UK Job Seekers in for a Cold Winter

By James Le Grice

It’s the news nobody wants to hear: finding a job is about to get a lot harder. The grim prediction comes from the Chartered Institute of Personnel and Development (CIPD), whose quarterly poll of 1,000 private, public, and voluntary organisations found that employers intend to scale back hiring.

The CIPD’s net employment index, the share of employers planning to increase staff minus the share intending to cut back, for the next three months stands at –3, down from –1 last quarter. And it won’t be hitting positive numbers any time soon; the 12-month index is a depressing –2.

This bleak outlook is set against a bleak backdrop. There are over two and half million people unemployed in the UK, an 8.1% unemployment rate. This is the worst unemployment has been since 1994. The Office of National Statistics (ONS) and the Bank of England will release new data on Wednesday that should see unemployment rise to 8.2%, growth predictions for 2012 halved, and the number of jobless 16-24 year olds reach one million, a number just slightly higher than the combined populations of Manchester and Liverpool.

So whom or what is to blame?

Critics of the Government’s deficit reduction plan will find new ammunition in the CIPD’s report, as it adds to the evidence that the private sector is unable to counterbalance the redundancies from public sector cuts. The public sector shed 111,000 jobs last quarter, whilst the private sector only added 41,000, and the CIPD predicts that 610,000 public sector jobs will be lost by 2016. Private sector weakness presents a serious hiccup in George Osbourne’s strategy.

But there’s the hiccups and there’s asphyxiation. Britain has an unemployment problem, whereas Greece, Italy, Spain, and Portugal have an unemployment crisis. And on the southern shores of the Mediterranean, Tunisia, Libya, and Egypt face an unemployment apocalypse.

Regardless of the deficit reduction plan’s contribution to unemployment, it has been more than vindicated by the current troubles in the Mediterranean, where oversized public sectors, unsustainable welfare states, and reckless Government spending have proven to be the virus causing the illness, and austerity is the proscribed remedy. Additionally, it has been vindicated by the economic woes in the United States, where inaction and partisan wrangling on spending cuts resulted in the world’s superpower being relegated out of the premier league of credit ratings.

A more scathing critique of the Government’s role in unemployment comes from the business community, in particular the CBI. The oft repeated argument praises the Government for its leadership on deficit reduction, but slams it for its lack of a coherent and consistent growth strategy to tackle the obstacles hindering private sector growth, such as red tape, burdensome regulations, infrastructure inefficiencies, and a complicated taxation and planning system.

However, this is a globalised economy, and the causes of British unemployment are not necessarily all British.  The CIPD labels the Eurozone crisis and other global economic upsets as major causes of companies’ plans to scale back on hiring. It is an economic form of the butterfly effect, though instead of causing a hurricane, the butterfly flapping its wings in Athens causes a lengthy queue at the Job Centre Plus in Scunthorpe.

Though the chief reason why it will be harder for the unemployed to get a job was identified 78 years ago when Franklin D. Roosevelt declared, “the only thing we have to fear, is fear itself”. Many companies are sitting on healthy balance sheets at the moment, and have the money to spend on new staff, but are afraid that they will not get a good return on their investment.

According to Gerwyn Davies, public policy advisor at the CIPD, “Many firms appear to be locked in ‘wait and see’ mode, with some companies scaling back on all employment decisions against a backdrop of increasing uncertainty”. Probability and empiricism support their views; investing profits on expansion right now means taking a risk.

Yet risk taking, intuitive thinking, and belief in big often unproven ideas, are the bedrock upon which invention, enterprise, and capitalism itself stand. It is a simple point, but one that’s been forgotten over the years. Employment levels will only improve when the fire of risk taking and confidence in the face of unfavourable odds is rekindled.


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