THE BLOG

Jobless Forgotten in Coverage of Interest Rates as Unemployment Falls

22/01/2014 16:02 GMT | Updated 24/03/2014 09:59 GMT

Unemployment has shown a big fall in the last three months and now stands at 7.1% of the working population.

But coverage of the issue has focused on the likely result of this fall on interest rates.

Mark Carney, the Governor of the Bank of England, has said he will not raise interest rates, which have been stuck at 0.5% since 2009, until unemployment drops to 7%.

It is now looking likely that this will be very soon, and newspapers and news websites have covered this issue obsessively, being concerned about its effect on house prices and the cost of business borrowing.

There are more obvious effects of the news though.

The Office for National Statistics (ONS) shows a fall in unemployment of 167,000 to 2.32 million between September and November 2013, while the number claiming Jobseeker's Allowance (JSA) has fallen by 125,000 to 1.25 million over the same period.

The ONS makes clear that there is an under-reporting issue, with those on universal credit, Iain Duncan Smith's failing benefit reform, not included in these figures.

Those who claim JSA are usually furthest away from the labour market, so the disproportionate fall in claimants compared to the overall unemployment rate suggests that those on JSA are feeling the effects of something else.

It isn't sanctions; while the number of these showed a huge increase to nearly 900,000 last year, these people are included in the claimant count figure.

It certainly isn't the support they're getting; the work programme, youth contract and other government programmes are not operating effectively.

It could be simply that, given the general inhospitability of the JSA regime, those who become unemployed and are in a position to avoid it because they can rely on a partner or some savings do anything they can not to sign on.

The UK is moving towards a position where the number claiming out-of-work benefits will only be half the overall unemployment figure, when twenty years ago the two were almost the same.

Rachel Reeves, Labour's work and pensions spokesperson, said this week that her party wants to restore the contribution principle to JSA, meaning those who have paid National Insurance would get £20 each week more for the first six weeks of their claim.

This could encourage all workless people to claim what is due to them.

Perhaps more influential than money in the decision of a newly-unemployed person to claim benefits would be if they were promised respect, and crucially no sanctions, in recognition of their work history.

But in among these dry economic figures real human stories can get lost.

An unemployment rate of 7.1% is still historically high, and for those stuck in the cycle of low pay/no pay, things keep on getting worse.

With pay still going up by only 0.9% each year while inflation shows prices have risen by 2% or more, most people are getting poorer.

Labour has said that the average family has lost £1600 since 2010 due to this, and work needs to provide a living wage if unemployed people are to be able to afford to take it.

The government says it wants to make work pay, but so far its only measures to support this focus on lowering the value of benefits.

It needs to support both pay and benefit rises if it wants to ensure poverty among Britain's 13 million poor is alleviated.