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How falling incomes and citizen desperation are driving the numbers, not economic growth or confidence

At times, I’m no longer sure it’s worth deconstructing the Employment and earnings statistics for the UK, so blanket and blatant is the optimistic trumpetings of them among the well-heeled classes and their media. But as (a) it would sound like sour grapes if I didn’t and (b) the Opposition sure as sh*t doesn’t have the remotest idea how to do it, oh alright then if you insist, I will.

1. Yesterday, the ‘new’ ONS Employment Statistics emerged.  But we were not looking at now; we were looking at two months ago, as these data relate to Sept-Nov 2013. Given what we know about privatised job finding schemes and the methods they use (being bonused by volume) all these statistics stand accused in 2014 of overstatement of the positive. The ONS is, as always, impeccably incorruptible. But it can only work with the raw data it receives.

2. Between September to November 2012 and September to November 2013, total pay and regular pay for employees in Great Britain rose by 0.9%. Between November 2012 and November 2013, the Consumer Prices Index (CPI) increased by 2.1%. Prices therefore increased at 2.33 times the rate of earnings.

ons_payvpricesThe ONS chart above shows this clearly. Although the gap between wages and prices varies, prices are consistently running ahead over the last five years – and long before that actually. The gap in favour of price inflation and wage growth remains very similar to that level the Conservatives inherited in May 2010. (I hope to return to this chart in a later post, as some other elements of it are, I think, significant).

3.There has been criticism of CPI as being a less effective measure of price rises than the Retail Prices Index, accusing it of being easier to manipulate and less broad based (for example excluding housing). Which probably explains why in 2010, the incoming Conservative chancellor George Osborne announced that CPI was to be more widely adopted, including for setting benefits and pensions. The ‘basket’ of items used for CPI has ensured (see graph below) that CPI understates spending power by a factor that has grown from zero in the mid 1990s to 14% in 2010.

cpivrpi88-10finalThe Treasury/ONS monitoring of the difference is in turn shown clearly above. By 2010, the CPI ‘calculation’ of falling spending power is shown to be 30/210 to the optimistic bias. That equates to around 14%, and the general trend since then has continued. The likelihood is thus that real prices rose 2.75 times faster than wages during the latest period.

This isn’t new news: the great majority of economists now accept that ‘mass middle’ class and young people’s working salaries have been squeezed in the UK by around  205-30% over the last decade. This is starkly illustrated by the way in which their relative poverty has caught up with even that of pensioners:

youthvpensionerfinalIn June last year, the Financial Times reported that ‘squeezed middle’ incomes fell 3% in 2012 alone. The FT added that ‘By 2011-12, a large majority of poor children lived in a family with at least one parent in work – a sharp contrast with earlier periods’. Given what we see above, this is hardly surprising.

While these first three points may sound like throat-clearing excuses, they’re nothing of the kind: if election results were cynically doctored in the way our economic stats are, the perpetrators would go to jail. As the world from US Labor stats via Elstat to UK Budget reports amply demonstrates, sleight of hand reigns supreme. Politicians do not like a level playing field: they prefer to play down the slope, with no change-round at half-time.

Anyway, time now to turn to an interrogation of the ’employment’ being created.

4. A striking difference this time around (which neither government nor press have mentioned) is that, in percentage terms, far more ’employment’ is being created by workers themselves than by employers: the number of employees increased by 160,000, and the number of self-employed people increased by 147,000. But in terms of the relative totals in each sector (25.5m and 4.36m respectively) the employee uplift is only 0.75%, whereas the self-employed boost is over four times higher at 3.3%.

Yesmen and naysayers will put their own spin on this. My commonsense view dictates that this is people (unable to find contracted work) turning instead to doing things on a freelance basis. But at base, these numbers do not reflect mainstream business employers bursting with confidence: full-time employment and salaried employment are two entirely different things. Crucially, this labour stats ONS report doesn’t go into detail on what sectors of ’employee’ employment are ‘up’. We’ll be able to speculate more about that picture when the next economic data come in. In short, as usual, the numbers fail to convince me that this is a recovery in full swing: rather, it is employees adapting to the situation – a conclusion wholly supported by the continuing decline in real wages.

5. It does no harm to take a longer-term look at what has changed since the ‘Thatcher Revolution’ at this point. It is forty years now since the end of Wilson’s White Heat that led to a brief Callaghan interregnum prior to the Blessed Margaret. The simple picture looks like this:

employ73-13No doubt Dan Hannan will be popping up somewhere soon to point out to those he lumps together as ‘Lefties’ that Conservatism is now on the way to achieving the 73.1% employment level ‘record’ of recent times that Labour achieved in 1973: and with a Sept/Nov figure of 72.1%, that sounds credible if you’re half asleep.

But since that time, everything has changed. First, we are infinitely more vulnerable as a country to others learning our skills: we make far less, grow fair less, and advise far more:

indstructchangefinalSecondly – and equally important – we have gone from being a bloated public sector biased salaried employer as an economic unit in 1973 to today’s situation of a far bigger private sector offering far less job security. The huge growth in self-employed in these latest figures was last seen in Spring 2012, when a rise of 84,000 over the previous three months became the highest figure since records began in 1992. This latest one is 80% higher even than that, but the same thing applies even more now as it did then: economists said that the surge in self-employment had come about ‘because people have been unable to find permanent work with companies due to the flatlining economy’. The only difference since then is the Tsunami of Conservative and rightwing press spin being piled onto the numbers.

At the time, Gerwyn Davies, labour market policy adviser at employment group the Chartered Institute of Personnel and Development (CIPD), said: “A rise in self-employment may, in itself, be a good thing, however previous analysis from the CIPD found that the recent rise was less a sign of a resurgent enterprise culture, and more evidence of a growing army of part-time ‘odd jobbers’ desperate to avoid unemployment.”

I’d love to join the throng putting out more flags about these latest stats from the ONS – and if there were signs in Britain’s export markets and manufacturing levels that more flags were justified, I’d be sticking one out of every window. But there are none whatsoever.

You have to hand it to the Shapps-Osborne-Telegraph-Camerlot spin machine: it is, without doubt, playing a blinder. But it is blinding us to the truth.

Last night at The Slog: the growing neuroscientific evidence of the splintered self