by Peter Franklin
Friday, 28
January 2022
Chart
14:00

The UK economy’s superpower: creating jobs

Unlike the rest of Europe and America, labour participation keeps going up
by Peter Franklin

There are many ways to measure the success of an economy, but if you had to pick just one indicator, especially for making comparisons between countries, there’s a strong case for the labour force participation rate among “prime age” males (i.e. those aged between 25 and 54).

Female workers are also important, but participation rates among women differ between countries for cultural reasons as well as economic ones. Older workers also matter, but retirement ages vary from nation to nation, again making comparisons difficult.

So, for these reasons and others, it makes sense to focus comparisons on prime age men. A chart tweeted out by the economist Robin Brooks, shows how the labour force participation rate has changed since 1995 for eight different countries. 

The overall story is one of decline. In most countries, participation rates were higher twenty years ago than they are now. Brooks points out that American men have done particularly badly. Only Italy has done worse (and that’s an economy that’s been stagnant since it joined the single currency). 

Greece, Spain and Portugal do better — which may come as a surprise given how hard they were hit by the Eurozone Crisis. However, these are figures for the 25-to-54 age group and so don’t include the high levels of youth unemployment suffered in these countries.

There’s one country that stands out from the others: the United Kingdom. In our case, the labour force participation rate has increased over the last two decades. From having one of the lowest rates 20 years ago, we now have the highest of the countries shown. 

Whether in the “jobs-led recovery” of the Cameron and Osborne years or Rishi Sunak’s furlough scheme during the Covid crisis, British governments have emphasised job creation and preservation.

But is this the right priority? Does it really matter if the Labour Force Participation Rate is, say 92%, as opposed to 87%? Well, it matters to people. In the UK, each 1% increase or decrease amounts to more than 100,000 men of prime working age either in or out of a job.

Factor in their families too, and it’s clear that these are numbers that make a difference to the well-being — and political stability — of a nation. 

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D M
D M
3 months ago

Jobs give people self respect which is a major reason why Britain is so united despite its diversity of cultures and our traditions of fair play and civil society are largely still intact. I’m happy to be British

Hersch Schneider
Hersch Schneider
3 months ago
Reply to  D M

Happy to be British?? What a racist, fascist thing to say!

D M
D M
3 months ago

Oh dear perhaps I should clean out my mouth. I’ve been happy but not proud of course !

SULPICIA LEPIDINA
SULPICIA LEPIDINA
3 months ago
Reply to  D M

Despite his name he’s only joking!

D M
D M
3 months ago

So was I of course – but good point !

Matt M
Matt M
3 months ago
Reply to  D M

For some reason the upvote won’t work. So I’ll just say, great comment! Lovely to hear. I’m happy to be British too.

Ian Stewart
Ian Stewart
3 months ago
Reply to  Matt M

Especially after the Brexit referendum. I had no confidence that the British electorate had the gumption, or the bravery midst the slings and shots of the establishment, to vote for it, and they did. I’m so impressed that our people did that – and for all the right reasons too, since the xenophobic, little Englander, empire nostalgist insults were just trash talk smears.

R Wright
R Wright
3 months ago

To be devil’s advocate, millions have been forcefully integrated into the economy with humdrum low paid menial jobs with minimal job security work which skews our figures. Real wages are far lower than they used to be before 08

Galeti Tavas
Galeti Tavas
3 months ago
Reply to  R Wright

USA stock market bubble has also been as much bigger than European, as jobs participation has been smaller, and I would guess the Bit coin and others may have been much more taken up in USA.

A fair number of Right-wing people believe this is to explain it: That the youth on their phones, with the massive Unemployment they got – and the PPP money, and the Stimulus, and the reduced spending – – all, coupled with ‘Robin Hood’, the phone stock buying app, meant they bought meme stocks and Crypto – and a substantial number acquired great ‘paper’ wealth – so gave up they low paid job.

They also believe when the Market Bubble pops, and Crypto corrects another 50% – they will go back to waiting tables and working at Costco.

Galeti Tavas
Galeti Tavas
3 months ago
Reply to  Galeti Tavas

P.S. this is very much a popular meme too – Crypto Coin with the McDonald’s M imposed over it – saying as Bitcoin collapses the youth with the paper crypto wealth will have to get a job at McDonalds –

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Linda Hutchinson
Linda Hutchinson
3 months ago

Whilst in most cases it is much better to be working than not, and not just because of earnings but also self-respect, there is nothing here about the quality of the jobs – are they part-time, zero-hours, burger flipping for minmimum wages etc. Also, is this because of the UK well attested practice of employing lots of cheap labour rather than investing in capital equipment and new technologies, hence our low productivity. So, it might look good, and even could be good for many individuals it’s not necessarily a measure of how well the country is doing economically.

D M
D M
3 months ago

Actually the supply of cheap labour is falling since we left the EU, much to the chagrin of global corporations because they are having to increase wages.

Ian Stewart
Ian Stewart
3 months ago

Any job provides the means for self-respect and opportunity. Tell the 25% plus Spanish youth long term unemployed that low skilled jobs aren’t valuable.

Ferrusian Gambit
Ferrusian Gambit
3 months ago

This seems like it could be an article that is going to be held hostage to fortune.

Andrea Re
Andrea Re
3 months ago

I wasn’t clear what the “job participation rate” was, so I followed the link. This is the definition:

“What Is the Labor Force Participation Rate?
The labor force participation rate is an estimate of an economy’s active workforce. The formula is the number of people ages 16 and older who are employed or actively seeking employment, divided by the total non-institutionalized, civilian working-age population.”

I’m still not clear who is not included. I supposed the chronically ill and those in jail, but apart from that? If you are on the dole you are supposed to be looking for work, so they don’t count. Who is left over? I suppose that Italy has a low rate because a lot of work is done under the radar. Maybe this is what this number measures, the “black market”.

D M
D M
3 months ago
Reply to  Andrea Re

Possibly same for US with uncounted immigrant labour ?

David Harris
David Harris
3 months ago
Reply to  Andrea Re

And does it include the millions of self-employed in the UK?

AC Harper
AC Harper
3 months ago

Using just one statistic risks misleading people… but if the UK’s emphasis on service jobs, rather than production, is true then selling other people ‘stuff’ is more stable than making ‘stuff’.
The phrase “a nation of shopkeepers”, commonly attributed to Napoleon, is a reference to England or the United Kingdom. Perhaps it has always been true?

Keith Jefferson
Keith Jefferson
3 months ago

I suspect that the definition of the ‘labour force participation rate’ renders this metric useless as a measure of the performance of the UK economy, because it does not distinguish between part time and full-time employment. In the UK, there are huge numbers of people on zero hours contracts or are otherwise working part time (often at minimum wage), with their income topped up with Government benefits (Universal Credit, in the UK). This can be beneficial to employers (an on-demand workforce on zero-hours contracts, and no need to pay employer NI contributions if the employee works less than a certain number of hours per week) and also sometimes beneficial to employees (Universal Credit will top up their income if their working hours fall short). The situation has become so ingrained that I often hear conversations about people juggling their working hours so that they work a sufficient number of hours to claim some in-work benefits but not enough to force their employer to take them on full time. It’s like some kind of weird game, where both the employer and the employee are taking the tax payer for a ride (though my criticism is mainly reserved for the employer – the employee is playing the game just to get by). It’s also a way for the Government to massage the employment statistics – the UK may not have a big problem with unemployment, but there is a problem with under-employment. This problem mainly affects the lowest levels of the employment market, where many are working at minimum wage. In effect, the taxpayer is subsidising the wage bill of employers via the benefits system. 

Matt M
Matt M
3 months ago

I thought the whole point of Universal Credit was to fix the problem you describe by making it always more profitable to work extra hours. The old system it replaced did indeed have lots of cliff-edges where people had to reduce their hours to keep their benefits.

Galeti Tavas
Galeti Tavas
3 months ago
Reply to  Matt M

The whole point of universal credit is to destroy the economy, so all become poor (it is totally un-affordable) and so have to get money from the Government as a private economy is in tatters, and so become ‘Clients’ of the state – and so become Serfs, bound to obey the state.

It is Communism-Lite. A kinder and gentler universal poverty – but as authoritarian, but without as many Gulags.

Last edited 3 months ago by Galeti Tavas
Keith Jefferson
Keith Jefferson
3 months ago
Reply to  Matt M

Yes, the Universal Credit system was designed to fix the problem and yes, it is beneficial to the employee to work more hours. The problem is it is not beneficial to the employer to offer those extra hours. 19 seems to be the magic number of hours – the employer doesn’t have to pay NI contributions if the employee earns less than £170 per week, or 19 hours at minimum wage. Any hours above that and the employer has to pay 13.8% of that salary as NI. So employing two part time employees to do a full time job reduces the NI bill to zero for the employer.
Many people I know have two or more jobs to get an equivalent full time income – maybe working as a dinner lady (sorry, working at the school canteen whatever gender) during the day and then working behind a bar during the evening, and maybe taking on a cleaning job as well. I really admire those people. There is a whole gig economy going on that is not just limited to Deliveroo and Uber drivers. But any one ‘gig’ will not offer you more than a certain number of hours, thanks to the taxation and benefits system. It’s almost as if the people that drew up the system could not imagine an employment scenario that is outside of the normal civil service 9 to 5 routine.
Many conservatives might think that this sort of gig economy will turn people into entrepreneurs. Many in the commentariat might think that this is the situation that they themselves have been working under for a long time – writing or presenting pieces for multiple outlets whilst being self employed. But this is not a realistic option for people at the bottom of the economic ladder scraping by on minimum wage.
I think that resentment of these employment practices, coupled with inflation and inevitable tax increases (Cop 26 and paying for the pandemic) could lead to the next upset in British politics.
And going back to the original article, the figures presented for the UK should not be taken as an indication of an economic miracle in the UK.
(p.s. – apologies; after having read this back, it is a bit of a rant. Not aimed at you, and I have upticked your comment. Cathartic, though)

Matt M
Matt M
3 months ago

Absolutely no need to apologise Keith. Interesting stuff. UC pulling in one direction and employers NI the other. Sounds like a typical Whitehall b***s up.

D M
D M
3 months ago

Paying no benefits would be cruel obviously . Heavily means tested benefits are also cruel because they discourage people from seeking life affirming work and make them uncomfortably dependent on the state.The principle of universal credit is sound where the lighter means testing allows people on benefits to keep a reasonable part of their income if they work – now a third I think but nicer to be a half if affordable. The debate is really about absolute numbers for rates and thresholds -which must dependent on affordability and can be better if larger numbers of people are employed

Jon Game
Jon Game
3 months ago

So why are we about to slam the brakes on by taxing jobs?

David Harris
David Harris
3 months ago
Reply to  Jon Game

Ask Rishi…

Ian Stewart
Ian Stewart
3 months ago

Jeez I thought 60 was the new 40 and now I’m depressed that I’m not in the vast age range called ‘prime’.

David Harris
David Harris
3 months ago
Reply to  Ian Stewart

Sub Prime?

Ian Stewart
Ian Stewart
3 months ago
Reply to  David Harris

Nah, post Prime unfortunately.