Wednesday, May 16, 2012

Unemployment is no longer a lifestyle choice: it is economic necessity

Inflation can be a misleading thing. Officially, inflation in the UK is fairly low compared to other nations, at 2.5%. But that tells barely half the story.

Real wages have barely increased over the last few years. Meanwhile, food prices and fuel prices have increased sharply, to the extent that some are having to seriously ration their car use; those that, due to their word commitments, do not have the luxury of that choice, are squeezed even further. Haulage companies, for example, have seen their costs increase by double digits year on year, with those increased costs passed onto the retailers, and then onto us, the customers. That is just one example; a microcosm of the overall hidden inflation that is squeezing the average family to the bone. Then there are the increased costs of utilities, creating massive rises in monthly bills for the average family.

 Many young families cannot get mortgages from risk-paralysed banks unwilling to lend; the result of that has been a surge in demand for rental accommodation in recent years, resulting in significant rises to rents around the country, and a further eating away of the hard-earned wages of everyday families.

Apart from the miserly wage increases, there are then government policy changes, such as the changes to working family tax credits, that make thousands of families worse off. These things all add up to a situation where some families are literally better-off week-on-week by being on benefits.

The overall rate of unemployment is apparently coming down; but there are two significant caveats to that point, it be true or not.
It may well be that the overall rate is coming down. But much of that decrease is taken up by a significant increase in people accepting part-time employment. The East of England, where I live at the moment, it the centre of this story. In other words, an increasing section of working people cannot find real jobs; only part-time jobs. In the mid-1970s there was the three-day-week for a while; for many people now, a three-day-a-week career has become the new reality. How these people make ends meet on a part-time salary, I don't know. Many, for obvious reasons, would rather stay on benefits than accept a part-time job that cannot economically support them.
Which leads me to the second point: that while overall unemployment may be coming down, long-term unemployment keeps on going up. For these people, the longer they stay unemployed, the less employable they can become. In other words, even when the economy does eventually improve for real, there is still likely to remain a significantly higher rate of long-term unemployment than we have experienced before. It seems the "good old days" of high employment may well be a thing of the past.
And if costs keep on increasing (and there is no reason to expect that they wouldn't), and if the government remains determined to cut the size of the state (and, consequently, the economy) for the foreseeable future, then the government will continue to have a massive welfare bill on its hands, undoing all the efforts that they have made to reduce the government's deficit.

The situation has come to this: the government's obsession with cost-cutting has eroded the economy so much that economic logic has been turned on its head. Conservatives wanting to reduce the size of the state will be responsible for the largest increase in state welfare benefits for their unemployed population ever seen in British history. The UK, with its millions of part-time "three-day-a-week", may reduce a significant portion of the population to virtual financial slavery. Meanwhile those of the population unemployed and unemployable will make the UK a permanent "welfare state" not seen since the days of the Soviet Union.

Quite an achievement for a Conservative government...

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