The real story of Britain's lopsided labour market

This is the third of three pieces I’ve written on the real state of the economy across the country ahead of the Autumn Statement, and it focuses on the labour market. Do go see the video report itself on the Sky News website here.

If there’s been one good news story of the crisis, it has concerned the labour market. UK unemployment simply hasn’t risen to the kinds of peaks it hit in previous episodes of recession.

For the majority of the 1980s UK unemployment rates were in double digits; they were in double digits in the early 1990s recession. But this time around, the highest the unemployment rate got up to was 8.4% late last year.

And while this is at least partly due to a shift by workers from full-time to part time work, it isn’t as if people are working any less: in fact, the number of hours worked hasn’t fallen by anything like the kind of amounts it dropped in previous recessions.

But that overall unemployment rate of 7.8% doesn’t tell the entire story. Many in the UK remain trapped outside the labour market. There are many who simply can’t get a job; others who are stuck in a job they’d rather not do. Some are losing out in the chase for work to others. Whereas with the broader GDP figures it’s relatively easy to dissect the winners and losers along regional lines, the jobs market is far less simple.

Urban regions like London have perennially higher unemployment, not necessarily because of economic difficulty but because at any one moment there tend to be lots of people who have come to the city to look for work. As long as they are looking, they are classified as unemployed.

However, from an analysis of the labour market it’s clear that you are statistically more likely to be unemployed on the basis of three factors:

1. Your age. In short, the younger you are, the more likely you are to be out of work. Youth unemployment throughout the UK has fallen in recent months, but it still remains stubbornly above 20%.

We spoke to Renee Connor, a 17 year-old from Middlesbrough who has been looking for work since leaving school more than a year ago. She is terrified that if she doesn’t get a job soon, she, like many of her friends and family, will find herself permanently outside the labour market, reliant on benefits to keep her going.

2. Where you live. Having said that regional disparities are not the be-all and end-all, they still matter.

According to official statistics, the highest unemployment rate in Britain in the year to June was to be found in the Shetland Islands – 3.3%. Meanwhile, in Hartlepool, more than 16.4% are looking for work – more than double the national average. Wayne Butterfield of is one of them: he used to work in construction, but the sector has been hit by the sharpest contraction in decades. It hasn’t been a crisis thus far, as he’s had enough savings to pay his mortgage, but that won’t remain the case for many months longer.

3. Where you’re from. While the number of people working in the UK has remained flat between the start of 2008 and this summer, this has disguised a stark contrast in the fortunes of British and non-British workers.

During that period, roughly half a million British-born workers lost their jobs and half a million non-British born workers got jobs. The disparity is even more stark when it comes to unemployment – as opposed to employment – levels.

Since the start of 2008, for every one non British-born worker who has become unemployed, seven British workers have become jobless. Even when you take into account the fact that there are more British workers than non-British workers, the increase in UK-born unemployment is still around 20% greater than for non UK-born workers.

On top of these concerns, the apparently healthy labour market disguises a substantial increase in so-called underemployment – with those who would like to work longer hours or full-time rather than part-time unable to find the work they want. According to the Office for National Statistics, the number of people facing underemployment has risen by a million since the start of the crisis.

None of this is to underplay the positive news story from the employment numbers. They suggest that the economy has managed to weather the recession differently to in previous crises.

Rather than sparking mass unemployment, the slump instead provoked companies into cutting wages; and, this time around, employees took the hit. However, as John Maynard Keynes would repeatedly emphasise, maintaining high employment should be one of the key objectives of a Government. In this, at least, the distinctly un-Keynesian coalition Government has made the great economist’s grade.

This article was originally published on the Sky News website