Economic statistics

UK Unemployment Stats: Fact or Fiction?


In 2012 the TUC announced their suspicions surrounding the regularly released unemployment figures, claiming they were inaccurate because they failed to include people who had not searched for work recently, or under-employed people, those who take part time work after being unable to find full time work. It was claimed that if those were included the unemployment total would be almost 4 million higher.

Brendan Barber, TUC general secretary, said at the time that, “When ministers say there are plenty of jobs out there, they are ignoring the sheer numbers of people looking for work, as well as the suitability and location of the jobs available”. Osborne and Cameron clearly did not take this advice as the unemployment statistics remained a big part of the Conservative pitch in the 2015 general election.

More recently phenomena such as zero hour contracts and apprenticeships that pay as low as £3 per hour, have lowered the unemployment rate further despite being low paid, unstable and in the case of zero hour contracts, may not actually see someone working each week as the name suggests. The growth in this area of work has been labelled ‘the gig economy’ and it is estimated that up to 5 million people work in this way which contributes to lower living standards and growing ‘underemployment’.

Disguised unemployment is another area where although not counted in the unemployment statistics people may not be working or working as much as possible. This includes those on sickness benefits but able to do some jobs, those forced into redundancy or early retirement and those in part time or zero hours work. Zero hour contracts have, the ONS revealed this week, reached their highest ever levels with 910,000 people on contracts not guaranteeing regular work, a 30% increase since 2014.

A 2016 study in the New Statesman Magazine found that once all of these other areas are factored in, a ‘true’ unemployment rate could be closer to 12% rather than the 5% that government published at the time. The TUC and others have argued that the UK should mirror the USA which compiles a ‘U6’ measure of unemployment that includes discouraged, marginally attached and under-employed workers.

As a result of not including any underemployment, the unemployment figures look much more impressive for the government. In Feb 2017 the ONS announced the jobless rate held at an 11 year low of 4.8% in the three months up to December 2016.

However there were signs of the underlying true unemployment rate and the underemployment excluded from these figures. Wage growth remained slow and inflation increased, sparking a fear of a real term wages fall in the near future, Ben Brettell, senior economist at Hargreaves Lansdown, told the BBC: “With inflation forecast to hit 2.8% early next year, a deceleration in pay growth could see real wages fall at some stage”.

It is evident that there are serious flaws not only in the methodology of the employment and unemployment statistics but also that they neglect a large, growing and worrying sector of work. With almost a million zero hour contracts added to economically inactive, underemployed and those who have given up searching, an honest unemployment rate would be much higher. However this is not something any government would be keen to admit to, so expect the so-called ‘jobs miracle’ to continue for the foreseeable future.

It all brings to mind the classic TV series ‘Yes Prime Minister’, and Cabinet Secretary Sir Humphrey Appleby's famous quote: “Statistics can say whatever you want them to say, Prime Minster”.



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