Rising employment figures hide some worrying trends

The employment figures came out yesterday which showed the employment rate rising to pre-recession heights and unemployment falling to 2.12 million. At the same time though, the figures showed that wage growth continues to be outstripped by inflation, while productivity continues to fall. Rising employment = good; falling real wages and productivity = bad, so what’s going on?

Some of this puzzle appears to be explained by some recent labour market trends, namely the rapid rise in self-employment. There’s a very interesting post up at Piera today by FlipChart Rick. It contains some nice charts which I will repost here.

The first chart shows the changes in employment since the 2008 crash, split between employees and self-employed. The Coalition likes to shout about the increase in jobs since they came to power, but since 2008, the rise in employment is almost entirely accounted for by the growth in self-employment. As Rick says in his Piera post:

“Take out self employment and the figures would be rubbish. The government wouldn’t have had much to boast about until the back end of last year.”

Source: ONS Trends in Self-Employment

The next chart shows the mean and median weekly earnings for employees and self-employed workers. Both median and mean weekly wages for employees have barely moved since 2001 (in real terms), which is pretty dire, but when compared the the weekly wages of self-employed workers, it looks pretty rosy:

This third chart comes from the ONS rather than Rick’s blog and shows whether those who are self-employed employ other people or not. It shows that while the number of “one-man bands” has risen by around 750,000 since 2007 (with most of the increase happening since 2010), the number of self-employed people with their own employees has actually fallen. It’s been argued that rising self-employment is a good thing because it demonstrates a increase in entrepreneurship and “wealth creators”, but this chart shows there is little evidence of that:

As Rick says in the post linked to above:

“More self-employed people, not much extra work, so falling productivity, under-employment and collapsing pay.”

 

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Self employment, money and post-crash economics

My weekly list of links returns. This week, blogs on economics, food banks housing and self-employment. First up, here’s Flipchart Rick with a blog on the remarkable increase in self-employment over the last 12 months:

Self-employed – the nouveau pauvre

On food banks now, and following the Mail on Sunday’s ‘expose’ of food banks, a couple of weeks ago, here, the manager of a food bank responds:

“We will always err on the side of compassion”

There’s been a real trend over the past year of TV docs focusing on poverty and aspects of the social security system. The latest is called “How to Get a Council House” as Jules Birch explains here:

Adjust your set

Here’s a couple of blogs on the DWP. The first details problems surrounding the new Help to Work scheme which aims to bully people into work, and the second is an interview with a Jobcentre Plus advisor:

Chaos at the DWP as bungled Help to Work scheme attempts to launch

Jobcentre Plus advisor: “The reforms have been designed to hide the numbers of unemployed”

Economics now, and there’s a couple of interesting (to me) debates going on in economics at the moment that are getting a bit of attention in the blogosphere. The first is over the nature of money and the role of banks in our society. This blog at Positive Money is quite a good summary of the debate (although I take the other side to them):

The debate on money reform goes mainstream

Another debate in economics has been kicked off following the publishing of a book called Capital in the Twenty-First Century by French economist Thomas Picketty. Larry Elliot in the Guardian explains the hype here, and this book does seem to have single handedly put the issue of inequality back on the table. This could potentially be quite significant as it gives academic respectability to any politician wishing to do something about inequality.

Finally, a third significant event in economics was the publishing of a report by some students at Manchester University into the state of economics teaching at their university. A lot of it chimes with my experience of studying economics (although reading the report, I think my course was probably a lot better). The response from academics has been interesting, mostly denying there is a problem, or playing down the issue. Here’s a good blog suggesting an alternative approach and discusses the response from mainstream economists:

Post-crash economics clashes with ‘econ tribe’

 

Welfare Cap, Labour are crap

Quite a lot of links this week, and first up, Scottish Independence. Much of the debate so far has been over what currency an independent Scotland should use. In this post Neil Wilson argues that it’s the real resources of Scotland we should be talking about and that a new Scottish currency would be the best option:

Scottish Independence – a Modern Money analysis

A nice blog from Tim Harford next how governments could start to address inequality, using Finland as an example:

Four steps to fixing inequality

And here Jules Birch discusses the welfare cap which passed through Parliament this week with help from Labour:

Does the welfare cap fit? 

Speaking of Labour, here’s two blogs expressing despair at Labour’s general uselessness:

Labour have stolen my Right to Vote

Oh, Labour

A wonkish this one, but I’ve included it, because it’s well argued. If you’ve know any economics, you’ll probably be OK:

Krugman Uses ISLM to Proclaim Looming Fiscal Crisis, Denounces Those Who Don’t Use ISLM

And finally, I found this blog on self-employment by Flipchart Rick interesting. Lots of nice charts as well:

Is the rise in self-employment really a Good Thing?