THE BLOG

Unemployment Down - But Quality Jobs Remain a Problem

15/10/2014 16:15 BST | Updated 15/12/2014 10:59 GMT

The UK's unemployment fell below two million people for the first time since 2008 according to the Office for National Statistics (ONS) - but the squeeze on pay and quality goes on.

There was a fall of 154,000 in the overall unemployment rate to 1.97 million between June and August, although the number actually in work only went up by 46,000 over this period.

Many of the rest went into 'economic inactivity', a category of people not working but not looking for work that includes those looking after their homes and others, some not well enough to look for work, the early-retired, students and some who simply feel discouraged.

113,000 more people were inactive than in the previous three months, making this a far more likely outcome for those leaving unemployment than getting a job.

This is a sign that the big falls in unemployment are not the positive sign they appear to be at first glance.

Climbing 'underemployment' - those working fewer hours than they need to make ends meet - continues to contribute to the labour market malaise, with 6.8 million part-timers a new record and many desperate to go full-time.

Self-employment registrations fell for the first time in years in the last quarter, but they are still up 279,000 in the last year.

George Osborne's pretence that there has been a wave of entrepreneurship sweeping the UK was exposed for the nonsense it is when the ONS released an article on this issue in August.

It showed that self-employed earnings fell by nearly a third between 2006 and 2014, a huge blow to those involved and evidence that this is often a destination for those without hope rather than business people full of ambition.

It gets worse than that though; with their average pay at nearly £100 per week less than in 2006, they now earn less than a full-time minimum wage employee by around £2,500 per year.

The continuing pattern of reducing pay across all UK employees continued last quarter, and average rises including bonuses in the last year were only 0.7% at a time when inflation is sitting at 1.2%.

UK workers have been getting poorer for so long that their incomes now sit far below the real level they had reached before he recession, and benefit cuts for low-paid working people make this position even worse.

Economists are in confusion when responding to these figures; every month they predict that falling unemployment should feed through to higher wages, and it simply hasn't.

For example, Samuel Tombs of Capital Economics says that pay "is likely to see a more substantial acceleration soon", while Chris Williamson of Markit acknowedges that "the puzzle remains as to why the tightening of the labour market has failed to feed through into higher wages. The normal laws of supply and demand do not appear to be applying to the current labour market."

Ever-decreasing union membership has left too many people unable to take advantage of the improving employment situation to push their pay higher, while negative representation of unemployed people and reducing benefits mean worklessness is more feared now than in previous times, keeping people in low-paid work through dread of the alternative.

If this is the case we may be in a position where the 'new normal' for pay is below-inflation settlements regardless of how the labour market performs.

A job is better than no job, but an economy that creates more part-time work, fake self-employment and low value work, and which continually cuts the real wages of its workers, is not healthy.