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Where is the Work?

Published by Colin Wiles on Monday, December 17th, 2012 at 08:10 am

The principal objective of the government’s welfare reforms is “to make work pay”. A laudable aim, but one that raises a question that has rarely been asked: where is the work?

The current unemployment rate in the UK is 8.5% or 2.5 million. But according to the ONS, around 3 million  workers are under-employed  -  that’s 3 million people who want to work longer hours but their employers simply do not have enough work to go around.

The latest impact assessment from the DWP claims that 300,000 people in England will be encouraged back into work as a result of Universal Credit. Assuming a similar proportion of claimants returning to work in Scotland and Wales we can guess that around 350,000 people will be re-entering the workplace if the governement has its way - that represents more than half the total number of Eastern European workers in the UK.

The simple laws of supply and demand suggest that several things will happen as a result of this change. Firstly, there will be more workers chasing the same amount of work, making it even more difficult to land a stable and secure job. For those in work, there will be even fewer hours available, so the level of under-employment will rise. Finally, this "surplus army" of unemployed and underemployed labour will suppress wage rises even further. That means frozen wages and salaries, more unpaid interns and, as rents, goods and services increase in price, more people forced to claim benefits. It’s a vicious circle.

It seems to me that pushing the unemployed back into the labour market at a time of austerity, and with no prospect of economic growth in the near to medium term, could have consequences that have not been fully thought through. We know already that most of the increase in the housing benefit bill is down to working tenants. The impact of universal credit could have the same paradoxical impact – an increase in the benefit bill and an even greater burden on taxpayers. Watch this space.

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