Friday, 18 March 2011

Unemployment rises and it's only going to get worse

Earlier this week unemployment hit 2.53 million, 8% - its highest level since 1994.

For young people the picture is far worse: 974,000 16-24 year olds are out of work - this 8 year age range makes up nearly two-fifths of all the unemployed. For 16-17 year olds the picture is increasingly grim: 37.7% are unemployed.

To be clear being under 25 and unemployed is particularly nasty. The young unemployed only get £51.85 per week on Jobseeker's Allowance (less than £2,700 per year), and under-25s (soon to be upped to under-35s) only get housing benefit at the shared room rate.

The government's response to this has been to put blind faith in a private sector recovery - a truly laissez-faire attitude to highest unemployment in a generation. Osborne believes the deficit, not unemployment, is the problem. Actually he's wrong, and economically illiterate - reducing unemployment would not only help reduce the deficit - it's the only effective way to do so.

As everyone from the Labour leadership to the CBI has pointed out, Osborne has no strategy for jobs.

Paul Krugman writing in the New York Times notes the same thing in the US: "no job-creation plans have been advanced by the White House and all the policy focus seems to be on spending cuts".

In another parallel, Krugman reports that "There are almost five times as many unemployed workers as there are job openings. Here there are under 500,000 vacancies and over 2.53 million unemployed, plus a further 1.7 million involuntarily working in temporary or part-time jobs (i.e. looking for more work).

Back to the UK and there's a final piece of the puzzle to be fitted in. At a time when unemployment is high and rising, the government is sacking 9,300 staff in Jobcentre Plus and forcing through a draconian Welfare Reform Bill.

Every indication is that Osborne will use the 2011 Budget to give more tax breaks and incentives to business to hire - but all the evidence shows they will pocket them as higher profit margins.

That's why we need an interventionist budget that levies a windfall tax on the profiteers and invests in jobs.

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