Employment

Baroness Donaghy Excerpts

Thursday 20th March 2014 Lords Chamber

[Baroness Donaghy (Lab)]

My Lords, I thank the Minister for initiating this debate, and in doing so, I note that he is much admired for the way in which he steered the Welfare Reform Bill and the Pensions Bill—two of the most difficult Bills in Parliament—through this House. In fact, I think that he is more appreciated by this side of the House than he is by his own party. I say this because my contribution is not very supportive of the Minister’s claims and I wanted to place on record my admiration for him before I rubbished his thesis.

I understand why there is a great deal of celebration from the coalition Government about the level of employment. However, the increase in inequality, the way we treat our young people, the way we treat public sector workers, the increasing economic fragility of people’s lives and the experience of most women in terms of income and childcare mean that there is absolutely nothing to celebrate. The economy is nearly 2% smaller than it was at the end of 2007. Looking at the very short term, it is true that the number of unemployed actively seeking work has shrunk by 250,000. I accept that. However, there are still 770,000 more people unemployed than at the end of 2007—a total of 2.4 million. That represents little change from May 2010. Unemployment has averaged nearly 8% since 1980. So we have to ask how—or even whether—the economy can bring that level down to the 2% we had for 25 years after the Second World War. We had growth averaging 3% a year for more than 60 years. Achieving that over a period of time under current government policies is beginning to look unlikely.

Then we have low productivity. Firms have survived by shelving investment and paying their workers less. This might work in the very short term but it will not lead to growth. George Osborne knows that low productivity has slowed growth and will continue to do so. The Financial Times has used the Office for Budget Responsibility’s own model to show that the £85 billion deficit target in 2013-14 will actually be £111 billion.

The Government’s headline increase in apprenticeships is positive on the face of it, and of course it makes the unemployment figure look better. However, the reality is very different. The minimum wage rate for an apprentice is £2.68 per hour. Although it is a positive step to acquire skills and work experience, when the wages are under £100 a week before travel costs and bills, it starts to look less attractive—and if those apprenticeships do not lead to a job, it breeds cynicism and despair. Most of the new jobs in the service sector are filled by young, unskilled workers on short-term, part-time and zero hours contracts, which is a guarantee that low productivity will persist. The impact on young people is extremely worrying.

The latest survey from the Prince’s Trust confirms what some of us know already. Young people are having a tough time finding security and fulfilment—unless they come from a privileged background. Some 9% of respondents to the survey said that they had “nothing to live for”, and one-third of young unemployed people have considered suicide. Clearly, there are other factors such as an increase in homelessness, poor careers advice and the break-up of families, but we cannot be proud that in this country a large proportion of apprenticeships are just an excuse for cheap labour, or are of poor quality and short duration. The Government’s own research shows that one in five apprentices receives no on-the-job or off-the-job training, and 25% are paid less than their legal entitlement. The Work Foundation has found that, despite the range of skills that are deemed necessary for a career in social care, only around one-third of health and social care apprentices receive both on-the-job and off-the-job training, and one-fifth report receiving neither. It is no coincidence that most new claimants of housing benefit are working rather than unemployed.

A Manpower survey shows that job prospects are better than they have been for six years, in particular in the building industry, the utilities and large companies. If that leads to more jobs for skilled workers, it may help productivity, but if it represents more low-paid, temporary and unskilled work, it will disguise the real problem. The Government have made much of the fact that private sector jobs have increased by 1.5 million and that that has made up for the loss of jobs in the public sector. Even if we discount the tragic loss of skills and commitment to public service that that represents—a hollowing out of the Civil Service and local government, and unsustainable pressure on health service staff—the figures hide blatant exploitation of workers and the prevalence of low pay, particularly among women workers. Some 11 million people have had no increase in real earnings since 2003.

The Government have also made much of the increase in self-employment. Research by the Office for National Statistics shows that women have made up more than half of the 10% growth in self-employment since the recession began. If this represented an increase in business start-ups and thrusting entrepreneurs, we would all be cheering, but the reality for most is very sobering. According to HMRC, in 2011-12 the average income for a self-employed man was £17,000. Even taking account of the ability to offset a large proportion of costs and expenses if you are self-employed, that is still a surprising figure. The average for women, however, was £9,800—40% less than men. In almost every region apart from London, the south-east and Scotland, self-employed women earned less than £10,000 a year. This suggests a great deal of substitution from low-paid employment to low-earning self-employment.

A recent report by the Women’s Budget Group notes that much of the increase in women becoming self-employed is effectively because of precarious work and zero-hours contracts rather than because of the creation of new businesses. Scarlet Harris, a spokesperson for the group, said:

“Clerical, cleaning and caring work, which is predominantly carried out by women, has experienced some of the fastest growth in self-employment in recent years. These women, who already suffer poverty rates of pay, are now having to contend with the poor working conditions and complete lack of job security that self-employment brings. These shocking gender pay gap figures should end any delusions people have about the UK’s four million self-employed workers”.

A BBC investigation last month found that advisers are encouraging individuals on welfare-to-work schemes to become self-employed in order to move them from unemployment benefits to working tax credits. Has the Minister investigated this matter? If so, how does he plan to deal with it?

Not only is the gender pay gap widening for the self-employed, but ONS figures show that the gender pay gap as a whole in the UK widened in 2012 for the first time in five years, from 9.5% to 10%. The Chancellor of the Exchequer said that the recent Budget is for,

“the makers, the doers, and the savers”.—[Official Report, Commons, 19/3/14; col. 794.]

He should have added—“and young people and women can push off”.

Finally, I do not believe that we can win a race to the bottom. We need high-quality jobs, investment in manufacturing and good-quality training and careers advice. The World Economic Forum in Davos concluded that the biggest threat to prosperity in the next decade was the increasing gap between rich and poor. This Government are following a path that will ultimately fail, at enormous cost to people’s security and aspiration. It really is a case of, “Never mind the quality, feel the width”.