Wales’ economic miracle?

Victoria Winckler wonders whether Wales has experienced an economic miracle or if it is just a mirage.

Last November something unprecedented happened.

Tucked away in the Welsh Government’s statistics pages  is evidence of an economic miracle. In amongst the stats, it is clear that last November Wales’ employment rate and economic activity rate matched the UK’s rate, at 75.8 per cent and 21.0 per cent respectively. Wales’ unemployment rate was very slightly below the UK figure.

This is an extraordinary shift. For decades,  Wales has endured high levels of worklessness and low levels of employment. Indeed, economic  inactivity and unemployment were widely thought to explain about half of Wales’ GDP problem.  As a result the early EU programmes, and indeed Welsh Government more generally, focused strongly on ‘helping people into work’ as the solution.

But before the champagne corks pop, there are three issues.

The first is that it is by no means clear that this change is down to the UK or Welsh Government.

At least some of the success is down to ageing.  All those people who are moved from unemployment onto long-term Incapacity Benefit during the late 1980s and early 1990s are now reaching retirement age and no longer count in the inactivity statistics.  It has been amongst 50-64 year olds that economic inactivity has plummeted – down from 40.8 per cent in 2005 to 29.8 per cent today.

While politicians may claim some success, it is by no means all down to them.

The second issue is Wales is still considerably poorer than the UK average in terms of wages and GVA.

Even though Wales now matches UK headline labour market figures, it is still well below the UK average on GVA per head and median earnings.  Low levels of participation in work are no longer even a partial explanation of Wales’ ills – the causes now lie elsewhere.

The most likely culprit is low productivity, a problem that bedevils the UK in general but especially Wales.  Public policy needs to stop banging on about employability and look at boosting productivity instead.

The third issue is that ‘helping people into work’ has done nothing to ‘tackle poverty’.

Remember how the various Welsh Government action plans were all about getting workless families to draw their curtains and get a job?  Well it may have helped individual households – the risk of poverty for working households is much lower than for non-working households – but it has not reduced the numbers of people in poverty. In fact, the numbers of people in poverty in Wales are rising, with all the increase down to working families.

What should we make of it?

On the one hand, we should be very, very pleased about last November’s labour market figures.  They are an objective measure of improvement in the Welsh economy and in many people’s lives, and something many thought would never occur.

But on the other hand, Welsh Ministers, local authorities and all those engaged in economic development should give pause for thought about Wales’ economic future.  No longer are mass employability programmes a solution to poverty nor economic well-being, although they have a role for specific groups of people. Instead, the question of education, skills, progression at work and accessibility look to be key.

Victoria Winckler is Director of the Bevan Foundation. If you like this article, please consider giving just £3.25 a month to help us carry on speaking out. Do it here.