by Matt Ridley.
Five years ago, almost nobody expected that
inflation would vanish, as tomorrow’s figures are expected to show,
or that unemployment would plummet, as Friday’s numbers will
confirm. Whatever else you think about this government, there is no
doubt it has presided over an astonishing boom in job creation like
nowhere else in the developed world.
The milestones are impressive: an average of a thousand new jobs a day over five years;
unemployment down by almost half a million in a year; a
jobless rate half the eurozone’s; more jobs created than in the
rest of Europe put together; more people in work, more women in
work, more disabled people in work than ever; the highest
percentage of the population in work since records began. All this
while the public sector has been shedding 300 jobs a day.
In a speech in September 2010, Ed Balls accused
George Osborne of “ripping away the foundations of growth and jobs”
and said that “against all the evidence, both contemporary and
historical, he argues the private sector will somehow rush to fill
the void left by government and consumer spending, and become the
driver of jobs and growth”. (Yup, Ed, it did.)
Is it too good to be true? I’ve talked to economists who think
the statistics must be misleading. The Labour party says that the
sanctioning of benefit seekers for the most trivial offences, such
as turning up late for interviews, has driven hundreds of thousands
out of the numbers, into dead-end apprenticeships, cruel zero-hours
contracts or doomed self-employment.
In a sense, they are not wrong. The government’s reforms, pushed
by Iain Duncan Smith, are indeed a crucial cause of the surprising
surge in employment. The reforms have indeed used tough love to
push people back into the workforce and off welfare. As long as
they are no worse off, this is no bad thing. Given that welfare has
treated people like children and conditioned them not to take
responsibility for their lives, it is a good thing.
For example, early trials found that making unemployment
claimants sign contracts in which they promise to look for work
(which is now universal) frightened quite a few people off the
system straight away — they had been working while claiming to be
unemployed. Regular re-testing of those who claim sickness benefits
has brought many fit people back into the labour force, while
actually increasing benefits for some of those whose conditions
have deteriorated. Paying work programme providers by results, so
that if they get people back into employment they get a bonus, has
worked.
And yes, the threat of sanctions if claimants do not treat
unemployment benefit as a wage for the full-time job of looking for
work has helped. The philosophy behind these reforms has not been
about cuts, IDS insists, but about reconditioning people’s
attitudes so they take responsibility for their choices. Little
things can make a big difference: like not having rent paid for
you, but having to budget for it from your housing benefit. Most
benefits are paid fortnightly but most employers pay monthly, so
going from welfare to a job often brings a budgeting crisis.
Universal credit is paid monthly wherever possible.
To general surprise, the welfare reforms have proved to be among
the most popular things this administration has done. Four in five
trade union members think the £26,000 cap on benefits is a good
idea, which is why the Conservatives are planning to push it down
to £23,000 if re-elected. Polls suggest that a policy of limiting
benefits to two children, so you could not get rehoused by having
extra children, would be wildly popular, as would a manifesto
promise to withhold benefits from immigrants till they have
contributed taxes for four years.
Tory candidates out canvassing tell me they are finding that
welfare reform, while horrifying the metropolitan elite, is most
popular in the meanest streets — where people are well aware of
neighbours who play the system. It is a staggering fact that when
Labour was in power and while the economy was growing, the cost of
welfare rose by 50 per cent in real terms, even as immigrants
poured in to work here.
The latest figures also suggest that British people from
inner-city estates are increasingly competing with immigrants for
low-paid jobs. We now have the smallest number of households with
nobody working and a record rise in the number of people who live
in social housing who are working. That feeds through to healthier
lives and less crime.
Universal credit, where it is being rolled out, has had an
immediate impact in making people more likely to go to interviews
and more likely to take jobs. Australian, New Zealand, Canadian,
German and American teams are monitoring Britain’s welfare reforms
with a view to emulating them.
Another international comparison is illuminating. Switzerland
has 3 per cent unemployment, Spain 23 per cent. As James
Bartholomew recounts in his book The Welfare of Nations, Swiss
unemployment benefit is slightly more generous than Spain’s, at
least initially, but to receive it you must prove every month you
are actively looking for a job. Switzerland has one of the
strongest such “search requirements”.
In Spain the requirement for the unemployed to seek work is much
less onerous. It is up to a public agency to find jobs for you to
consider and you don’t have to accept them if they are outside your
line of work or based more than 19 miles away. It is possible to
take long holidays abroad while receiving unemployment benefit.
There are other differences. Switzerland has no minimum wage and
makes it comparatively easy to fire people, both of which make
employers keener to hire unskilled young people. In Spain, the cost
of hiring somebody at a salary of 1,500 euros a month is about
twice as much as the employee receives after tax and social
security — three times as large a “wedge” as in Switzerland.
This government’s reforms have made us less like Spain and more
like Switzerland. Nor are most of the jobs created in the past five
years insecure, poorly paid and part-time. Since 2010, 60 per cent
of the rise in employment has come from managerial and professional
jobs. In any case, shoving people into some kind of work rather
than parking them on welfare has to be better for their morale and
their future.
Update: subsequent to my article, the latest unemployment figures showed continuing
strong improvement in Britain's workforce statistics:
Employment up 248,000 on 3 months before
Unemployment down 76,000
Claimant count down 21,000
Number not in the workforce down 104,000
Weekly earning and vacancies both up"
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