change, particularly by making our training market as flexible as the labour market, and by making it more rewarding for people on benefit to take a job.

But no useful purpose is served by seeking to talk down the recovery and to depress the aspirations of the unemployed. It is curious that the TUC should be seeking to do so.

The writer is director-general of the Confederation of British Industry.