The cost of unemployment

It’s back to work – after several months of unemployment during the recession, a quartet of former builders from jobs blackspot Nottingham have been given a chance as a crack team of gardeners for a charity called Groundwork.

They get paid minimum wage for six months and that’s entirely funded by taxpayers’ money – part of the ‘future jobs fund’ – the theory: spend more public money now on jobs rather than paying dole, and prevent long term unemployment.

Today’s headline unemployment number was bad news for Labour — joblessness up 43,000 reaching a 16 year high of  2.5m a fortnight before the election.

On the other more timely measure though, – those claiming job seekers allowance – better news down by 32 thousand – it’s now below what it was in 1997.

So a mixed bag today. But what about the bigger picture? Despite the Great Recession, there’s something really rather surprising that’s happened in the unemployment numbers.

This recession has been the worst on record. But unemployment in the 1980s peaked at 11.9 per cent in the recession of the 1990s peaked at 10.7 per cent, but this time it seems to have peaked at about 8 per cent.

Even though the fall in output has been worse this time round. The question is – can the government take any credit for that number? They’re certainly trying to, pointing to £5bn of borrowed money funding jobs, but most of those schemes like this one, have only just got started.

So could the answer come from within businesses like Metal Assemblies, a car parts company in West Bromwich? It saw half its jobs go when the recession Carmageddon hit in autumn 2008.

Then on top of that, the management proposed everyone drop down to a four day week – effectively a pay cut of 20 per cent.

All the staff decided to accept it. At Metal Assemblies it seemed to do the trick and workers went back to a five day week after three months, now with a cheap pound they’re even getting interest from European carmakers, and they’ve refilled 50 of those lost jobs.

Despite today’s numbers, there’s about a million people still in work who would have lost their jobs if this recession had it been like the 80s or 90s – that’s the conclusion of a study released today by leading labour market economist Professor Jonathan Wadsworth. 

Good news for now, but maybe it’s storing up bad news for the future. That’s because the higher than expected levels of employment have seen a collapse in British productivity.

Productivity went up in the US recession. The fear will be that the recovery will be as job-light as the recession was jobless-light.

Back at the Nottingham garden – it’s clear that many of the type of jobs that this quartet used to do, at the Raleigh bike factory, in the lace and textile industry, even at the city’s famous Boots, seem to have gone forever, or are now being done by foreign agency workers.

The question facing any new government will be can indebted Britain afford these types of ‘makework’ schemes … or can it afford not to?