WE did expect a shake-out of public sector jobs as the government tries to address a structural deficit on public expenditure and that’s what we have seen.
The disappointing news is that the creation of private sector jobs which was anticipated is not happening to the degree we expected. The government had been relying on this to take up the slack.
This was the reason that the Bank of England decided last week to keep interest rates at historically low levels and to inject a bit more oil into the machinery through more quantitative easing to make sure growth in the economy, which is soft, does not become softer.
As a consequence, we might eventually see an uplift in employment as the machinery is oiled in the way the Bank of England has suggested.
We’re in a downturn, but this is cyclical and we will come out of it. We need to remind ourselves that politicians cannot cure unemployment. The idea that you should rely entirely on the private sector to create jobs is a flawed argument and to say that the public sector can simply spend its way out of unemployment is equally flawed.
The solution is going to come when confidence returns to those who make the employment decisions in the private sector.
Is there a way of jump starting the system? Can we put some charge into the UK economic battery? The short answer to that is yes we can, but that would have consequences for the long-term health of the UK economy. There’s a very real risk that we would buy short-term job creation, but set ourselves on a track that, dare I say it, could ultimately lead to a situation that the Greeks find themselves in, which is overspending and overpromising so that the citizenry gets used to a certain standard of living and employment, but it’s based on borrowed money.
That would be an extreme version of trying to spend our way out of difficulty. That’s not to say there isn’t a role for government intervention, it’s getting that balance right.
The position among 16-to-24-year-olds is a concern and there is a danger of a lost generation, and we need to work hard to ensure those who are in not work get opportunities to stay in education or training.
It’s also a worrying increase among women. The usual explanation for this is that women tend to be the second earners in households and therefore when there’s a shakeout it tends to be jobs that are traditionally done by women which get lost in the labour market. However, if you look at household composition, we live in an age where in many households the key earner is female and there are a lot of single parent households. So we need to be careful about the tried-and-tested explanation. It’s a worrying trend that’s worthy of further examination because there may be some policy interventions which could address this like short-term incentives for traditionally female-orientated jobs.
I worry that when the economy does pick up that women won’t benefit.
• Professor Nicholas Terry is acting principal of Abertay University and former head of its Dundee Business School.