Employment

Lord Haskel Excerpts

Thursday 20th March 2014 Lords Chamber

[Lord Haskel (Lab)]

My Lords, every Wednesday, John Kay writes an article in the Financial Times. Last week he wrote about economics and mathematics, and he came to the conclusion that numbers do not really reflect the world as it really is. Numbers have to be tempered with the realities of human life, as I think the noble Baroness, Lady Eaton, implied. While I welcome this opportunity to debate employment and I welcome the rising numbers in work, I am not sure that there is much to be gained in just debating the level of employment. The noble Lords, Lord Holmes and Lord Bilimoria, told us that the number in work is at a record level; I gently remind them that so is the population. I agree with John Kay. The numbers without the humanity can be meaningless.

I will give another example. In the normal course of events, every month some 30,000 people in Britain change jobs for a whole range of reasons; many of them are for personal reasons totally unrelated to government policies, yet they are all included in government figures. The level of employment has to be considered not just in terms of numbers but also in human terms, in its effect on people and on the fairness of our society. So I will look at the level of employment in this way.

There was a time when the Government were going to create employment by means of an industrial strategy, a strategy that would balance the economy and balance the country; it says so in the coalition agreement. This would mean high-tech growth, skilled jobs, advanced technology and a lower north-south divide. However, as yesterday’s Budget indicates, this has manifestly failed. As my noble friend Lord Monks explained, we have growth, but it is based on increased consumption and on a property boom. It is based more on trading in finance, which is a zero-sum game that benefits the few, and less on trading in goods and services, which benefits us all. Yes, the employment level has gone up, but in a way that reflects this rather disappointing industrial strategy.

The recent report from the Resolution Foundation makes it clear that some 5 million of our workers meet the definition of low pay set by the OECD. We have a higher proportion of low-paid jobs than most OECD countries. Of course, the low pay in many of these jobs is topped up by the Government through the tax system, so giving people a chance to make ends meet but also keeping up the employment figures. Instead of subsidising low pay, why do the Government not do more to encourage people to run their businesses better—by raising productivity so that they can pay a living wage? Yes, the Government are trying to raise skill levels and encourage people to gain qualifications, but if we are seeking to have a successful economy, a degree or a qualification is not necessarily a proxy for or even a means of getting a job. As my noble friend Lord Giddens explained, in that kind of world the economy pays you for what you can do with what you know, not just for knowing it. I would add that, in that kind of economy, success is increasingly a group endeavour that depends a lot on soft skills such as leadership, collaboration, adaptability and the ability to learn and relearn. Indeed, it is the absence of these skills as much as technical skills that concerns many employers today. Perhaps the biggest threat to our level of employment is the possibility of leaving the European Union. This would marginalise us economically because every day we hear from international corporations that our leaving would reduce their activity in Britain and jobs would go elsewhere. Thank goodness we now know that a Labour Government would remove this threat to our level of employment.

Then there is the matter of productivity, raised by my noble friends Lady Donaghy and Lord Monks. Did the Minister see the release on 20 February from the Office for National Statistics which gives the final productivity estimates? In case noble Lords missed it, I will give the highlights. Last year the output per hour in the UK was 21 percentage points below the average for the rest of the major G7 industrialised economies. UK output per hour and output per worker fell compared with the previous year. Our output per hour was 3 percentage points below the level of the pre-recession year of 2007. What this demonstrates is that this Government have maintained the high level of employment thanks to the high number of low-paid, low-skilled jobs that are needed in a low-productivity economy. That is a strong indicator that we are in a race to the bottom. Is this how we are going to pay our way in a globalised economy? Many of the people needed to do all these low-skilled, low-paid, entry-level jobs are the very immigrants that the Government are seeking to control. Is this how we are going to build up our exports to deal with our balance of payments and borrowing, which the Chancellor spoke about yesterday?

The Minister’s fine words about our level of employment does very little to deal with these issues, which are central to our economy. John Kay is right: take the numbers out of the human context and you get a completely different picture. Not only does this kind of employment do little for our economy, it also damages our society. There is more employment, but the unemployed are, more and more, overwhelmingly the younger generation. This is a problem all over Europe and there are EU social funds available to tackle it. Central to this funding is a job guarantee scheme, and the Government were wrong to scrap it. The Minister is wrong. The rising level of employment still leaves many young people needing to be rescued from long-term unemployment before the rot sets in.

Other noble Lords have spoken about the huge growth in zero-hours contracts and part-time work. Yes, this may raise the level of employment, but it also raises the number of people who live with insecurity, people about whom my noble friend Lady Donaghy spoke. My noble friend Lady Hollis, in her letter to the Guardian, pointed out that if you work 30 hours a week on a minimum wage split between, let us say, two 15-hour jobs, you cannot add the hours together to bring you into national insurance, so you end up with no state pension. It is playing on this kind of insecurity that enables employers to make unreasonable demands such as working people harder and paying them less, sometimes insisting on false self-employment, as other noble Lords have spoken about. I put it to the Minister that there is plenty of evidence that this is happening. The economy is growing, corporate finances are in good shape, executive salaries and bonuses are soaring, but ordinary wages are being squeezed. The number of people who are living precariously is on the rise.

We are told that average wages are going up. But the Minister may remember when he was being taught arithmetic at school, that a big increase at the top is enough to lift the average. Meanwhile, the median wage is static, leading to the rising inequality that concerns so many of us. Even with rising levels of so-called employment, is this the kind of leadership that inspires growth and innovation? Is this the kind of leadership that delivers a fair society? Successful leadership means that people have to believe that you believe in what they believe. If they think that all you care about is the numbers, you are in deep trouble. This kind of insecurity and inequality means social and economic trouble.

The level of employment must be in the context of an economy that works for all of us—not just the few who are doing well, but the many who have to make do with low wages and dehumanised working conditions. This level of employment does not create the society that I seek. This is not my vision.

--- Later in debate ---

[Lord Freud]

My Lords, I have really enjoyed the debate. I thank noble Lords for the energy and effort they have put into some of these complicated issues. I particularly enjoyed the noble Baroness, Lady Sherlock, stealing the “Get Britain Working” slogan that we used in the last election, but that is a compliment. I enjoyed the first two sentences from the noble Baroness, Lady Donaghy, but the next sentence, about where my personal support lay in the Chamber, was incredibly dangerous so I did not like that. The rest of her speech I did not like at all.

To start dealing with the issues, at the core of what the noble Baroness, Lady Donaghy, and the noble Lord, Lord Haskel, said—the real attack on this—is, “Forget the quantity, feel the quality”. However, according to the figures, in the past three years, three-quarters of a million of the extra employment has come from managerial, professional and associate professional occupations. That is 70% of the rise in overall employment. The noble Lord, Lord Shipley, made a point about the importance of having quality jobs that come from the efforts on exports, having the most competitive export finance in the country and reducing the costs of energy. Those are the fundamentals and they create real business and quality jobs.

The noble Lord, Lord Monks, spoke about different parts of the country and the north-west in particular. Clearly, the Budget announcements work in that respect: the business energy package, for instance, helps firms in the north-west, including 27 CHP plants, while the SME package helps 481,000 SMEs in the north-west. The noble Lord, Lord Haskel, cavilled at the numbers going up, pointing out that the population is also going up, but the underlying employment rate is moving up to 72.3%. The most interesting thing is that, if the people in full-time education are taken out of the figures, we are now back in rate terms to the peak point that we reached before the recession. According to the projections of the OBR, we are now moving into new ground, at least on the quantity side.

I tried to go for the fundamentals in my speech and I think noble Lords might find it interesting to read it; it can be hard to take something in when you are listening to it. I was trying to say what was really happening. Productivity is really very interesting and I do not think we understand exactly what has been happening in our labour market in the past five years. We had a crash, the like of which we had not had in a very long time, so there are peculiar things happening. One of the things that was happening with productivity was that, clearly because of the impact on the financial sector, there were some odd moves. There are now forecasts from the OBR that productivity will pick up. Clearly, one of things that will happen as a direct result of that is that wages and take-home pay will start to move in the right direction.

The noble Lord, Lord Giddens, made a lot of interesting points, but one simple one was on income inequality. There is a figure, but the figure is the lowest now—as the Chancellor said—for 28 years. More fascinating were his technological issues and what we need to do about those if they happen. Clearly, as the noble Lord, Lord Bilimoria, said, there have been predictions like this regularly. The noble Lord, Lord Giddens, said that we were now really at a discontinuity, so perhaps it would be different this time. I think that was—in the jargon—such a shocking or disruptive event, however, that it is hard for us to expect the Government to sit down and be able to plan it through. When we see it really start to happen, we will have to work on it. We are getting jobs up, so we have not seen it yet. To respond to him, we have got, in universal credit, something effectively close to a negative income tax. We can actually make the adjustments. On the point made by the noble Lord, Lord Giddens, on the displacement of wealth, the interesting study that came out a few months ago from UBS showed that we were the only major country where the impact of the crash was seen evenly right the way along the income spectrum.

On the gender pay gap, there is a long-term downward trend for full-time employees, falling from 17.4% in 1997 down to 10% and it narrowed in all regions between 1997 and 2013. The noble Lord, Lord Monks, said youth unemployment was too high. On the other hand, it has been falling: the JSA claimant count has now been falling every month for 21 months: it peaked at 480,000 in December 2011 and is now at 295,000, so it is going in the right direction.

Turning to apprenticeships, the point raised was that demand exceeded expectations. That is why the Budget announced funding for more. As for the concerns of the noble Baroness, Lady Donaghy, about their low quality, all first-time apprenticeships will now involve a job and low-quality provision has been ended. My noble friends Lord Shipley and Lord Holmes said that we needed to ensure that youngsters were better equipped with career guidance by schools. Ofsted is also concerned that schools need to meet their duty better and it will give higher priority to guidance in school inspections. The effect of the increase in participation is coming through now and the latest data indicate that the proportion participating is still going up.

The noble Lord, Lord Haskel, simply said that I was wrong on the job guarantee, a point echoed by the noble Baroness, Lady Sherlock. I happen to have a pretty long memory about these schemes from various places. I can, and will, have a go at what is really wrong with that scheme, but I am more concerned about the people who are unemployed. We can help them—we know who they are—but we do not know about the youngsters who just disengage, who are called “inactive”. We all find it very difficult to do anything about that. It is probably where the most serious problem is, because if they are coming into the jobcentre, you have got them and can put them on any scheme you like. If they are not engaging, however, you have a problem.

The guarantee scheme—the one we have got hold of—is fine: it is very like the Future Jobs Fund, which I never liked at the time; instead, we put in work experience. The outcomes of work experience are virtually the same as those of the Future Jobs Fund and the guarantee strategy, but it costs one-20th, and that is how to waste money. Even then, on the sums that I can see, there is not enough money put aside. We cost this policy from Labour at £2.6 billion every year, and very considerably less has been put aside. I am not going to make the joke much about how often the Labour leadership has spent the bank bonus taxes. It spent them on reversing the VAT increase, it spent them on more capital spending, it spent them on reversing child benefit saving and it spent them on reversing tax credit savings. It says that it is not going to do any of that now—it is going to spend them on this. Let us see how long that lasts.

[Lord Haskel]

We can keep spending the bonuses because the bonuses keep going up.

[Lord Freud]

Not by that much—not by a factor of 30, or whatever it is.

The noble Baroness, Lady Turner, spoke of her concerns about childcare. We have also been concerned about childcare. Clearly, not only will she have seen the announcement yesterday about the money for taxpayers but she will have also spotted that within universal credit the rate will now be 85%. I know that she and a lot of other noble Lords will welcome that.

My noble friend Lord Soley mentioned skills. I am sorry, he is not my noble friend: I quite like the noble Lord, Lord Soley, but cannot call him a noble friend. On skills, our priority must be to get English and maths training first. One of the things we are doing with universal credit is ratcheting up the requirement for getting people to the basic level of digital involvement. We are doing a lot of work currently to work out how to help people to get to that basic level. The noble Lord is looking at a slightly higher level—into coding. That would be something separate.