The misleading UK official unemployement numbers

This is almost unheard of. Unemployment was most recently this low in December 1973, when the UK set an unrepeated record of just 3.4%.

The problem with this record is that the statistical definition of “unemployment” relies on a fiction that economists tell themselves about the nature of work. As the rate gets lower and lower, it tests that lie. Because – as anyone who has studied basic economics knows – the official definition of unemployment disguises the true rate. In reality, about 21.5% of all working-age people (defined as ages 16 to 64) are without jobs, or 8.83 million people, according to the Office for National Statistics. Continue reading

Euro

Unusually perceptive of the political and historical roots of monetary union, the author begins and ends his book by reminding readers of Altiero Spinelli’s call for “the definitive abolition of Europe’s division into national sovereign states” (p. 1). The common currency, even though not specifically mentioned in the Ventotene Manifesto, may be seen as the most radical answer to Spinelli’s call to end the nation state. At the same time, the success or failure of the euro could well turn out to be the ultimate test of Spinelli’s proposition.

The book has little sympathy for objections inspired by a narrow reading of “optimal currency area” theory (interestingly, its original proponent, Robert Mundell, came out in favour of the creation of the euro). In contrast to American economists such as Kenneth Rogoff (“a giant historical mistake”) and, more recently, Joseph Stiglitz (“fatally flawed from birth”), Sandbu argues that the architecture of the common currency has been wrongly blamed for the Eurozone crisis, and has been used as a decoy by policy makers for their own unforced errors.
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How the destruction of industrial Britain casts a shadow over present-day public finances

A new report by Christina Beatty and Steve Fothergill, Centre for Regional Economic and Social Research, Sheffield Hallam University

  • UK manufacturing employment has fallen from 8.9 million to just 2.9 million overthe last fifty years, and 500,000 jobs have disappeared from the coal industry. This has destroyed the economic base of many communities, especially in the North,Scotland and Wales.
  • The main effect ofthis job loss has been to divert vast numbers of men and women out ofthe labour market onto incapacity related benefits, these days Employment and Support Allowance (ESA) which accounts for almost 2.5 million adults of workingage. The highest claimant rates – 10per cent or more of all 16-64 year olds – are nearly all in older industrial areas.
  • ESA and the additional benefits received by ESAclaimants – Housing Benefit and Disability LivingAllowance for example – are a £30bn-plus annual claim on the Exchequer.
  • Low pay in former industrial areas depresses tax revenue and inflates spending on in-work benefits. Spending on Tax Credits, for example, exceeds £850 a year per adult of working age in much of older industrial Britain – double the level in parts of southernEngland.
  • The Treasury has misdiagnosed high welfare spending as the result of inadequate work incentives and has too often blamed individuals for their own predicament, whereas in fact a large part ofthe bill is rooted in job destruction extending back decades.
  • The welfare reforms implemented since 2010, and strengthened since the 2015 general election, hitthe poorest places hardest. In effect, communities in older industrial Britain are being meted out punishmentin the form of welfare cuts forthe destruction wrought to their industrial base.
  • Across most of older industrial Britain the loss arising from welfare reform is expected to exceed £750 a year per working age adult by 2020-21.
  • There is an alternative – a genuine rebalancing ofthe economy in favour of industrial production and a revival of regional economic policy.
  • Policy makers need to take a long-term perspective, look at the differences between places, and stop thinking in silos.

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Real wages in the UK have fallen by more than 10 per cent

Real wage change (%) Employment rate change (percentage points)
Greece

-10.4

-9.0

UK

-10.4

0.6

Portugal

-3.7

-5.4

Italy

0.9

-2.3

Czech Rep

1.1

1.0

Ireland

1.6

-7.9

Spain

2.8

-8.5

Netherlands

3.4

-1.7

Denmark

4.0

-3.2

Lithuania

4.3

5.5

Israel

4.3

1.9

Finland

4.3

-3.8

Belgium

4.4

-0.7

Japan

4.7

2.6

Latvia

4.9

-3.0

USA

6.4

-3.4

Austria

6.5

1.2

OECD average

6.7

-0.6

Slovenia

7.2

-4.3

Australia

7.2

-0.7

Hungary

9.3

5.9

Canada

9.4

-1.7

Sweden

10.1

-0.7

France

10.5

-1.8

Luxembourg

11.1

-1.2

Switzerland

11.3

0.5

Slovakia

12.3

0.9

Estonia

13.4

2.2

Germany

13.9

5.1

Poland

23.0

4.5

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The effects of poverty costs the UK £78bn a year

The Joseph Rowntree Foundation (JRF) estimates that the impact and cost of poverty accounts for £1 in every £5 spent on public services.

The biggest chunk of the £78bn figure comes from treating health conditions associated with poverty, which amounts to £29bn, while the costs for schools and police are also significant. A further £9bn is linked to the cost of benefits and lost tax revenues. …

The JRF report, called “counting the cost of UK poverty”, estimates that 25% of healthcare spending is associated with treating conditions connected to poverty.
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