Overlooked unemployment

Justin criticizes Employment Minister Murphy for ignoring the human costs of the rise in unemployment, announced yesterday.
He's right. But everyone does this all the time. The figures that never get reported are in table 10 of this release (pdf). They show that 206,900 people joined the claimant count of unemployment last month. Even when aggregate unemployment was falling, the numbers were similar*.
Of course, not all these did so because they lost jobs; some joined the labour force. But a hefty number would have done so; good figures aren't available on this.
This matters. It means tens of thousands lose their jobs every month. Which in turn means hundreds of thousands live in economic insecurity.
Sure, this is the price we pay for a market economy; firms have to shrink.
But it raises the question: do we really have adequate insurance mechanisms to protect people from the financial and huge psychological costs (pdf) of job loss? Or should we investigate Robert Shiller's ideas for better insurance markets in income risks**?
It's a scandal that New Labour doesn't raise these questions. Even more scandalously, it perpetuates two illusions.
Illusion one - that macroeconomic stability means individual security. It doesn't. Even in good macroeconomic conditions, tens of thousands of people lose their jobs every month.
Illusion two - workers can control their own fate. This is the implicit message behind the belief that education and training are sufficient to equip people for the future. They are not.
* Brave readers can get the figures from Statbase. Code identifier DPRD.
** The insurance he has in mind is for occupations or industries, so the problem of moral hazard - if people aren't scared of the dole they'll not work - is diminished.

Comments

[dearieme]

Now that the really preposterously subsidised industries have been junked - e.g. coal - that idea sounds worth an investigation. Perhaps a few more would have to be binned before such a scheme could work e.g. the BBC, the paper Press.

[angry economist]

The NO. 1 ILLUSION for me is that the labour market is static. As you allude to Chris - the labour market is a constant dynamic of flows.

In fact in the First Release you link to ...
- unemployment increases
- employment increases
- claimant count increases
- no. of economically inactive decreases

Points to an expanding labour supply, with a reduction in economic inactivity.

If we can say anything - its perhaps that demand cannot cope with the the increase in supply, rather than unemployment is the result of a cut in demand.

Folks coming out of inactivity to join the labour market might signal a bouyant labour market amongst other things.

The labour market is dynamic and a series of flows. It has to be remembered. And to consider all elements of labour demand and supply in one go rather than plucking one indicator out fulminating half baked theories.

Some other useful references below.

P11 of this publication has a diagram which sums it all up well:

http://www.futureskillsscotland.org.uk/web/site/home/Reports/NationalReports/Report_The_Scottish_Labour_Market_2002.asp

More detail here:

http://www.statistics.gov.uk/articles/labour_market_trends/gross_flows.pdf

[angry economist]

"Illusion two - workers can control their own fate. This is the implicit message behind the belief that education and training are sufficient to equip people for the future. They are not."

Chris - I agree. Too often, the powers that be area preoccupied with the supply side of the labour market.

Whereas its more substantially about the demand side. You can supply all the skills you want, but if employers don't want them or won't use them they won't pay for them - it represents a loss on the state's, or individual's investment in them.