Monday, August 22, 2011
ECONOMIC INACTIVITY - THE CURSE OF A LOST GENERATION
Earlier this week, the labour market data for Wales was released, showing that unemployment had increased by 10,000, leaving Wales with the highest jobless rate (8.4%) of the four “home nations” with 122,000 people out of work.
However, there is a deeper issue here that both the press and politicians seem to conveniently ignore every time the data is released, namely that of economic inactivity.
These are the group of individuals who are not in work, but who do not satisfy all the criteria for unemployment (wanting a job, seeking in the last four weeks and available to start in the next two).
It also includes students, those in retirement and those who are not actively seeking work.
Currently, there are 520,000 economically inactive people in Wales, which account for just of a quarter of all working age adults. To put that into perspective, it is equivalent to seven times the number of Welsh fans that were packed into the Millennium Stadium to watch the rugby match against England last week.
But we mustn’t just look at the headline figure in isolation, as a cursory glance at the latest data shows some interesting facts on those who are classed as economically inactive.
For example, 30 per cent are aged between 24 and 49 with 61 per cent being women. In addition, 23 per cent are students with a further 30 per cent are classed as long term sick, and 20 per cent are looking after family or the home. Therefore, the majority are not in a position to work or simply do not want to.
However, a quarter of those who are economically inactive class themselves as wanting a job, which is approximately 130,000 people, and at a time when employment opportunities are few and far between.
Now those of you who are politically inclined could pass comment on this. For example, some will blame the current UK Coalition government for doing little to grow the economy, whilst others will accuse Labour of doing little to address this problem whilst being in office for thirteen years.
Yet, if we look at the long-term trend of economic inactivity in Wales, it is an issue that has been a problem for a generation and is probably one of the key issues for the continuing underperformance of the economy.
For example, in May 1992, the number of economically inactive in Wales was 500,000. Fast forward to May 2011, and the number of economically inactive in Wales was 483,000. However, the numbers employed in Wales during the same period has increased from 1.16 million to 1.29 million, an increase of 139,000.
Simply put, there has been a failure during the last two decades to address the high economic inactivity rates across the country when job opportunities were increasing as a result of a growing economy.
So who has filled these jobs? It would seem that a significant proportion have been filled by workers from outside the UK, a fact gleefully seized upon by some newspapers as one of the reason for youth unemployment and a spark for the riots across the cities of Britain.
Yet, if you speak to many business owners, they admit that they are more than happy to employ well-educated, hard working and polite individuals from overseas who value their jobs.
Given the alternative, many employers are left with little option but to employ non-UK staff because they simply cannot get the same standard of skilled and motivated local people to take up these jobs. Given this, it is surprising that the level of economic inactivity in Wales has stayed roughly the same for two decades?
During the last 20 years, successive governments have, through a combination of apathy and bad policy-making, created an underclass of individuals who will not get on the job ladder within their adult lives, with all the serious social and economic implications for this country that are already becoming evident in the events of the last few weeks.
If the economy is to grow, then the Welsh Government, in partnership with the current Coalition Government, will need to change the policies of the last two decades, take the bull by the horns and finally start to address the issue of long-term economic inactivity within the economy.
As the Welsh economy hopefully begins to recover from the recession, politicians must prioritise the reduction of the unacceptably high numbers of economically inactive people in this country's potential workforce.
Most importantly, there must be radical changes to upskill and motivate the thousands of young people who leave school with little prospects and to assist them onto the first rungs of the employment ladder. If we do not, then this ‘lost generation’ of workers will continue to haunt the statistics for years to come.