The Cooking the Books column from the August 2015 issue of the Socialist Standard
The government blames the unemployed for being ‘a burden on the taxpayer’, denouncing those of working age without a job as scroungers and devising all sorts of schemes to try to drive them off state benefits and on to the labour market. They do this well knowing that there will always be a pool of unemployed and so that not everyone can get a job, however hard they try and however harsh the sanctions. Their calculation is that bashing the unemployed is a vote-catcher.
Not only do they know that there will always be a pool of unemployed but they also want there to be. They don’t want ‘full employment’ as this would exert an upward pressure on wages, cutting into profits. But the truth sometimes slips out, as in an article in the Times (10 June) by its Economics Editor, Philip Aldrick. He referred to an ‘equilibrium unemployment rate’, defined as ‘the level at which wage inflation pressures build up.’
This used to be called ‘the natural rate of unemployment’ but conceding that unemployment was natural to capitalism was considered too much of a concession to its critics and it is now called in economics textbooks the ‘non-accelerating inflation rate of unemployment’ (NAIRU). It’s a bit of a dubious concept (it’s trying to calculate when a boom begins to get out of hand, but even if this could be done it wouldn’t make any difference as nobody could do anything about it). But that’s not the point. The point is that government policy-makers believe it.
Economists differ as to what this rate is. Some put it at 6 percent. The Bank of England puts it, for the UK, says Aldrick, at ‘5.1 percent – the average between 2001 and 2007’. He quotes a City economist (these days the media interview them rather than academics despite their obvious lack of independence) called Michael Saunders of the Citi investment bank, as suggesting that the rate here could now be as low as 4 percent, and comments:
‘In other words, at the economy’s optimum cruising speed, 400,000 fewer people need be unemployed than before the crisis.’
‘Need be unemployed’! That’s a telling phrase, saying that some people need to be unemployed. In the three months to April this year the unemployment rate was 5.5 percent, or 1,810,000. If it had been 4 percent this would still have left 1,316,000 as ‘needing’ to be unemployed.
The government may well, from one point of view, want to cut the benefits bill by reducing the number on the dole, but, from another point of view (that of big business whose interests they serve), to reduce the number too far would set off an upward pressure on wages to the detriment of profits. It’s a balancing act. Capitalist firms will have to pay one way or another. Either their profits are taxed to pay unemployment ‘benefit’ to at least 1,316,000 (or on the Bank of England’s figure 1,678,000). Or their profits will be eaten into by rising wages.
So, however many application forms they fill in, however many courses they go on, however many times they report to the DWP, between one and two million people will not get a job because, if a substantial number of them did, it would upset ‘the economy’s optimum cruising speed’ and the government doesn’t want that. In saying that they are practising ‘tough love’ by harassing people as a means of helping them to get a job, Cameron, Osborne and the rest (the leaders of the Labour Party too as they are also into bashing the unemployed) are shameless hypocrites.