Wednesday, March 14, 2012

Jobs are up, but the private sector still fails to make up the difference

Today (Wednesday, 14 March 2012) the UK's Office of National Statistics released the latest figures for the jobs market. Some commentators have noted the net increase in private sector employment over the last quarter. From September to December 2011, public sector employment decreased by 37,000 and private sector employment increased by 45,000. Does this increase back up the claims made by business leaders in October 2010 that they could "the private sector should be more than capable of generating additional jobs to replace those lost in the public sector"?

On the face of it, yes, the private sector has created more jobs and filled the gap. But this is just for the three months running up to the Christmas period, a time traditionally associated with higher levels of short-term private sector employment. We would need to see this pattern repeated over the next two quarters at least to see if this represents a real trend.

The figures given in Table 4: Public and Private Sector Employment shows that from September 2010 (i.e. the figures immediately before the Telegraph letter), public sector employment stood at 6,262,000 and the total employed in the private sector stood at 22,858,000. At December 2011, this had changed to 5,942,000 employed in the public sector, a reduction of around 320,000. Private sector employment had increased over the same period to 22,947,000, a net increase of 89,000. Clearly, since October 2010, the uptake in private sector employment has failed to keep up with the loss of public sector jobs.

The total labour force has also increased by around 400,000 over this period. The participation rate of the overall workforce has fallen by around 0.2%.

In table EMP0, over the 12 months to the January 2012, the ONS notes a rise in the temporary workforce of around 110,000. This may also account for the rise in private sector employment seen above. The latest figures state that nearly 40% of those now working in temporary jobs are doing so because they cannot find permanent work. Over the same period, part-time working has increased by some 178,000 employees, with around 18% of these wanting but unable to find a full-time job. Nearly 350,000 more employees are working shorter hours than they would prefer than a year ago. This represents real under-employment, and has serious implications for the economic wellbeing of households. It also represents a real, irreplaceable loss of output for the economy.

It is also worth considering that swapping a public sector job for a private sector one may not be a like-for-like exchange. The public sector has a much higher proportion of female workers than most parts of the private sector. This is probably partly due to the nature of work carried out by the public sector in the UK, but public sector organisations can often offer much more flexible working arrangements and better benefits, particularly compared to the lower levels of the private sector. Many decide on careers in Health, Social Care and Education as a positive choice; the classic vocational motivation. Even where public sector employees earn less, these benefits to the employee may not be reflected in the hourly pay rate.

As noted above, there has been a substantial increase in both temporary and part-time working, not all of it voluntary. Exchanging a full-time teaching assistant post at £6.50 an hour for a part-time store assistant job at £6.08 an hour can hardly be considered a move into the “lucrative” private sector. Trade Unions representing public sector workers stick to the line that public sector workers are “underpaid”, to the point where even those in the higher-rate tax band have been know to proclaim themselves “low paid”. The latest ONS figures show that average Public Sector pay (excluding the banks) is higher than Private Sector pay, and has remained constant in recent months while Private Sector pay has fallen. Economics professors may still earn less than their City counterparts, but that is unlikely to elicit much sympathy from those on the Work Programme. Using this logic, the austerity measures are “liberating” armies of workers from the yoke of public sector drudgery for the bountiful pastures of shelf-stacking at Poundland.

The private sector has yet to increase the numbers of employed to make up for the full loss of public sector jobs announced so far, plus the overall increase in the workforce. This has resulted in an increase in the percentage of the workforce economically inactive. Even if the private sector can create sufficient opportunities, these jobs may not be of the same overall pay and conditions available in the public sector and represent a real fall in welfare. If the trade unions choose their battleground from the starting point that public sector workers are always worse off, they will be entering a quagmire.

Unemployment is being used to discipline both public and private sector employees. Workers are being forced to take whatever employment is available, even if that means accepting a degree of “flexible working” that they do not want. Employers would not be able to demand this level of unwilling flexibility if there were sufficient jobs available in the economy. This represents a loss of potential output and real hardship. So, the real question remains: why are there not enough jobs?

Notes - Full ONS tables and datasets are available from:

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