U.K. unemployment: the case for optimism
Dr. John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development (CIPD), told the Yorkshire HR Directors Forum in Leeds on February 29 that even a relatively modest economic recovery in 2012 could see U.K. unemployment stabilize at around the current rate of 8.4%, while a stronger recovery has the potential to result in a sudden sharp fall in the jobless total.
Although Philpott said he still expects economic growth to be too weak to prevent unemployment from rising close to three million in 2013, he rejects the assertion that the U.K. has a structural jobs deficit that can only be solved by the application of tough employment policy medicine, including a major overhaul of “hire and fire” regulations.
Philpott argued instead that the U.K. labor market was performing exceptionally well prior to the recession of 2008-2009 and has experienced no subsequent structural deterioration. The barriers to a return to low unemployment are not to be found in the labor market, he said, but rather in the various factors constraining total spending power in the economy:
- The U.K. has no structural difficulty in creating private sector jobs. The private sector accounted for four in five of the 2.3 million jobs added to the U.K. economy in the decade prior to the recession, shed fewer jobs than expected during the recession and enjoyed a surprisingly jobs-rich recovery when the economy picked up in the first half of 2010.
- The buoyancy of private sector job growth following the recession has been masked by a sharp fall in public sector employment, combined with a 600,000 increase in the U.K. labor supply. Without the large scale public sector job cuts of the past two years, the CIPD estimates total employment would be only about 80,000 (0.25%) below the pre-recession level.
- Although the number of people unemployed for more than a year has increased from 400,000 to 860,000 since spring 2008 (from 25% to 33% of all those unemployed) this is a much better outcome than previous recessions (44% in the 1990s).
"The CIPD is amongst the first to stress the severity of the current jobs shortage and the importance of easing the plight of those desperate to find work,” said Philpott. “We have consistently been very optimistic about the U.K.'s potential to create the private sector jobs needed to offset the loss of public sector jobs, and thus cut unemployment, once a sustained strong economic recovery is underway.
He added, “The real jobs pessimists are those who think the way to cut unemployment is to turn the clock back on employment rights. There is no ‘U.K. labor market problem’ that a dose of employment deregulation would help overcome. The mass unemployment we are currently suffering is not caused by the inability of employers to hire and fire workers or excessive wage costs. The arguments of those who wrongly assert it ought to be rejected.