Ahead of what’s now a guaranteed rate cut from the Bank of England on Thursday, and on a day when the jobless rate in the US printed a four-year high, it’s worth noting that unemployment in the UK is likewise the highest in nearly half a decade.
The figures, released Tuesday by ONS, showed the jobless rate at 5.1% in the three-month period through October. That was up from the prior three-month stretch and the highest since early 2021.
As the chart below shows, the rate’s been climbing steadily for over a year.
Not surprisingly, wage growth slipped, albeit not by as much as expected. Pay gains in the private sector were just 3.9%. The last time that metric sported a three-handle was 2020.
“Having started the year close to 6%, private sector pay is now rising by just 3% in three-month annualized growth terms, which gives a clear sense of just how much momentum has slowed,” ING’s James Smith remarked, adding that the annual growth rate should move lower still going forward.
Notably, youth unemployment in UK is now quite high, with the jobless rate for those 16-24 hitting 16% in Tuesday’s release.
As the figure shows, that’s the highest since 2015, which is to say it’s above rates observed at the onset of the pandemic. The blue shaded area shows there were nearly three quarters of a million young people counted as officially unemployed in data covering the three months to October.
A pint half-full take says this is evidence that young people are getting “out there” and searching for work. A pint half-empty take says, “Yeah, and they ain’t findin’ any.”
Invariably, critics will blame Rachel Reeves, and specifically her October 2024 payroll tax hike. Just ask The Telegraph. “Reeves’s tax raid is to blame for Britain’s jobs downturn,” a December 15 piece reads, citing a Labour-linked think tank for air cover.
Higher national insurance contributions were mandated from April. Since then, businesses have cut nearly 200,000 jobs, ostensibly validating the old saw which suggests that for every new government ask of the private sector, someone loses a job, with the burden falling disproportionately on younger workers with the least experience.
The minimum wage also increased from April, and the new budget suggests businesses will need to foot the bill for another increase next year.
“Too many people are still struggling to make ends meet and that has to change,” Reeves said earlier this month, announcing the 2026 increase which she imagined will “benefit many young people across our country getting their first job.”
I’ve found the British economist Gary Stevenson’s socioeconomic commentary quite interesting. His take has been that the political center in Britain (as in the US) is destroying itself by reducing to address wealth inequality, which is also is the cause of the lack of growth. Labour now trying to balance public sector deficits by taxing the middle class only compounds to the inequality problem. Exactly nobody in the center wants to address the root cause which is that the rich’s share of total wealth has been increasing for decades to unsustainable levels. That also means the far right will eventually be elected, and that might spell the end of democracy (if not necessarily solve anything, because of course the rich extend their influence into the far right).
For me as a layman it is of course hard to say to what extent he is right, but his description of reality makes intuitive sense, much like MMT. Would be interesting to hear your view on “Gary’s economics” (as he calls his Youtube channel).
In general, I agree with the sentiment. In fact, back in 2013 my main argument was ultra-loose monetary policy exacerbates “asset-rich, income-poor” which will eventually lead to growing social divides and political polarisation. I’d argue that has definitely panned out. BUT, his solutions won’t work. The UK already has more than half of all income tax being paid by the top 5%. More than half of the UK live in households that on average receive more benefits than they pay in taxes. Plus, without tax on foreign earnings, the rich will and do leave if you tax them too much – there is a wealth flight happening right now out of the UK. I wish i had the answers but a tax on foreign earnings like the US does would be one step in the right direction.
Thanks for the food for thought.
On the capital flight pushback point his argument is that wealth flight can be intercepted, on the basis that income streams from the UK would be taxable for anyone perceived to be evading tax (even after emigrating), as long as you know it’s their assets (not trivial, not impossible). He is upfront about that he is not suggesting final policy with all wrinkles ironed out, and merely painting an approximate goal to which tax specialists in government would need to work towards.
I concede the biggest risk with any so called simple fix is the assumption of ceteris paribus. I.e. it’s easy to make projections that are linear in nature that do not hold in practice after second order effects. So although one can arbitrarily reduce relative inequality, doing so without disrupting total wealth and productivity is admittedly harder.
To mean anything, numbers like “the top 5% pay over half of the total income taxes” need to be put in proportion to how rich they actually are compared to the median. Using absolute numbers when in reality there’s no equivalence of personal situations is a favorite talking point of the right. An entirely different issue is that income (disregarding when it is blurred from capital) is usually a bad form a tax since it discourages work. He’s mainly concerned with taxing wealth. I used to hate the idea but Heisenberg has woken me up to the fact I’m a completely nobody in the grand scheme of things and shouldn’t be covering for billionaires.
(As usual I apologize for spelling/grammar mistakes since I can’t edit anything I post here and I’m half blind after staring at screens for decades.)
I’m 81 and I make many errors initially. So I go over and over the text before I send off my comments. It’s a pain but I look less like an ignorant plod.
I think that’s a lost art in my generation.