Thursday, July 01, 2010

Jobs Bonanza

If only they'd thought of getting on their bikes

Listening to the Grun/BBC line, you'd conclude that the Office for Budget Responsibility's forecast of private sector jobs growth had absolutely no chance of coming about.

As you will know, the OBR is forecasting that private sector jobs will grow by 2m by 2015-16, more than compensating for their projected 700,000 fewer public sector jobs. Well, actually, you may not know that because a lot of the reports have been chronically apples and pears garbled. So just to be clear, here are the actual OBR numbers clipped direct from their report:

As we can see, the OBR expects total jobs to grow from 28.89m this year (end-year) to 30.23m in 2015-16 - an overall increase of 1.34m. Since General Government jobs are forecast to fall by 710,000, that implies a growth in private sector jobs of 2.05m.

(Well, strictly speaking, it doesn't necessarily imply that, because the OBR is forecasting General Government jobs, and General Government excludes some bits of the public sector. Exclusions comprise around half a million people working for public corporations - including our nationalised banks - and also a range of contractors like GPs who work for the public sector but for historic reasons are excluded from the formal count - see this blog.  But for present purposes, let's ignore these complexities and focus on the big picture.)

The question on everyone's lips is WTF are these 2m private sector jobs going to come from?

And the answer on Tyler's lips is the same as always - he hasn't a clue.

But as we've blogged many times, given the necessary incentives and freedom, our economy has an excellent record of creating private sector jobs (eg see this blog). And there is absolutely no reason to think it can't do so again over the next 5 years.

So let's put the OBR forecasts into their historic perspective. The following chart shows the growth in public and private sector employment since 1992, the year of Black Wednesday and the pit of the early 90s recession (actually we had to start there because the ONS stats don't go back any further). We've spliced on the OBR's forecasts for employment growth*:

Eyeballing the chart, we can immediately see that the OBR's forecast doesn't look at all unreasonable. Yes, private sector jobs growth does return to its upward trajectory, but it's no more than we saw during the nineties and noughties - right up to crash.

And those of us who recall the early-90s recession remember very clearly how the Grun's doomsters told us we'd entered the world of permanent mass unemployment, and how the evil Thatch had destroyed all the real jobs, and how we'd all have to atone for the excesses of the greed-fueled 80s.

It didn't work out like that. In the subsequent 15 years the private sector created a net 4m new jobs. And yes, a few of them were privatised public sector jobs, and yes, some reflected the final blow-out of Brown's bubble. But most were real-life jobs for real-life people, many in industries that didn't even exist 20 years ago (like internet marketing, currently providing employment to one of the junior Tylers).

The most important thing - indeed, the vital thing - Cam and George must do is to create the conditions for the private sector to create all these jobs. To recap, that means:
  1. Cut taxes - especially business and payroll taxes
  2. Slash red tape - including restrictions on working practices
  3. Cut welfare, abolish the minimum wage - alongside a programme of welfare cuts, we need to junk the minimum wage - low productivity workers in high unemployment towns like Dewsbury simply cannot find jobs at those rates (see this blog)
  4. Break up public sector monopolies - especially in the world's boom industries of healthcare and education - private sector providers would soon build expertise and sell it around the world
  5. Decentralise - including giving our old bombed out industrial cities charter status (eg see this blog) - remembering that the bulk of these new jobs will be required in precisely those areas
  6. Cap immigration - yes, we know we all benefit from some high skill migrants, and we must continue admitting them. But as we've blogged many times, net net Labour's open door policy hasn't made us richer, whereas from Slough to Lincolnshire, it has taken low-skill jobs from low-skill unemployed locals. If we want the new jobs to cut UK unemployment, we need a much tighter immigration cap (including all those foreign "students" who never return home).
Assuming that's what Cam is planning, and assuming he can push it through, and assuming he can resist the temptation to "create" non-jobs in the so-called "green economy", 2m real new jobs should be well on the cards.

And in 5 years time, the BBC will be running stories congratulating the government for presiding over a fantastic unheralded jobs bonanza.


*Footnote As explained above, the OBR's employment forecasts relate to General Government rather than the whole public sector. For the purposes of the chart, we have assumed the changes will be the same. Note that for the whole period shown we've also reassigned our nationalised banks back to the private sector, where we hope and expect they will soon return.

PS Here's a question for you - how many jobs did the UK economy lose during the Great Depression - the Depression the Grun/BBC/Blanchflower keep warning us we're tipping back into? Was it 1m, 2m, or 5m? Give up? Well, between 1929 and 1935 (ie pre-rearmament) the economy gained - yes, gained - a net 0.6m jobs. Not enough, given the high level of unemployment in the old industrial heartlands, but it was still jobs growth - despite the Great Depression. And those who were prepared to get on their bikes for the new boom towns like Slough and Coventry benefited from it (Data taken from The British Economy 1900-1970, shamefully liberated by Tyler when he left public sector employment many moons ago).

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