Remember
this?
35
business leaders back Osborne's cuts (Robert
Peston's blog, BBC website, 17 October 2010)
In
mid-October 2010, 35 high-profile business leaders in the UK wrote an
open
letter to the Telegraph newspaper calling for the government not
to delay the deficit reduction programme in order to “deliver a
healthier and more stable economy”.
In
spite of concerns at the time of rising unemployment, the business
leaders stated that "the private sector should be more than
capable of generating additional jobs to replace those lost in the
public sector".
So
influential was this view, that the economy was exiting recession and
the private sector was poised to pick up the excess labour, that it
found its way into the House of Commons Select Committee for Work and
Pensions as they considered the Coalition government's decision to
end the Future Jobs Fund:
Professor
Gregg: “The Connexions service isn’t working well in terms of
getting people from deprived backgrounds into work at the first
stage. As the economy picks up, some of that will be solved.”i
At
this date, the Employment Rate in the UK stood at 70.6%.
One
year later, in October 2011, the Employment Rate was 70.3%, a fall of
some 14,000ii
in the number of employed. Moreover, as the total workforce
increased from 40,045,000 to 40,181,000, for the employment rate to
have remained stable, the total number of employed would have had to
increase by around 150,000
over the period.
Where
have all these private sector jobs gone? If the private sector is
“more than capable” of making up for public sector job losses,
why isn't the Employment Rate stable? And given that the government
has diligently followed the business leaders advice of October 2010,
and remained on its path of austerity, where is the improved
“business and consumer confidence” promised?
Although
the Commons Select Committee seemed to be working on an assumption
that the private sector could create jobs, there were notes of
caution even then:
Neil
Carberry: “I also echo the point made about labour conservation.
There has been a strong stream across the private sector- probably
based on the experience of the ’90s recession when some executives
felt that the axe was taken a bit far, a bit early and the firm was
not then prepared for the recovery [...] That means that there is
quite a lot of excess capacity in terms of human resources within
members. That is one of the factors that is driving lower hiring. […]
lower hiring does affect the issue.”iii
At
this time, many businesses were implementing a shorter working week
to avoid redundancies. In effect, they were “hoarding” surplus
labour, waiting for an upturn in demand. If workers are on short
hours or reduced overtime, employers will generally look to increase
capacity with the current workforce before taking on additional
employees.iv
The
claim that the private sector would take up the slack has turned out
to be based on ideology rather than fact. The government has kept
its half of the bargain, but the private sector has been placed under
no obligation to reciprocate. As noted in this edited exchange
between the Government Minister, Chris Grayling, and Glenda Jackson
MP of the Select Committeev
regarding the Work Programmes, the private sector was never expected
to make up the difference:
Glenda
Jackson: “Could I just take you back to the Marks and Spencer
experience? Is this something that other retailers are participating
in? I am thinking of those, for example, who wrote that letter saying
that the private sector would be able to create the jobs necessary.
Are they all participating in this, and are they actually coming to
you and saying, "We can guarantee to create this number of jobs
for this number of young people."?”
Chris
Grayling: “We’ve been very encouraged by the response so far to
the work experience initiative we launched three months ago […]
Certainly we have found bigger retailers and bigger employers very
co-operative.”
Amazingly,
large retailers, in the run up to Christmas, were happy to have large
numbers of “work experience” people at minimal cost to
themselves:
Glenda
Jackson: “So you are not actually pushing those companies that are
engaging in the work experience programme to give you some kind of
numbers of the jobs that they can guarantee to create? In that work
experience, is there any cost to the employer that the Government
have to cover?”
Chris
Grayling: “Beyond some core costs of just people’s time
organising it, no. This is something that employers will be doing
themselves and we are looking at employers on a large scale and a
small scale.”
But
would this equate to new jobs?
Glenda
Jackson: “But you’re not asking the private sector to guarantee
an increase in jobs?”
Chris
Grayling: “The private sector will never guarantee to recruit a
certain number of people, but the point is we have to ensure that
those people who are [on] benefits are ready to take advantage of the
opportunities that arise.”
So,
private sector businesses, including many retailers, asked the
government to reduce the deficit, leading to the axing of paid-work
schemes to be replaced by “work experience” schemes, for which
they had to contribute minimal resources and offer no guarantees of
employment.
Why
is nobody asking why the private sector employers who signed that
letter have failed to deliver their half of the bargain?
i Uncorrected
Transcript of Oral Evidence to House of Commons Work and Pensions
Committee, 27 October 2010 ref:
HC472-i Q94 http://www.publications.parliament.uk/pa/cm201011/cmselect/cmworpen/uc472-i/uc472i.htm . Professor Paul Gregg is Professor of Economics at the
University of Bristol.
Note:
This document references quotations from the above document.
Neither witnesses nor Members have had the opportunity to correct
the record. The transcript is not an approved formal record of these
proceedings.
ii Source:
ONS Labour Market Survey February 2012
iii See
(i) Q95. Neil Carberry is Director of the CBI
iv http://news.bbc.co.uk/1/hi/england/derbyshire/7856022.stm
An example of negotiated “short hours”. Production did return
to normal, only to be reduced again in this case following the 2011
Japanese earthquake and tsunami.
v http://www.publications.parliament.uk/pa/cm201011/cmselect/cmworpen/uc472-ii/uc47201.htm
See (i) Q125-130 . See also Note for (i). Glenda
Jackson MP is a member of the House of Commons Work and Pensions
Select Committee. Rt Hon Chris
Grayling MP is the Minister of State for Employment, Department
for Work and Pensions.
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