Economy Booming, Unemployment Dropping So Why Are So Many People Out Of Work?
by Phil T Looker, The Daily Stirrer
Unemployment is in freefall the latest government figures tell us. So why aren’t we feeling it?
More people are working, but work doesn’t pay a living wage. Employment is up, but tax revenue is down. The economy is humming again, yet Britain is still in debt. What exactly is going on?
The latest statistics, published today show unemployment rates have fallen to their lowest level in five years. The Coalition has presided over an incredible boom in employment, with Britain gaining jobs at the fastest rate of any country in Europe. This week David Cameron even resurrected the old dream of full employment; our own leader column calls it a jobs miracle.
So why isnt it doing us any good?
Lefties will screech about the need to raise the minimum wage, but the minimum wage has never worked and never will. Employers imply cut hours.
Even with more people in work than ever before tax revenues aren’t as high as were predicted. Why? The usual suspects are involved, part time working, zero hours contracts, and the statistical trick of only counting those claiming job seekers allowance as unemployed and classifying the long term unemployed (jobseekers allowance runs out after two years,) as not economically active. Count the real unemployed rather than the ‘scientifically’ unemployed and the figure has dropped little since its peak in 2009. As it happens, two analysts at Citigroup – Michael Saunders and Ann O’Kelly – have been considering exactly this question.
They found that the problem is not corporation tax higher profits mean revenues have grown at almost double the rate predicted. Nor is it VAT, which has grown by exactly as much as expected. Stamp duty has gone up by 34 per cent. Neither high-rolling executives nor ordinary shoppers have slowed down their contributions. You can read the full analysis with charts in this Daily Telegraph article.
It is an excellent analysis and confirms all of the suspicions cited by business managers and accountants. It will be useful however, for the benefit of those who are not accountants, to expand on the bare statistics in order to highlight where the under-employed, and those who claim the lion’s share of working tax credits, are coming from. See this report created by a statistician with the help of a Freedom Of Information request. Yes, its another indictment of uncontrolled immigration and the eagerness of main pary politicians to smooth the path of those who arrive in our country illegally, to full residency rights.
The problem with the Government / Office of National Statistics methodology is the manner in which the UK assigns ‘nationality’ to anyone who wasn’t born in this country, and excludes naturalised British citizens (i.e. it doesn’t include non-UK born children who were naturalised).
From Table 2 in Saunders and Kelly’s analysis it is notable that of lower income tax credits families with children – i.e. whose awards include both Working Tax Credit and Child Tax Credit – over a quarter (27.13%) are migrant families.
From Table 3 this group of lower income families with children forms almost half (48.25%) of all migrant families claiming tax credits. Lower income families with children form a smaller proportion of non migrant families claiming tax credits (39.14%).
From Table 3 a slightly lower proportion of migrant families are out of work families with children (26.5%) than non migrant families (31.4%). However, from Table 2 migrant families comprise nearly a fifth of tax credits families who are out of work couples with children (19.49%) but only half that proportion of out of work single parents (10.59%).
The key issue however is that despite the increase in employment numbers there has not been a corresponding increase in the income tax take.
Clearly there has been an increase in low paid low skilled jobs. The influx of labour from eastern Europe and the subcontinent combined with Gordon Browns working tax credits has meant that the elasticity of labour supply has depressed wage growth and it may be simply that the treasury models have incorrectly forecast, in their models, this effect.
Secondly, there has been a significant increase in self employment, many of these self employment jobs have been created by East Europeans typically your Polish/ Romanian builders and as such the tax take from such employment is generally much lower than PAYE as a result of cash transactions etc.
Additionally, at least from my experience, much of the self employment increase has also been driven from higher Salary earners particularly in the media and IT sectors (so fed up with high levels of Tax and what they see as Government waste) that they opt out of PAYE employment and take on contract work under IR 35 where they can reduce their Tax charge by as much as 30% to 40% as well as their NI charges.
Thirdly, the very low even negative yields on fixed income investments that have resulted from low interest rates must have a significant impact on the tax take.
Statisticians delude themselves that those not inducted into the mysteries of the dark arts are easily fooled by graphs and charts, in truth it is statisticians who are easily deceived by their own deceptions. People who live in the real world do not look at and graphs, they look at the bottom line of their payslip and think about how they will stretch it to pay the bills and put food on the table
The do – gooders can screech all they like and demand that the minimum wage be raised to £10 per hour or even higher. If like a young woman I know, somebody is bullied by public servants into taking a minimum wage ‘job’ that only provided seven and a half hours a week work, in order to get her off the unemployed register, it still isn’t going to giver her family a living wage.
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