The fact that there are over two and a half million unemployed adults at a time when we are one of the richest countries in the world is nothing short of a disgrace. That we are wasting the talent and efforts of so many people when we need to promote economic growth should be a matter of permanent shame to the government. Most of the measures they have proposed have been embarrassingly ineffective and generally ridiculously small.
When George Osborne stood up to announce the onset of what he termed an austerity program, he admitted that by making savage cuts to the public service he would cause people to lose their jobs. But he went on to say that the private sector would fill the gap in employment possibilities. This was not only a myth, it was palpably dishonest. Throwing people out of work depresses demand and therefore discourages investment and expansion. Far from needing workers, the private sector has also cut jobs.
It is still a mystery how Osborne expected the private sector magically to find the jobs needed to restore employment when the private sector has, as its largest customer, the public sector. In fact, nearly 60% of public sector expenditure, other than benefit transfer payments, is in buying goods and services from the private sector.
There is no question that the present level of unemployment is largely due to the cuts made in public expenditure. By closing down a large number of capital projects, many of them quite small, such as the refurbishment of existing school buildings, the government effectively condemned many businesses in construction, as well as their suppliers, to reducing their labour force and, in some cases, going out of business.
Huge areas of the private sector in Britain today depend for their livelihood on continuing public expenditure. It was the great myth of the Thatcher revolution that somehow removing government responsibility for the provision of goods, services and investment would somehow restore life and energy to the private sector.
Industry is not the answer
The great fallacy in the argument that the private sector would produce new jobs has to do with the way that industry actually operates. In a recession, whether small or large, enterprise business managers will take every step possible to reduce costs. They will implement change, and invest in innovation and new equipment in order to reduce their staffing levels. I know of businesses which have grown by as much as 30% over the last decade while not increasing their labour force by a single person.
We are assailed with news stories of how opening supermarkets, packaging plants and distribution centres creates hundreds, sometimes thousands of new jobs. What we are not told is that such activities almost inevitably throw out of work those involved in the same activities in less efficient and less well-managed operations.
The plain fact is that the march of technological change means that productivity increases from year to year. In fact, within any business, it is almost impossible to avoid improvements, which replace human effort. In general, productivity increases at about 2% per annum without any special effort. That means simply by upgrading your computer system, or buying more efficient vehicles, or installing the latest equipment in your factory or warehouse, you take advantage of this productivity improvement. Improved productivity means lower staff numbers.
When I was at university in 1960 we were told that it took 400 man hours to produce a motorcar. It now takes four hours to produce one car. That is because the investment in the machinery to make cars has improved by nearly 1000% in that period. The days when we had factories which employed thousands of workers are long past. In those days nearly 45% of the population were working in manufacture. Now, only 15% is actually involved directly in manufacture.
Increased productivity happens everywhere.
The impact of productivity, though less, is felt everywhere. In transport and distribution technical improvements have meant that we are moving much larger tonnages and many more people on our roads, rails and ships. That means we require the effort of fewer men and women. Even in the provision of services there have been steady improvements in productivity. In many supermarkets we now check ourselves and pay using automatic machines. Stock control is automated, and deliveries planned automatically. Retailing as a whole is an industry that has embraced so many technical improvements, and thereby reduced its manning levels.
However, it still takes one person to cut my hair, and one person to clean my teeth, and one person to give me a medical checkup. And we all know that tutoring, by one individual of another, is an essential part of all skill training and higher education. There is also the whole care industry and, increasingly, a substantial sector involved with household service.
The building trades have improved their productivity. One only needs to examine the cost structure of building work to see how dramatically things have changed. Back in the 1970s when we were refurbishing houses in London, we reckoned that building costs were about 50:50 divided between labour and materials. Now the cost is closer to 80:20. As a result the building industry has had to improve its productivity through the use of a whole range of sophisticated tools and materials.
Agriculture has changed enormously. The days of individual family owned farms are now almost history. Farmers now refer to themselves as running agro-businesses. Many of the men who you see in fields driving tractors and other machinery actually live in towns and drive to work in the country. Farmers no longer own much of their machinery, which is supplied and used by contractors. As a country, we could not compete in the production of food in a world market without making ourselves one of the most efficient agricultural nations on earth. This simply means that there are fewer people doing it.
Observe the extraction industries; these too make use of the most modern and efficient equipment, and are the beneficiaries of huge investment which always results in extraction per man hour increasing dramatically, and therefore fewer men involved in the process.
Wherever we look the march of technology has driven productivity up and the demand for workers down. Sadly it has not seen the rewards to labour increase concomitantly. Much of the benefit of improved productivity has gone to owners of capital. In short, we need fewer workers, and we pay them proportionately less.
The private sector has to be profitable.
The private sector in Britain does not have the possibility of creating new jobs to replace those that have been destroyed by this government. The private sector has to be as efficient as it possibly can be in the present circumstances because it is exposed to competition from the rest of the world. It is widely believed that we have somehow lost our manufacturing sector. That is another myth. In terms of output volume, we actually produce in value five or six times what we produced in the 1960s, and we do so with levels of sophistication and technical advance which are often the envy of the world.
Britain is one of only three countries that can actually build a modern jet engine. We are at the forefront in the production of specialised metals and ceramic materials. We produce some of the most sophisticated glass in the world. Our scientific advances in the whole area of high technology engineering in many cases put us at the forefront of international competition.
All this tells us that the cry of the present government, that we must reduce public expenditure and jobs will appear from the private sector, is simply not going to happen. What the government needs to start telling us is what the new jobs are really going to be, and how we, as a nation, should prepare to do those jobs, and fund them at the same time. We need to look at where employment is increasing, rather than where technology is continuing to make the problem worse.
New jobs from renewed idea of service.
Before the war, when Britain was faced with a long-term depression, there was still a large army of men and women in what was then called domestic service. It has been estimated that even in the 1930s this accounted for well over two million jobs. This, of course, was in addition to all the other support services for running a household, laundries, shoe repairs, and the building trades.
After the war, this sector almost disappeared. Now, it is reappearing in a very large number of households. Where both parents have to work in order to meet the financial needs of their families, they could not do so without a substantial amount of domestic support. We have a rapidly expanding senior population who need support. There is hardly a family in the kingdom which is not employing home helps, cleaners, child-minders, odd job men, and a whole host of other personal and household service providers.
A great deal of this is actually in the informal economy. This is often referred to as the grey, or even black, economy. However, it is very much more widespread than the government would like to admit. This means that much money circulates between those who need the services and those who do the services without record or taxation. Please God that no government seeks to regulate this economic activity! Compared with the excesses of big business in avoiding tax and exploiting loopholes, this huge amount of employment deprives government of relatively little for a very big gain to society at large.
Some countries, such as Germany, have succeeded, to a certain extent, in regularising such employment. But most, like the Americans, turn a blind eye. Nevertheless, this is now a very substantial and significant part of the economy, and probably provides a great many work opportunities, which are completely unknown to the official accounting of Great Britain.
Alongside these informal arrangements has grown up the substantial care industry. The large number of people with disabilities who cannot work, and often are not able to look after themselves, require constant care. This used to be provided in large homes and institutions. They are now increasingly replaced by direct supported living financed by the state. This is a growing activity, and neither productivity or economy can be applied. It is a direct and permanent call on the public purse, and it will generate increased numbers of jobs in the future.
Leaving personal services aside, we return, of course, to the government. Far from cutting public expenditure on the whole array of services they provide, what they should be doing is increasing expenditure, and increasing job opportunities throughout the provision of public services. From the support for the needy, right through to libraries and art galleries.
Mr Cameron: where will the jobs come from?
If I were to be able to question our Prime Minister this is what I would ask: Would he be so kind as to explain exactly what jobs will be available to our one million unemployed young people next year? They will certainly not get jobs in manufacturing, agriculture, transport, or mining, for all of those activities have declining workforces. Transport and distribution will increase only slowly.
In future, jobs will either be created in the sectors that are concerned with the exercise of intellectual skills, such as teaching, consultancy and research, or they will be involved in health, care and personal services. Of these, it is the care industry that is the one that holds the greatest probability of being able to produce worthwhile work for thousands upon thousands of people doing necessary and important work to improve the life experience of the old, the infirm, the handicapped and, of course, our children.
We must also have to face the fact that, since 1984, for most families a single income is simply not enough to provide for all the necessities for bringing up a family. Therefore, it follows that the availability of well-financed personal services, call them welfare, if you like, is an absolute necessity for ensuring a return to full employment.
Investment is also an answer.
There is another element in restoring full employment. Substantial, in fact huge, public expenditure on the infrastructure would be a powerful generator of growth, and provider of employment. This is entirely within the gift of government, too. There has not been a single inch of new motorway in Britain for over twenty years. There have been no serious road works in London to improve the circulation of traffic since almost 1974. We need investment in energy, water, transport and, above all, housing.
Curing mass unemployment does mean spending money, and that means borrowing and increasing debt in the short run. But if we consider the two and a half million unemployed to be money in the bank which, when put back to work, will stimulate demand and pay its taxes, then we can finally get a handle on the ‘debt’. This is a virtuous circle to end all.
So I propose that the one sure way of taking us out of this miserable situation, where we have one in 12 of our labour force out of work and, in particular, a huge army of young unemployed men and women, is for the government to stop fiddling while Rome burns, put its hand in its pocket, and stimulate the economy by a massive investment programme, and an expansion of public services. There should be no more little schemes of stimulation, just go for growth, and be kind to those who need public services.
The objective of government should no longer be the protection of the currency and, by implication, the protection of the bankers. It should be wholeheartedly to promote full employment, which is what the post-war governments pledged themselves to do, and succeeded. Now, it is up to a modern government to pledge itself to do the same.