Another day brings yet another tantrum from the hapless Work and Pensions Secretary Iain Duncan Smith. This time it’s the BBC who are the subject of his potty mouth, with his claim that journalist Stephanie Flanders is ‘peeing all over the economy’ for discussing the strange discrepancy between a nose diving economy and apparent falling unemployment.
IDS appears to think that state TV should ignore this much discussed phenomena and instead broadcast announcements proclaiming what a wonderful job our glorious leaders are doing. Unfortunately for ministers balanced journalism doesn’t quite work like that.
The truth is that it doesn’t take much digging into the recent unemployment figures to discover that the situation is far from rosy. The staggering rise in self-employment – 218,000 self employed workers on the year – seems to be one explanation for the fall in unemployment. Combined with the growth in part time work, this explains much of the economic anomaly which seems to be taking place.
On it’s own, a rise in casual, part time and self employed work still doesn’t fully explain what’s going on. The Office for National Statistics (ONS) still maintain that the number of total hours worked over the economy rose by 0.5%, meaning that even if people are pushed into insecure and casual work, the actual amount of work being done in the UK is still rising.
This still flies in the face of the plummeting growth figures. To understand why this is happening requires something few economists and journalists possess – an understanding of the benefits system, and in this case Working Tax Credits.
To qualify for the self-employed element of Working Tax Credits, a claimant must declare that they are working at least 30 hours a week. This does not mean that they are earning even minimum wage for those hours. They could be earning nothing at all. Those on low (or no) incomes as self-employed workers will be recorded in the statistics as working 30 hours a week. So whilst the recent figures show a small rise in the numbers of hours worked, this doesn’t mean that people are actually getting paid for those hours.
Given the huge leap in those now registered as self-employed, and the relatively small rise in hours worked across the economy, this is perhaps enough to reveal that whilst people may be working more hours (on paper at least) they aren’t any better off.
The number of people without children claiming Working Tax Credits under the 30 hour rule has almost doubled since 2004 and is still rising. There is even anecdotal evidence that Work Programme providers – the grasping poverty pimps paid billions by the Government to get people into work – are bullying unemployed claimants off the dole and onto Working Tax Credits.
This dovetails with the growth in people who are in work, or self-employed, and claiming Housing Benefits – a benefit based on income rather than hours worked. The latest DWP Statistical bulletin shows a rise in Housing Benefit claims of around 20,000 people between April 2011 and April 2012*. Whilst this does not represent a huge leap it must be weighed against the far stricter criteria for the benefit.
So whilst the number of people who are ‘unemployed’ is claimed to be falling, the number of people claiming income related benefits appears to be rising.
There are two figures which are key in understanding levels of unemployment. The headline figure, which states that there are currently 2.56 million unemployed people, is based on the Labour Force Survey. This is a large scale household survey using internationally recognised measures of estimating unemployment and is carried out by the ONS. The second is the Claimant Count. This is compiled by the ONS from data provided by the DWP and represents the number of people claiming the unemployment benefit Job Seekers Allowance.
Whilst unemployment according to the Labour Force Survey has steadily fallen over the last few months, in part because of the reasons given above, the Claimant Count figures have bounced around, although the number fell last month.
For the last year the Government have been claiming this is down to the changes made to sickness, disability and lone parent benefits. The argument is that many who were previously claiming Incapacity Benefits or Income Support will now be on Job Seekers Allowance and included in the claimant count. As ever the Government’s claims hold little water once the numbers are crunched.
The number of people claiming sickness benefits (Incapacity Benefit or Employment Support Allowance) fell by just 21,000 between February 2011 and February 2012. The number of those claiming lone parent benefits dropped by 30,000 in the same period. Many of these people will not have then been eligible for Job Seekers Allowance. Even if they were then it would only represent about 4000 people a month – the true figure is probably half that. What can’t be hidden is that the number of working age benefit claimants in total rose by 117,000 between February 2011 and 2012.
It’s clear that changes in benefit eligibility criteria have had only a negligible impact on the claimant count. There is one factor however which has skewed the figures considerably.
Over half a million benefit sanctions were handed to Job Seekers Allowance claimants in 2011 and the figure is believed to be rising. This represents a tripling in the number of claimants who have had benefits stopped since 2009. The ONS recently confirmed to me that those sanctioned are often not included in the Claimant Count – it depends on whether a claim is maintained throughout the sanction, which in many cases it isn’t. With sanctions lasting anywhere between two weeks and six months, this is enough to skew the count by tens of thousands of people every month. Other people are ‘disallowed’ benefits because they are judged to have given up a job voluntarily, or failed to meet JSA eligibility. It almost renders the Claimant Count worthless, as it tells us far more about the current sanctioning policy in Jobcentres than it does about the true number of unemployed people.
Economic editors at the BBC and elsewhere have rightly focused on the rise in temporary jobs due to the Olympics, the rise in part time work, or zero hours contracts, as some of the factors behind falling unemployment. All of these will no doubt have made an impact.
But almost a quarter of a million more people on Working Tax Credit (but not necessarily earning anything) and half a million benefit sanctions tells us far more. Unemployment is not falling as Iain Duncan Smith claims. The growth in hours worked has more to do with reporting requirements for working tax credits than it does with any genuine improvement in the labour market. Sanctions grossly distort true numbers of unemployed benefit claimants. The number of people claiming Housing Benefit and Working Tax Credits is rising, despite stricter eligibility for these benefits.
And once again, even this month, those who have been unemployed for over a year rose, despite over half a billion handed out to welfare to work companies with the aim of cutting long term unemployment.
This Government’s policies are not working. And no matter how they try and cook the books, neither are an increasing number of people.
Correction 17/10/12: Recent information from the ONS suggests some people who are sanctioned may be included in the Claimant Count. It depends whether the claim remains live, many do not. Am waiting on further information from the ONS and will clarify in a later piece.
*Unfortunately there is a lag in Housing Benefit, sickness benefit and lone parent benefit statistics which are now only to be published quarterly. Therefore the most recent figures are not available and won’t be until November. The most recently published figures are at (PDF): http://statistics.dwp.gov.uk/asd/asd1/stats_summary/stats_summary_aug12.pdf