Another lost generation

There have been two recent announcements regarding the state of the economy that put into the question the idea that the economy is on the road to recovery. The first is yesterday’s surprise announcement that GDP fell by 0.5% in the last quarter of last year. The second is the publication of labour market statistics that show unemployment continuing to rise.  These announcements would lend credence to the view that the UK risks entering another recession (remember a recession is merely two quarters of negative growth – so we are halfway there already). We are now in the situation of rising inflation, rising unemployment and no growth.

There are now almost 24,000 people under the age of 25 in Wales who claim Job Seekers Allowance (almost a third of all people between 16 and 25) , 1,500 of whom have been claiming job seekers allowance for over a year. Youth unemployment for a lengthy period of time has a extremely negative impact on health and future prosperity. Nationally almost a fifth of people in that age group are unemployed.

Sometimes statistics do not tell the whole story though. For those now entering another year of unemployment, it wouldn’t have mattered if GDP was 0.5% up – they would still have been socially excluded and disadvantaged. Particularly as the recovery may indeed be jobless one. Indeed sometimes commentators behave as if the problems in our economy will just go away if we can get growth restored  – at times recent political debate has simply appeared to be about the best way to restore the economy to what it was prior to 2007. The problem with this is that the social problems of long term unemployment, social exclusion and poverty were around prior to 2007. They may have got worse during the recession, but simply reverting back to business as usual will not tackle the issue of youth unemployment.

There is still the mentality amongst some that long term unemployment is merely an issue of welfare dependency, with the implied solution that welfare reform with time limited benefits will solve the issue. Historically schemes such as the new deal have merely involved forcing unemployed people onto schemes and subsidised work placements. The success of such efforts is limited, usually involving people obtaining a short term contract (to make the statistics look better) before returning to unemployment and waiting another 6 months for the next set of pointless courses and schemes.

If we do not want another lost generation, then rather than tinkering with schemes that don’t work, or penalising people for the situation they find themselves in with draconian welfare reform, then the state needs to become more pro-active. After all, in the financial industry the bank of England acts as the lender of last resort. Instead of sacking hundreds of thousands of workers, the state would be better off performing the same function in the labour market – acting as the employer of last resort. Furthermore, it should employ those people who have been unemployed for a long time, invest in their futures by training them on the job, pay them a wage which significantly increases their living standards to what benefits would give them, and ensure that the length of employment is sufficiently long to be a worthwhile addition to a CV.