Economic truths: Situations vacant but no takers - 'Help wanted' signs are commonplace in the US. They may soon be hitting these shores too, if current employment trends continue

Economic truths: Situations vacant but no takers - 'Help wanted' signs are commonplace in the US. They may soon be hitting these shores too, if current employment trends continue - An interesting event will soon occur in Britain's job market. For the firs

by DAVID SMITH
Last Updated: 31 Aug 2010

An interesting event will soon occur in Britain's job market. For the first time in three decades the number of vacancies in the economy will rise above the level of unemployment. There will be, in other words, more than one job vacancy for every unemployment claimant.

Currently there are around 350,000 job vacancies registered at job centres. Applying the rule of thumb that these account for only a third of all vacancies in the economy, this suggests a vacancy total of 1.05 million. Claimant unemployment is just above 1.1 million and falling.

It would be misleading to give the impression that there is a fixed total of jobless people, and a fixed number of available jobs. Both sets of figures are in a constant state of flux. About a quarter of a million people join the claimant count each month and a slightly larger number leave it to find work. New vacancies are constantly coming on stream, and are regularly being filled.

Nonetheless, there is also a permanent element to both the unemployment and vacancy figures. I know of a business in an area of relatively high unemployment that, faced with rising demand, decided to put on a new shift. The wages were pretty good and the local job centre advised the company that there were plenty of unemployed, male, local candidates in need of full-time jobs. They did not, however, materialise, despite extensive advertising. The firm instead had to employ married women as part-timers.

The normal explanation for this kind of thing is that it must reflect the extent of the black economy. This is a source of official concern, hence Gordon Brown's decision last year to commission Lord Grabiner QC to investigate it. But it is not realistic to expect the black economy to release an army of skilled and motivated people, ready and willing to take on mainstream, taxed employment.

Nor is it the case that the only jobs available are in areas where unemployed people do not live. The chancellor, indeed, is fond of pointing out the extent of job vacancies even in the high-unemployment Northeast. The spread of vacancies, indeed, is remarkably even between regions.

So what is the problem? The Government has already discovered, under the New Deal, that there is a significant hard core of unemployed people, notably in the 18-24 target group, who lack motivation, reliability and the basic social skills associated with working regularly. Multinationals building plants in countries where there is no tradition of paid industrial employment have long been accustomed to the lengthy and frustrating learning period where workers are taught about the need to turn up at the same time each day - and also to remember to turn up. The same difficulties, it seems, afflict a minority of the UK workforce.

Younger workers are at least subject to intensive help under the New Deal, and it is how it manages the problem of this hard core that will determine whether it is up to the job. A more intractable problem arises for older workers. For the over-fifties, 40% of whom do not have a level 2 (NVQ2) qualification or better, a kind of double jeopardy arises. They have little incentive to invest in new skills until they have clearer evidence that workers of their age will be wanted by employers. Employers, meanwhile, tend to invest in training younger workers, despite evidence that older people tend to be more loyal.

Older people make up the bulk of 'discouraged' workers in the economy. Research for the Government by Sheffield Hallam University found that more than half of the 1.45 million men claiming incapacity benefit are fit to work but, having effectively dropped out of the job market (usually because of redundancy), they no longer seek to do so.

According to the report: 'What seems to be happening is that for many the move on to incapacity benefit is a one-way ticket. Detachment from the labour market grows, skills become quite rusty, and the barriers to retrieval sometimes become insuperable. At the extreme, some men have not only given up looking for work but also wanting it as well.'

When unemployment was a lot higher, nobody, perhaps not even most of the discouraged workers themselves, minded the fact that incapacity benefit was a politically convenient way of easing the problem. Now, though, things are rather different. Employment is at a record level and, barring a sudden economic downturn, the labour market is going to carry on getting tighter.

Britain has not yet reached the stage America is at, where the 'help wanted' vacancy signs adorn the highways and shopping malls. But we are not far behind. Unless a way can be found of stretching the workforce by tackling the unemployment hard cases, and by encouraging and incentivising discouraged workers, there will be trouble. At present the fact that the level of unemployment is dropping below the number of vacancies is a curiosity. Before long, however, it will be a serious problem for business and the economy.

Visit David Smith's web site: www.economicsUK.com.

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