A rocky road for the labour market

Article first published on Shifting Grounds

As Duncan Weldon highlighted in his article on Shifting Grounds, No end to the ‘squeeze’ in sight, the recent fall in the headline rate of unemployment has largely been driven by an increase in part-time employment. Whilst a part-time or temporary job is better than no job, the instability these jobs can bring signifies a problem for long term growth.

The latest figures reinforce the same pattern. Whilst the unemployment rate has stabilized (and, indeed, decreased), the level of part time employment has risen further.

Furthermore, the number of people becoming self employed, most likely through necessity rather than choice, shows further instability. It is easy to see how this insecurity and instability at a household level translates into low demand and weak consumer confidence.

The vacancy statistics show precisely why people are turning to self employment. The number of unemployed per vacancy has risen from 2.5 at the end of 2007 to 5.5 at the end of 2009 and has shown little sign of decreasing since. Austerity has led to a decrease in public sector jobs and the financial crisis, leading to credit tightening and recession, has meant that fewer private sector jobs are available and being created.

There is no one magic bullet to solve this problem. However, in terms of business policy, if the UK and Labour are to support the private sector to boost jobs we need to understand how different firms need different kinds of help.

An overwhelming proportion of private sector vacancies are found within the largest of firms (2,500+ employees). The positives big business can bring in terms of employment are vital and they often put an important marker out for UK plc for inward investment. Yet we also need to rein in the pitfalls of unrestrained capitalism and redesign the system to work for us.

However, when we look at small-medium enterprises (1-250 employees), the vacancy level is roughly equal to the largest of firms. It shows that the emphasis on supporting SMEs is not unfounded and is of particular importance as these firms, especially towards the smaller end, are rooted within the communities they serve.

The key issue for me is how to support the growing number of self-employed people who want to start a business and control their own employment and stability. Furthermore, these people need very different support to those small businesses that are looking to expand and want advice on how to grow. Supporting these businesses, through allocating a certain proportion of local or national Government procurement will provide the stability needed for these firms to innovate.

Clearly, the labour market is unstable and the UK is by no means out of the woods. A strong emphasis on different types of private sector support, i.e. boosting large firms to employ and supporting those who want to start and/or grow a business, will provide people with the necessary stability to demand and consume more.

Follow me on Twitter: @joesarling

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2 thoughts on “A rocky road for the labour market

  1. The job market in America sucks!
    But…most jobs in America also suck!
    Being self-employed seems to be the way to go!
    Love your Blog, it is awesome! Thanks, Joe, and keep up the great work!
    Cheers!

  2. The growth in self employment is also being driven by concerted efforts on the part of the current government to move people off incapacity benefity and income support and onto the job seekers allowance or the ESA. People in these circumstances electing to become self employed get a £2,000 grant from the DWP plus get to keep all their disability allowances without any further health checks. The viability of the new business doesn’t seem to be in question. Many of these people just become market traders or trade on large internet trading sites like Ebay, Play.com and Amazon. Very few of these businesses are likely to make sufficient income to support someone, simply because the people in these categories becoming self employed lack capital to invest in stock. Is a business that only takes less than £1,000 in revenue, – and that’s revenue, mind, not profit – in the first year, or doesn’t make a profit for 5 years running really a business?

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