12 FEBRUARY 1972, Page 10


The new unemployment

Kenneth Baker M.P.

On Monday, January 24, the Prime Minister replied to Labour's censure motion which attacked the Government for allowing unemployment to rise to 1,023,000. It was one of the most important speeches of this session and its significance has not yet been fully recognised.

In the first place he made a defence of the Government's economic policy — it was by far the most convincing we have heard from the front bench. Then he went on to analyse the nature of unemployment under three heads — cyclical, regional and structural. In effect he was saying, and giving his Government's recognition of the fact that the unemployment of today is a very different animal from the unemployment of the 'thirties and of the period 1945-1965.

Since June 1970 the Government has concentrated on the cyclical nature of unemployment — indeed it had to since it took over an economy that had suffered six years of stagnation. The economy was like a hoop that had toppled over because it had lost its momentum. The effect of Roy Jenkins's post-devaluation overkill is still with us and the Government has been right to embark upon a massive programme of reflation.

This should convert growths of just over 2 per cent per year from 1964-70 to over 4 per cent in 1971-72, and if our programme is to be met then this rate must be maintained for the next three years. Indeed, to sustain a level of growth of over 4 per cent a year, further reflationary measures will almost certainly be needed in the near future. • If we get this growth then new jobs will be created, but they might not be created in sufficient numbers to offset completely the jobs that will be lost as a result of regional and structural factors.

The trend in employment can be seen in the following table: Value of GDP per GDP £m amployee (constant in employ Total work force factor) ment £ 1960 22,500,000 24,369 1,096 1965 23,600,000 29,030 1,229 1970 22,900,000 32,232 1,408 1971 22,500.000 NK NK During the first five years of the decade new jobs were being created at about the rate of nearly 200,000 a year. In the second five years jobs were disappearing at the rate of about 100,000 a year, and the drop in 1971 was a dramatic 400,000. Or put another way, in 1965 it took 23.6 million workers to produce £29,000 million of wealth, but in 1970 700,000 fewer produced £32,000 million.

The striking reversal of post-war trends that started in 1965 was due to the fact that growth in output was exceeded by growth in productivity. Britain was in fact learning the lesson of efficiency.

1965-70 Average annual increase in output + 2.3% Average annual increase in productivity + 2.8% Average annual decrease in employment —0.6% All parts of the economy got the message that swollen payrolls were very costly. The distributive and construction industries in the five years to 1970 shed some 645,000 employees. No doubt selective employment tax had some effect, as did the squeeze on profits and liquidity. The IRC promoted merger after merger which resulted in substantial labour savings. Once management has learned the lesson of improving productivity it is difficult to give up. The Engineering Employers' Federation has forecast that the engineering force could increase its output by 15-20 per cent before new jobs are created. The clothing industry's little Neddy has reported that there could be enormous increases in output resulting from better workplace engineering and an improved use of simple production aids. Even service industries are conscious of manpower savings — London Transport saves train guards, bus conductors and ticket checkers by single manning and automatic ticket gates on the Underground. The hotel and restaurant industry has responded to the tourist boom by a massive expansion, but in June 1970 there were exactly the same number of people working in the industry as there were in June 1960.

Productivity is working in favour of a Spectator, February 12, Labour the Department of Employele" Wilson renamed the old MinistrY. a moment of tragic irony that Har°0! better use of resources and „11„6; profitability, but it's not working in favv; of creating new jobs. It must have been; and Productivity. io The critical factor is that groWt'A output must exceed growth in Pr0',I1 ivity. The Chancellor has forecas growth in 1971-72 of about 44 Per,cgeo This of itself will not create any there has been a substantial and soinew freakish rise in productivity of ove,,rci per cent. If this falls to a more likelY of 3 per cent in 1972-73 and 197'd$: and if the economy continues to eXPaaperi. over 4 per cent for these two then about 250,000 new jobs vo:'„,er: created. This will leave an unemPleY." level of about 750,000 to 800,000. The Government's first priority 'le? therefore be the maintenance of sveo: level of growth. This should re„re ' cyclical ' unemployment, but as the r'e: Minister recognised in his speeci4 " structural and regional " will be Wi.111 for a long time. Different policies 'IT' needed to deal with these and rheori: fruit of this new approach is Robert ,rig, major reshaping of industrial retrainc; This will increase training ari, training as a means to help peoPleit with the pace of industrial change. to create a greater willingness in thespor workforce to accept change and to r'ierfe to it. It should be accompanied IVf reit resettlement grants to encourage vee mobility. I would like to see it folloa ve an acceptance that if people ili,' tP change their jobs more frequent ;',.est(' wear and tear on them will be 6;1;ortf, This could be reduced by a tyI: working life — retirement at sui, V men, and a shorter working We re a trade unions in the new situation ,A themselves whether it is socially iiistiroe' jobs are so short, for so much over Regional policy is likely to be tb e r50/rIx be worked. fruit. The important thing to re-eis; Z here is that although the ieveit unemployment in the regions arre-e vre they have not done relatively W°:„the rest of the country. Indeed, for instance, the relative position P* improved, for in 1965 the We15hterflia4:1 2 unemployment was 1.9 times grlf; it " the national average, but by 19,700 fallen steadily to 1.4. The res,;,-e therefore likely to benefit to P-frO,' extent as the rest of the counfr)Liy, general expansion of the ecooeOr new regional initiative should be Li terms of job creation and itit probably be more effective iftoc. concentrated on one or two gr°W in each area, rather than in ha,je. stimulus to the regions as a W.-,ry is a fashionable and despairing finds favour in some quarteil Conservative party that we 51° 1t1 about the regions and let ira";e off: determine the nature and the rte decline. It would be strange if •00( Disraeli abandoned the regions Ilfor(Jui' A party of One Nation cannot a tile Ea or apsatrty from the South-East f