Trump’s right about one thing...

THERE has been too much crowing about our low level of unemployment. It is true to say that the figure in the UK is at a historic low, and I do not want to suggest that this is not good news. But it is not a sign, as Brexiteers would have it, that Britain will sail through our European exit unscathed. Put simply, the unemployment figures just don’t tell us as much about the economy as they used to.

Much has changed about the way we work in the UK in the last 30 years, and those changes have accelerated dramatically in the last decade. Far more people are self-employed and far more people are working flexibly, either part time or on zero-hours contracts. This is a flexible labour market.

Flexible labour markets help bring down the unemployment figure and help to keep it lower even in times of economic strain.

Rigid workforces (of the kind that were more typical in the unionised 1970s) create high, fixed costs for a business. If there is a downturn, a company cannot easily cut their costs without simply making people redundant.

But a flexible labour force means there are other options, particularly if many of the workers are technically selfemployed, like a delivery driver for example.

With this kind of flexible labour force, you can reduce costs and reduce output by other means – cutting the amount of work available for staff on flexible contracts or for those selfemployed contractors. You may even be able to convince staff to take a pay cut, rather than risk job losses. This flexibility is a key reason why unemployment has fallen so sharply in the UK and indeed in the US, whereas it remains stubbornly high in more rigid France.

If a company makes someone redundant, it shows up as rising unemployment. If it cuts working hours or pay rates, it has no effect on unemployment at all. But in both cases economic activity has shrunk and the total going into the economy in wages has fallen.

The unemployment figure is just not telling us the whole story.

One figure who has recognised this is Donald Trump. The Donald has argued that America’s falling unemployment figures are ‘a hoax’ or ‘phoney’. His argument is that the US figures, among other things, do not take into account thousands of people who are in part-time jobs, but only because they can’t get a full-time job.

Trump’s suggestions for what the real unemployment rate may be in the US have been typically ridiculous and the bombastic language of a ‘hoax’ is daft. But there is a grain of truth in the issue he raises and it applies as much in the UK as in the US.

You won’t hear me say this often, but even Donald Trump is not wrong all the time.