What type of jobs could the government create?

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What type of jobs could the government create?

By alittlecon @alittleecon

Read a bit of nonsense this morning from the so-called ‘Taxpayer’s Alliance’ about how ‘work for dole’ programmes should be expanded to save money. The effectiveness of this as a policy rest upon the idea that most unemployed people are generally taking the piss, and if we make being unemployed more unpleasant (as if it’s not unpleasant enough already), people will just go out and find a job. The idea also appeals to a certain type of person who view themselves as ‘paying for’ unemployed people to live it up on benefits, and think they should have to dance for their suppers.

Needless to say, I think this idea is garbage, and the actual problem is a lack of paid work. The solution to this seems obvious. The government should just create jobs. This is anathema to people like the Taxpayer’s Alliance, who suffer from a certain kind of cognitive dissonance about the issue. While they have no problem in coercing welfare claimants into jobs at Poundland et al as long as it pays no more than the current level of benefits, if the government were to actually create jobs paid at a living wage, these jobs would be ‘make-work’, akin to Keynes’ digging holes and filling them in again.

Even people who realise there simply aren’t enough jobs to go round are resistant to the idea that the government should simply create some, because they doubt that sufficient useful work could be found, so it’s better to leave people unemployed.

To counter this, I thought a list of potential jobs that could be created might be useful. I’ll start with a few of my own and request others to add their suggestions below in the comments:

  • Sports Coach
  • Street Musician
  • Street Artist
  • Actor
  • Landscape Gardner
  • Community Allotment Worker
  • English Language Teacher
  • Community Translator
  • Childcare (own kids)
  • Childcare (someone else’s kids)
  • Adult Social Care
  • Youth Worker
  • Household Energy Efficiency Installer

When is an economic recovery Not an economic recovery? – When It’s Based on Slave Labour!

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When is an economic recovery Not an economic recovery? – When It’s Based on Slave Labour! 

From Gracie Samuels

Before people get carried away and the Conservative government enter meltdown over this perceived recovery they should take the words of their leader the prime minister to heart and “calm down dears”.

A so-called economic “recovery” built on the backs of slave labour (workfare), zero hour contracts, consumer credit and an over inflating housing bubble, is not an economic recovery it is an economic deception!

On first looks the National Institute for Economic and Social Research (NIESR)  raising its growth forecasts by approximately 0.3%  for the UK for 2013 and 2014 it could have been construed as tentative good news, but is it? Unfortunately I believe the answer is no and I say this for several reasons which I will explain, but realise this, Osborne and Cameron and their supporters in big business will not tell you because they do not want you to know, they would prefer you to go on believing their tissue of lies. One such lie, we were told when the economy either flat-lined on contracted that such a small percentage of around 0.3% doesn’t matter – if it didn’t matter then, why does  such a small percentage of growth matter now, especially on the back of months of flat-lining and contractions? If Osborne and his Tory doning friends in the financial sector maintain that the chancellor losing the triple A rating “doesn’t matter”, then why did George Osborne stake his economical reputation on retaining the country’s AAA credit status?

Britain’s recovery is dependent upon the financial sector and the service sector, consumer spending and the housing market. Currently consumers are on a spending spree financed by credit card spending and expensive credit from payday loan companies. They are being tempted into spending by retailers offering huge discounts and the only way these discounts can be offered is if manufacturers sell to retailers at reduced costs and the only way manufacturers can offer these reduced costs is by keeping the cost of their labour artificially low. They cannot keep the cost of their raw materials low because the chancellor has slapped 20% VAT on them, so cutting labour costs is the easiest option

A lasting sustainable economic recovery can only be built on solid foundations on proper risked assessed credit and spending from disposable income and savings etc and from people hired in real jobs, with regular dependable incomes. It may be old fashioned, but it is the only way,  consumer spending based on expensive credit and people using credit cards and payday loans to meet their household bills each month is neither lasting or sustainable.

Just like in the 2008 crash, at some point people will reach the end of their credit road and be unable to keep switching from one credit card company to another and will be faced with paying back thousands of pounds of debt. Expensive loans from payday loan companies will always in the end implode on the consumer, borrowing money to buy so-called discounted goods is not economically viable, not for the consumer, the retailer or the manufacturer.

It’s a vicious circle in which the low paid, the poor, the vulnerable and the unemployed are being forced by the Tory government and their Tory doning friends in big business to fund this faux economic recovery!
Manufacturers keep their costs down not by the chancellor, George Osborne doing the right thing by lowering VAT and employer and employee NI, fuel and energy costs etc, they keep their costs down by:

  • Driving down wages
  • Driving down living standards
  • Removing workers rights
  • Sacking full-time staff and employing low paid part-time workers
  • Abusing zero hour contracts
  • Using taxpayer funded slave *workfare* labour Government underpinning all the above practices by cutting benefits; imposing a £1,200 charge for an unfair dismissal tribunal and removing the right to legal aid.
  • These practices are not only prevalent in the manufacturing sector, they are now prevalent across all sectors.

This situation in the British economy is as dangerous as the practices that led to the crash in 2008, in fact, they are probably even more dangerous, as the long term damage being done to industry and employment is virtually irreparable!

When nearly all the British workforce is hired on zero hour contracts in the future (and this is what it will come to) how are they going to have the confidence, or the proof of a steady regular income to spend in the economy or be granted a mortgage or a loan? Which bank or building society will  offer workers on zero hour contracts mortgages or loans? Answer – none! Further, if in future so many people will be hired on zero hour contracts what will happen to the tax receipts that the chancellor depends upon to keep the economy going? People on zero hour contracts will probably pay little or no tax and there is a huge propensity for an explosion of black market labour!

Our whole economy is not so much teetering on the edge, it has actually gone over the cliff and is hanging on by a thread and it is George Osborne who has pushed it over the edge!

Two thirds of GDP (economic growth)  is caused by consumer spending, for the economy to sustain this growth needs to based on solid consumer spending from savings and or disposable income from people in regular jobs with regular incomes, not reliant on consumer spending based on nil savings and maxed out the credit cards! at the moment people are merrily switching balances from one set of credit cards to other credit cards this is unsustainable, sooner or late the whole thing will catch up with people they will begin to default on their payments and the problems will begin ie another credit crunch!  Have you noticed how many advertisements for credit cards and payday loan companies are suddenly appearing on TV and in papers and magazines etc? It is exactly what took place pre 2008!

Steady and real consumer confidence and sustainable spending comes from people who feel safe and *are* safe and secure in their jobs, confidence does not come from people borrowing on expensive credit to buy in artificially reduced priced goods and services, this is a false economy and sooner or later this false economic recovery will come to a juddering halt and the true extent of government and corporate deception will hit families across this country like a tonne of bricks!.

How can a proper economic recovery take place when a rising number households  are seeing their standard of living fall dramatically, their outgoings rise sharply and are desperately struggling to pay their household bills, and whereby most people would struggle to pay an unexpected bill of £300?

Many families’ are resorting paying their bills and even their rent or mortgages with their credit cards, this is unsustainable in the short, medium and long term! Families’ debt levels are now at their worst for over two-and-a-half years, where does this fit in with this so-called “economic recovery”?

Average household debt has risen sharply from just over £9,000 a year ago to £12,834, including an average of £2,011 borrowed from friends and family, £2006 heaped onto credit cards and £1,959 in personal loans. To make matters even worse inflation is now rising again.

According to the Office National Statistics the Consumer Price Index (CPI) inflation from 2.4% in April , to 2.7% in May.
The Retail Prices Index (RPI) which includes housing costs etc, rose from 2.9% in April to 3.1% in May.

Low interest rates have helped to push the cost of borrowing down, but  this doesn’t tell the full story; one in 20 (5%) of families have said they are relying on expensive payday loans to get by on and one in 33 (3%) are using pawnbrokers and buyback shops and many thousands of people have already sold their gold and silver jewelry to help  to try and manage their household budgets.

So not only do we have a so called economic recovery underpinned by slave Labour, the low waged, zero hour contracts and an over inflating housing bubble and cuts to people’s benefits, we also have a situation where the poorest most vulnerable people in society are now being forced to maintain the recovery in the financial sector by taking out expensive payday loans and using credit cards to pay their household bills.

Inflation is on the rise and if it keeps rising there will be a call for the new Governor of the Bank of England to raise interest rates to try and cool it off, if this happens people’s mortgages, loans and credit card repayments will also rise placing a further drag on the standard of living, which is already falling. If he doesn’t raise interest rates to curb inflation people’s standards of living will be eroded still further and once again it will fall onto the poorest in society to pay for the economic recovery of the rich. But this will have consequences, there are more poor than rich, and the poor spend their money while the rich tend to put theirs in offshore accounts, so this will add to less consumer spending and will in the end have a negative effect on the economy.

Some banks this week have published profits, however, this is not profit because the banks have made money, this is profit made from the sacking thousands of people and the shedding of assets. If the banks are not making proper profits how are they going to lend for mortgages and businesses? An added stress is that the banks now need to hold large amounts of high-quality assets as “liquidity buffers” of safe securities that they can sell in the event of a repeat of the 2008 run on the banks and they are struggling to do this. If the banks are not making the profits they will be unable to meet the “war chest” requirements, so how will they loan to people asking for mortgages, loans and business loans?

What has also helped to buck the economy is the chancellor’s “Help to Buy” scheme, this is a scheme whereby the chancellor is overriding the banks and building societies (who for  their own reason do not want to loan money) and subsidising the private sector with loans underwritten by the British taxpayer. (If government were to do this with the public sector the furore and noise from the right wing press would be enormous), The Help to Buy scheme will cause an over inflation of house prices, which is already starting to happen. Today the Halifax house price index found prices in the three months to July were 4.6% higher than in the same period in 2012. The chancellor is fuelling a housing market price bubble which cannot be sustained and when the government’s ‘Help to Buy’ scheme is due to come to an end in three years time, where is this suddenly going to leave the housing market? The likelihood of this is that this will tip us into a further recession (if we are not already in one). We do not need the chancellor bucking the housing market like this, we need to see social housing built, where people with properly paid jobs be able people to have a decent place to live where they will be able to save for a deposit on a house and then step onto the property ladder, in a real and sustainable way thus freeing a council house for someone else and also helping to properly invigorate the housing market.
This is what used to happen and this is part of the way back to good steady economic recovery and health, what the chancellor is doing is sticking gaffer tape over a severed mains and hoping it will all hold until  after the next election.

People are currently buying property with the help of a loan underwritten by the taxpayer. Instead of having to find a 20% deposit, people need only find a 5% deposit the rest will be underwritten by the taxpayer. This is a way the chancellor has found to subsidise the private construction sector with taxpayers money. It is thwart with potential problems, the government loan must be repaid when the property is eventually sold, so if the people buying a house now want to move in 2 years time, they have to find the money to repay the government on top of what it costs to sell and buy another property! Currently after 5 years the loan repayment will attract a fee of 1.75%, which will rise annually by RPI inflation plus 1%. So if RPI inflation rises (as it has just done by from 2.9% in April to 3.1% in May) then the cost of what people must repay the government also rises. if the economy falters and housing prices fall, then people are going to find themselves in negative equity very quickly.

If a person loses their job and can only find a zero hour contract position, this will affect their ability to be granted a mortgage, or another mortgage should they be wanting to sell their property and move on. Here is a prediction (and by the way I predicted the 2008 crash in 2005)

What George Osborne is doing is taking a 1000 – 1 gamble with the economy and financial health and work of the people of this country and at some point, sooner or later the whole kit and kaboodle will crash down around our ears and he and zero hours contracts will crash the British economy head on into a brick wall!

Bucking the housing market and offering toxic loans which in the end people cannot pay back is part of what caused the global economic crash in the first place, it appears that George Osborne has learned absolutely nothing.

We are told by the over excited right wing Tory supporting press that the “feel good factor” has returned and the chancellor is telling us that the economy is on the mend.

Let’s see how good people feel as we leave summer head into winter with the cost of gas and electricity and water set to rise sharply  and families food bills set to reach a 12.1% rise by the end of the year. Grocery bills have already soared by £357 a year, plunging more families into food poverty. The cost of staples is soaring, bread has risen by 10p per loaf and potatoes risen by 246% to £326 a tonne in a year! A food poverty report carried out for Kellogg’s revealed that last year 280,000 families turned to food banks for help, that is a rise of 400% in just over four years.

With winter just around the corner and the onset of Christmas families will be struggling even more this year.

The average households owe almost £13,000, this combined with falling real wages means that the next election will be the first since 1931 when living standards are lower than the last general election! There is a widening gap between income and needs and the chancellor and the DWP attacks on those on benefits and low wages is only going to accentuate this problem and this will feed through to the wider economy as people on low incomes spend nearly all of their disposable income in the economy each week.

And underpinning this whole huge “economic recovery” deception by George Osborne is still the lie that enabled the deception in the first place and that is the deliberate falsification of this country’s unemployment figures, with zero hour contracts, workfare and a low paid workforce on part-time work, the true unemployment figures must be at the very least 4 million and not the 2.5 million.

If Mark Carney the new BoE Governor (hired by George Osborne) allows interest rates to continually ultra low, this will in turn keep house prices artificially high and they will continue to rise, this will have a devastating affect people’s ability to buy a house, no matter how much Osborne tries to buck the market with taxpayers money. What we are witnessing here is ‘market rigging’ and the cost to this country is going to be of catastrophic proportions, it will make the crash of 2008 look like a walk in the park!

Whichever party forms the next government after the 2015 election they will have to deal with the true number of unemployed and underemployed. They will have to raise taxes by at least £6bn to try and plug the gap of Osborne’s £25 bn black hole in the public finances  as well as deal with falling tax receipts due to zero hour contracts, the two are polar opposites and will have a disastrous effect on the economy, however, this is not the only only worry, whoever is chancellor after 2015, will have to deal with the impending disaster of Osborne’s housing bubble and his ‘Funding for Lending’ and  ‘Help to Buy’ schemes and when and how to stop them when the period of “political influence” comes to an end without triggering a financial tsunami in the economy if it already hasn’t happened as a result of him bucking the housing market!

Then there is the social costs of Osborne’s policies and the rise in homelessness and poverty and the unprecedented rise in the number of food banks and those dependent upon them to feed their families.  The doubling of winter fuel bills and food bills, made worse by the cuts to people’s benefits and working families tax credits etc.
By the time of the next election  a new report out estimates that workers will have lost an average of £6,600 from their wages in real terms. With price rises outstripping pay, David Cameron has presided over 36 months of falls in wages, more than any other prime minister, how is this going to help the economy?

The  new government will also have to deal with disaster that the Tories are currently causing in the NHS with their unwanted, unnecessary health and Social Care reforms also known as full-scale NHS privatisation. We as a country will suddenly have millions without health cover and  all the implications for social decay and poor public health this will inevitably bring.

Bank of England governor Mark Carney has said the Bank will not consider raising interest rates until the jobless rate has fallen to 7% or below.

Would that jobless rate be the official jobless rate or the real one? The government preferred jobless rate of 2.5 million of the true unemployment rate of over 4 million?

Does his forecast of 750,000 new jobs in 3 years include all those on zero hour contracts and those reclassified public sector jobs to private sector?

It appears that the new Tory hired Governor of the Bank of England is going to continue with the old Tory deception of the out going Mervyn King.

Meanwhile this country is tipping towards financial catastrophe and the only thing that seems to matter to the City, big business and the banks etc is reinstating another Tory government – the Conservative party the political wing of the banks and big business.

God help us, our government is operating a massive deception and taking a massive gamble with all our livelihoods!

The true effect of Immigration on Economics

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In the last few months, we have seen a desperate Coalition led by Tories, and supported by the right-wing media attempting to shift the perceived blame for the pain from their Austerity Policies so as to divide ordinary people. The rise in UKIP has unnerved them.  We have seen reactionary policies proposed and vile statements and touring vans reminiscent of Nazi Germany. Why?

It is unsurprising that people struggling to find work are angry that cheap labour is being employed. The erosion of workers’ rights, the increase in temporary work, the exploitation of workers at home and abroad by unscrupulous employers which is leading to the division in the electorate and can only result in maintaining the status quo as it divides working people. We look to a united left, to a tough Labour Party which will be tough on the bankers which created the crisis, the exploitative employers, and the rich, parasitic corporations whose personal finances accumulate unsustainably. Immigration is not to blame for the rising cost of living and families being plunged into poverty. Exploitative policies are. Michael Burke’s article puts the issue in perspective. 

Economics and the debate on immigration

Previously published on Socialist Economic Bulletin
By Michael Burke

Political parties in Britain have once more begun to talk about immigration, especially in the wake of the Eastleigh by-election. Unfortunately the debate is usually an all-informed one and typically just a cover to introduce racist notions about the impact of immigration. Therefore it is useful to examine some of the more important economic aspects of immigration.

Immigration

There are a number of countries in the world which have a higher per capita GDP than Britain. There are also a number of countries in the world who have a higher proportion of migrants as a proportion of the population. Both those facts are worth stating simply because discussion in Britain often seems to be dominated by the implicit assumption that Britain is both uniquely attractive to migrants and that it alone experiences immigration.

The chart below shows the countries with higher levels of per capita incomes than Britain. It also shows those countries proportion of the population which is migrant, that is not born in the host country. The table below specifies the data shown in the chart.

Chart 1

Immigration chart1jpg

Table 1

Immigration table 1

There are 13 countries in the world with a higher per capita income than Britain. Of these, 10 countries have a higher proportion of migrants. Some of these, such as Australia, Switzerland and Luxembourg have very much higher levels of immigration and have a much higher level of incomes.

There are 3 countries which have higher incomes but lower levels of immigration. However, of these 2 countries, Norway and Iceland have higher per capita GDP because they have a very large energy resource that comes pumping out of the ground (oil and geothermal energy). The remaining country is Belgium, whose geographic position means it has an exceptionally high proportion of people who work in Belgium but commute there from other countries.

By contrast, among the 18 OECD countries with a lower per capita income than Britain 12 also have a lower proportion of the population as migrants. The remaining 6 countries are small economies which generally have specific geographic or historical reasons for unusually high levels of immigration, or both. (The exception in this group is France).

Migration is part of growth

According to the IMF the total number of migrants in the world rose from 75 million people in 1965 to 195 million in 2005. Official data shows that most of that is to high income countries, about 80 million and most of the remainder to middle income countries.

The growth in the world’s migrant population is far more rapid than the growth in the total population. Over the same 40-year period to 2005, the world population doubled while the migrant population grew by 3 times.

However, this cross-border migration captures only a fraction of the world’s total migrant population. From a strict economic perspective there is little difference between cross-border migration and internal migration. This is especially the case when internal migration encompasses vast distances and differences of language or dialect.

According to China’s National Bureau of Statistics in 2008 there were 285 million internal migrants in China. This is far larger than the world’s total number of cross-border migrants. For the migrants themselves this frequently encompasses far greater geographical distances than is required, say, in intra-Western European migration. This level of migration is certainly the greatest level of internal migration in human history. It is also associated with the greatest rate of growth for any major economy in world history.

In India the level of internal migration is over 300 million people according to UNESCO. India’s medium-term growth rate is below that of China, but both countries have been growing at a rate considerably faster than the high income countries. The rate of internal migration has been a necessary accompaniment to high growth rates.

Correlation does not prove causality. But within the high-income countries higher levels of income are associated with higher levels of migration. Within the middle income countries, higher growth rates are associated with higher levels of internal migration.

Economic development depends on two key factors, the proportion of national income devoted to investment and increasing participation in the division of labour. Migration is a key part of the division of labour, allowing workers to migrate where production (and wages and jobs) are expanding. It also allows production to increase on the basis of employing the most adaptable workers.

Opposition to immigration

The government has recently produced a video to show potential migrants from Romania and Bulgaria that Britain is not a great country to emigrate to. There is a certain logic to this. The only way to stop immigration over the medium-term is to reduce the growth rate of the economy to zero or below. This is the basis for the government’s self-proclaimed success in reducing net migration in the most recent data; by curbing overseas students growth is directly reduced. Of course prolonged economic stagnation would also lead to a more rapid swelling of the 5 million British people who now live overseas.

Immigration of all types provides a substantial net benefit to the British economy, which a Home Office report clearly demonstrates. Growth attracts immigration but is also increased by it. The proportion of workers leaving a country will increases when there is an economic downturn and the proportion of the workforce arriving from overseas will tend to decrease. The reverse is also true: net immigration increases when the economy prospers.

There are a series of reactionary myths about immigration, which are perpetuated in the labour movement by outfits such as ‘Blue Labour’. These tend to focus on the supposedly local or microeconomic effects of immigration, particularly that they drive down wages. These arguments are a rehash of Labour notions which opposed the growth of women in the workforce and even supported restricting their wages relative to men.

Jonathan Portes has done very good work in countering the assertions that immigration drives down wages, even for the very lowest paid workers in Britain. As the Home Office study shows, the average wages for migrant workers in Britain are also about 5% higher than British workers, because on average they are more highly qualified. The relationship between unemployment and immigration is also equally clear; immigration increases while unemployment falls and vice versa.

Chart 2

Immigration Chart2

In reality the debate on immigration in Britain is not about the economic causes and consequences of immigration at all. It is overwhelmingly a ‘debate’ that allows politicians and others to whip up xenophobia and racism, while posing as being concerned about the interests of workers or the poor. The cause of migration is growth, to which migration is a decisive contributor. The consequence is stronger growth. The contrary argument is being raised now as a reactionary diversion from the current economic crisis, and the policies which are responsible for it.

References and Further Reading:

Osborne says he won’t take us back to Square One – We never left…

Osborne says he won’t take us back to square one. We never left

George Osborne has been coming under increasing pressure to change course of his austerity strategy. Even the IMF – who originally backed austerity – have deserted him. Osborne is sticking to his guns however and last night, in a speech at the annual CBI dinner said:

“Now is not the time to lose our nerve. Let’s not listen to those who would take us back to square one. Let’s carry on doing what is right for Britain. Let’s see this through.”

So the message is that doing anything additional to help the economy would “take us back to square one”. But how does “square one” compare to now? Assuming square one would be the situation Osborne inherited in May 2010, have far have we come since then? Here’s a few quick stats and commentary.

1) The Deficit

2009/10: £159bn

2012/13: £121bn

So the deficit down by a quarter. This seems to be the thing Osborne is most proud of, but – putting aside the fact that the deficit on its own is neither good nor bad – this reduction has been achieved primarily by cutting capital expenditure in half. From right to left, almost all commentators believe capital spending is precisely the thing notto cut, so in trying to lower that headline deficit figure, he’s actually setting us up for problems further down the road. Square one with double the capital spending actually sounds quite attractive.

2) Unemployment*

3 months to March 2010: 2.51m

3 months to March 2013: 2.52m

Yes, you read that right. Unemployment is actually higher now than in the comparable quarter in 2010. We are still at square one!

3) Employment*

3 months to March 2010: Employment rate – 72%; Total Employed – 28.83m

3 moths to March 2013: Employment rate – 71.4%; Total Employed – 29.71m

The Coalition like to say it has created 1 million private sector jobs. The net additional jobs since March 2010 though has been just under 1 million, and the working age population has risen faster than that, so the employment rate has actually fallen. Square one would actually be an improvement here.

4) Real Incomes

Median hourly earnings 2010 (constant prices): £11.92

Median Hourly earnings 2012 (constant prices): £11.21

Real incomes then have fallen since 2010, so again, square one doesn’t look too bad.

5) Interest Rates 

10 year bond yield May 2010: c3.6%                                          

10 year bond yield May 2013: c1.9%

Interest rates are another success Osborne likes to trumpet, and they have come down since 2010 (although by May 2010, they were already coming down). Whether this is a good or a bad thing depends on whether you are a borrower or saver, but assuming they are a good thing, how much credit should Osborne take for them?According to Jonathan Portes, not much.

In conclusion then, if Osborne were to change course, taking us back to square one, what would that look like? The deficit would be higher, but so would capital spending. Unemployment would be slightly lower, and a greater proportion of people would be employed. They’d also be paid more for that work. Interest rates would be higher (although on a downward trend). So the overall economic picture has barely changed since May 2010. I haven’t even mentioned the almost complete absence of economic growth since then. It looks like we never left square one. Going back there would actually be a slight improvement, and if we could go back there, but deploy our resources smarter than Gordon Brown in 2009/10, a huge one.

* Labour market figures sourced from ONS here: http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/index.html