Jobs, jobs, and more jobs. That is Britain’s economic success story of the last 10 years.
While public services crumble and the welfare budget continues to be squeezed, when planning for a no-deal Brexit has displaced almost all other activities in Whitehall, ministers can always point to the UK economy as a well-oiled jobs machine.
More than 3m jobs have been created in the last 10 years. As David Cameron points out in the recent BBC film documenting his time as prime minister, he was negotiating in 2015 with his EU counterparts for concessions on benefit and migration rules while the UK was a magnet for skilled labour and European members looked out over a jobs desert. As he tells the interviewer, by 2015 Britain had created more jobs since the financial crash than the rest of the EU put together.
According to the Treasury, the labour market has only improved since then. And especially over the last year when wages growth has climbed above 3% and annual inflation falling, improving the purchasing power of the average household.
In July, inflation stood at 2.1% and year-on-year weekly earnings growth increased to 4% to generate the fastest increases in real incomes for 10 years. Last week, official figures showed that inflation fell to 1.7% in August indicating that real incomes are set to rise further when wages figures for that month are reported.
This bountiful situation forms the economic bedrock on which Brexiters base their case for quitting the EU without a deal.
The labour market tells them that employers, despite professing in public statements that they fear leaving the EU, are feeling confident enough to stuff their workers’ wage packets. More than that, Britain’s entrepreneurial spirit lives on.
A look under the bonnet presents a different picture. The trend of the last two years to 18 months, far from being a return to the buccaneering age of British innovation (for which you probably have to go back to the 1830s), is a return to public sector spending as the main driver of growth.
Private sector pay growth has improved in the last couple of years. However, the jump to 4% can be found in the loosening of pay restraint in the public sector. It’s not by much, as any teacher or nurse will report, but it is enough to lessen the public sector’s drag on the average figure for wages growth.
There is also the trend for workers to join the ranks of the self-employed or the part-time workforce. In July, analysis of the labour market by the Office for National Statistics found there were 4.9 million self-employed people in some kind of work, up by 125,000 from a year earlier. This category of flexible worker now makes up 15% of the workforce.
Full-time work has also risen, though as a proportion of jobs growth it has lessened as self-employment has returned.
Then we need to look at who has grabbed the bulk of the full-time roles created in recent years. Without a doubt the bulk have been taken by older people. They are men aged between 55 and 70 and women in their early sixties who have been forced to carry on working after former chancellor George Osborne increased their state retirement age to 66 at an accelerated rate.
Of the 3.4m jobs created over the last 10 years, says the Institute for Employment Studies, 2.5m have been professional or senior jobs, 500,000 are classified as low skilled and just 400,000 sit in the middle as skilled and semi-skilled workers.
Young people simply cannot jump into professional and senior roles. They are hoovered up by older workers who, it stands to reason, fit the bill.
Going back to the issue of pay, the recent increases reflect rises that were agreed earlier this year. In other words, they lag other statistics that are more contemporaneous. Whether anyone is going to get a pay rise this year or next is anyone’s guess, but with inflation falling and the Brexit noose tightening, the odds must be against.
Then there is the dramatic rise in Britain’s working population over the last 10 years, which means the economic cake has many more mouths to feed. Official figures show that the inflation-adjusted incomes of the average worker took seven years to recover to 2008 levels.
Yet one study after another has shown that the ONS calculation of real terms increases in incomes per head is flawed. One of the main reasons is that the ONS fails to include the effects of austerity on average incomes, and tax increases in particular.
Last week, the New Economics Foundation calculated that the average worker was still £128 a year worse off than in 2008 once VAT rises in 2010 and 2011 were taken into account, among other costs that hit real terms earnings.
This report is echoed by previous analysis from the Institute for Fiscal Studies thinktank, which also disputes the official measure used to calculate inflation adjusted wages. It said annual wages were £760 lower last year than they were a decade ago.
Britain’s productivity, as measured by a worker’s output per hour, is another tick in the box for negative trends. It fell in the last quarter of 2018 and the first quarter of 2019, albeit not by much: 0.1% and 0.2%, respectively. But these small percentage falls are devastating when added to the dire performance over 10 years, the persistent increases notched up by our major competitors, and that the biggest element dragging down the 2018 and 2019 average was a drop in manufacturing productivity.
Then you look at where jobs are being created and it is no surprise to find most are in London and the south-east, which voted against Brexit. Ironically both areas have the most to gain from a Brexit that depresses the pound, as international firms use them as a relatively cheap base from which to sell professional services – created and marketed by an increasingly international workforce – to the rest of the world. That’s probably not the post-Brexit land that Leave voters wanted, but it’s the one they are going to get.