Yahoo Finance The Guardian view on Covid economics: worry about jobs, not the deficit
Last November, the Office for Budget Responsibility’s worst-case scenario figured that the double whammy of a lingering pandemic and a no-deal Brexit would see 4.2 million people out of work by 2022. The good news is that Britain clinched a deal with the EU before it left its regulatory orbit. The bad news is that the OBR’s worst-case scenario almost certainly underestimates the scale of the jobs crisis. Ministers have wilfully shut their eyes to the facts, clutching at the straws of dodgy statistics and inadequate policy responses.
We ignore the obvious at our peril. A report by the Alliance for Full Employment, a cross-party coalition of politicians, charities, trade unions and faith leaders, reckons that within months at least one in 10 workers (about four million people) will be without work. Government ministers may latch on to the fact that Gordon Brown is the report’s messenger and train their fire on the former Labour prime minister. But they would do better to deal with its message.
In 2020, an estimated one million under-25s were looking for work. The chancellor, Rishi Sunak, responded with a Kickstart job-creation scheme for those who had not worked for six months. Mr Sunak’s programme is too small and too reliant on private companies to help much. Despite government claims that 120,000 jobs have been created, fewer than 2,000 young people have started in new roles. This is a lost generation taking shape.
Conservatives are supposed to be interested in ways to improve economic efficiency. Yet, high unemployment is such a waste of resources that no one interested in cost-effectiveness can be complacent about it. Ministers are playing down the biggest inefficiency of all: high levels of persistent, scarring joblessness. The government ought not to hide behind statistics. Its latest Labour Force Survey has unemployment at 1.78 million in October 2020, a rate of about 5.2%. However, this is unreliable – and depends on how people view their employment status. When seen through the lens of employers, the story is very different. Businesses that have taken on loans to stay afloat during the Covid lockdown may think that their furloughed staff are off their books not temporarily, but for good. That perhaps explains why unemployment looks worse when PAYE data is considered.
Unemployment and inequality are set to rise. The UK’s lowest-paid workers are more than twice as likely to have lost their jobs in the pandemic than higher-paid employees. This explains the paradox that wages are rising during the coronavirus-induced recession. David Blanchflower at Dartmouth College described this as a “batting average” effect, where “the team average rises because batsmen 10 and 11 are not counted any more”. The issue, as Prof Blanchflower pointed out, is that many of these jobs – in pubs, clubs and restaurants – won’t return after furlough payments stop. A wave of bad news could become a tsunami.
The government, unfortunately, seems more focused on cutting the deficit than creating jobs when the economy recovers. This is boneheaded and absurd. Budget deficits should be used to stimulate the demand needed to generate jobs for all those wanting work. Ministers ought to be thinking about a job-guarantee scheme, like that proposed by the economist Bill Mitchell. This would see the public sector offer a fixed-wage job to anyone willing and able to work. This buffer stock of employment can expand or decline as business activity falls and rises. It is mad to be worrying about government debt when people’s livelihoods and wellbeing are at stake. It is maddening that ministers continue to do so.
