Understandably, a lot of attention has been paid to the job losses and hiring freezes among tech companies, especially given the treatment of Twitter workers. This is a high-profile and economically important sector. However, we are in danger of overlooking a larger, potentially more dangerous development– the considerable reduction in employment throughout the economy in the last three months, most of which is impacting on low-paid sectors.
While there was strong growth in employee numbers up to April, between May and August, there has been a decline of 56,000 employees, or 2.4 percent.
So far the unemployment numbers has not matched this reduction. The CSO’s monthly unemployment report shows an increase of only 4,700, or a 4.2 percent, in the numbers unemployed. The Live Register isn’t picking up anything significant either.
However, there are a number of reasons why a decline in employee numbers doesn’t automatically translate into an increase in unemployment. People could be leaving the labour market for caring duties, or education and training. Others might be leaving the country – returning or leaving home. Some might be taking up self-employed work. In other instances, two part-time employees might leave and be replaced with a full-time worker; in this instance, the number employed falls but not the total hours worked. A fruther qualification is that recent months should be treated as provisional and subject to subsequent revision.
Whatever the explanations we should be alert to this potentially emerging trend, especially as to where it is impacting.
There are 33,000 fewer employees in the hospitality sector, followed by falls of 8,000 in the arts & entertainment, and distributive sectors. The losses in these three low-paid sectors made up 87 percent of the entire economy-wide loss of employees.
There were no significant gains made in any sector bar the financial services sector. There was a minor gain in the ICT sector but that is before the recent job loss announcements (which may not become evident in the data for a few months). In short, almost all sectors suffered a loss of employees.
And as often happens, it is young people and women who take the first and significant hits. While there was a 2.4 percent decline in employee numbers:
- Among 20–24 year-olds, the reduction was 7.7 percent
- Among 25-34 years-olds, the reduction was 3.1 percent
And women were more than twice as likely as men to suffer a reduction in employee numbers.
References to a potential recession are actually references to unemployment. In some cases there is a limit to what a government can do in the short-term. If there is a ‘correction’ in the tech or other multi-national dominated sectors (code word: job losses), Ministers can do little to influence what is a global process. However, governments can influence domestic economy. And they can help mitigate the damage.
This requires measures to ensure that demand, especially consumer demand, is maintained. Boosting wage and income floors is one effective measure as these groups spend most of the additional income they receive; namely, the minimum wage and basic social protection rates.
Another helpful measure is to introduce a pay-related unemployment benefit. This would help households maintain consumer spending in the short-term, rather than see their disposable income fall over a cliff, risking debt or significant cuts in their consumption. Regarding this, the Government’s recent announcement that they will examine a pay-related element to unemployment benefit is good news.
Unfortunately, this will take time (this should have been top of the agenda following the last recession). In the intervening period, the Government could re-introduce the staggered payments under the pandemic unemployment payments which would provide some support.
Hopefully, this fall in employee numbers is only a blip with growth returning in the months ahead. But we should prepare for the worst. And the worst is that we are heading into a recession driven by job losses in both high-value and low-paid sectors.
It’s not like we haven’t been warned.
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