Repost: If unemployment is at an all-time low, then why are we all skint?

This was originally posted in July but, with Theresa May harping on about low unemployment in Prime Minister’s Questions today (September 13), a repost seems in order:

So much for the Tory slogan that “work is the best way out of poverty”.

The UK jobless rate has fallen to 4.5 per cent of the workforce. According to definitions used in the USA and France (and elsewhere, probably) that means we have full employment and people should be able to demand higher wages or walk out and get another job.

In practice, we know that doesn’t happen. Most of the jobs are extremely low-paying, or zero-hours work, and we have no fewer than six million people who do not pay taxes because they simply don’t earn enough.

And with inflation at a recent-years high of 2.9 per cent, we know that average pay isn’t even rising to compensate for the increase in prices.

So what does the low unemployment rate mean?

It means a huge rise in profits for rich employers who dictate pay rates.

They have been able to use ‘austerity’ to threaten British workers for the last seven years, and now they have the opportunity to say economic instability caused by Brexit means they cannot afford to put up people’s pay. They have the credit ratings agency Moody’s to back them up.

Luminaries like Professor Simon Wren-Lewis of the Mainly Macro blog have said that the prime duty of UK economic policy at the moment should be raising interest rates, as this will lessen the risk of economic shocks like that which we’re told Brexit threatens.

But Tory austerity has ensured that interest rates stay low. The reason?

To ensure that pay is kept artificially low.

It also reveals another telling fact:

The Conservatives are happy to keep the UK economy weak, in order to impoverish the working population.

The trouble is, this doesn’t even make economic sense for employers!

With less money available to working people, there is less for them to spend. This means demand for products will drop and the economy will weaken further.

The Tories are happy for this to continue, at least for the foreseeable future, because they are focusing on short-term profits for their friends and party donors.

Ben Brettell, a senior economist at Hargreaves Lansdown (whoever they are), has said it seems workers don’t have the bargaining power they once had – which suggests a surprising ignorance of politics since the rise of Thatcher.

Neoliberal economic policy – as followed by Thatcher, Major, Blair, Brown, Cameron and May – has made a priority of depriving workers of any bargaining power. They are now entirely at the mercy of employers and government policy.

So, if another crash happens – as seems inevitable under current Tory-fuelled conditions – it won’t be the fault of the workers.

That will be scant comfort when the Tories penalise us all for it, as they did from 2010 onwards.


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5 thoughts on “Repost: If unemployment is at an all-time low, then why are we all skint?

  1. 1968xavier

    From Michael Roberts Blog https://thenextrecession.wordpress.com/

    https://thenextrecession.wordpress.com/2017/09/13/uk-full-employment-but-falling-incomes/

    “Why is the UK’s unemployment rate so low and how is it possible that wages are not keeping up with prices when the labour market is at its tightest for over 40 years?

    Well, as several posts on the excellent Flipchartfairytales blogsite show, British employers, rather than invest in new technology that could replace labour, have opted for cheap ‘unskilled’ labour, both British and immigrant, with the full knowledge that with little employment protection and weak trade union backing, they can hire and fire as they please.

    Union membership has fallen to its lowest level since the government started counting in the 1970s. This is not just a feature of the UK. In most advanced economies, union density (the proportion of those in employment who are members of unions) has fallen over the last few decades

    At the same time, much of the employment increase since the Great Recession has been in low-paid self-employment as people set up themselves on-line or take jobs as taxi drivers etc that do not involve wage employment.

    As the recent report on the state of the British economy (Time for Change A New Vision for the British Economy The Interim Report of the IPPR Commission on Economic Justice) states: “The UK’s high employment rate has been accompanied by an increasingly insecure and ‘casualised’ labour market. Fifteen per cent of the workforce are now self-employed, with an increasing proportion in ‘enforced selfemployment’ driven by businesses seeking to avoid employer responsibilities. Six per cent are on short-term contracts, and almost 3 per cent are on zerohours contracts. More workers are on low pay than 10 years ago. Insecure and low-paid employment is increasing physical and mental ill-health.”

    “There is a huge sense of insecurity that has persisted since the recession. Even those in full-time jobs feel less secure than they did a decade ago and, when combined with the rise in more insecure forms of housing tenure, it is hardly surprising that people lack the confidence to ask for a pay rise.” – Flipchart.

    The UK is the only major OECD country where GDP has risen since the recession but wages have still fallen.”

  2. Ann Ford

    We are all skint because the government may have lowered personal taxes but they have increased lots of others. Add into that that they are not investing in ANYTHING that has reduced any available income to lower earners. As the lower earners are the ones that spend their money that is why there is nothing left to spend on extras.

    1. Mike Sivier Post author

      Banks create their own money these days, for example by granting mortgages. They don’t actually move their own money over to the homeowner/builder – they create new money and expect the homeowner to pay it back to them.

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