John Oxley: Unemployment isn’t a strategy it’s a sign the economy is not remotely being fixed | Conservative Home

John Oxley is a consultant, writer, and broadcaster. His SubStack is Joxley Writes.

The latest employment figures make worrying reading for anyone, but should be a real concern for the Chancellor as we move towards the Budget.

Joblessness has ticked up by 0.2 per cent, while other indicators have also grown worse. More people are economically inactive, while the total hours worked has also fallen. Once again, Labour isn’t working.

It is easy to find the policy choices that have driven this.

The increase in employers’ National Insurance has made it more expensive to keep people on.

The looming workers’ rights bill also threatens to increase the non-monetary costs of creating jobs, making it less attractive to hire people at the margins of productivity. Together they shift Britain more towards the Continental model of an illiquid labour market with entrenched privileges for those who do manage to make it  to employment – but with less opportunity for those out of work.

Now that approach might be excusable, if not admirable, if it looked like a conscious decision by the government.

Instead, it highlights their strategic incoherence. Elsewhere, the government claims to be prioritising reducing the welfare bill, aiming to drive down the coast of worklessness and get more people into jobs. The problem now should be immediately apparent: you cannot do this if you are also squeezing the jobs market.

This bad policy betrays a bigger fact about the government. It doesn’t understand how jobs are created. In the simplest terms, jobs will be there when the value they are intended to create exceeds the cost of getting someone to do it, with a bit of risk pricing thrown in. Increase the cost and that margin gets squeezed. Increase the risk, by, for example making it harder to get rid of people, and the same thing happens. Do both, as the government has done, and the jobs won’t appear.

These latest results show the business response Labour’s choices. In sectors and roles where that calculation is a narrow one, jobs are becoming unsustainable. Either that means rising prices, driving further inflation, or reductions in the workforce, neither of which bodes well for the government. In more vulnerable sectors, like hospitality, we see this flow through to business losses and closures, making it even harder for the economy to grow.

Labours other economic goals will likely become harder.

Rising unemployment will push up the benefits bill as more people stay out of work for longer. Extra costs will make it even harder for those who have extra challenges, like disabilities, to be helped into the workplace. This in turn will hamper growth and force more borrowing or taxation.

There is also a human cost here too. The squeeze in wages and jobs is mostly affecting the young – whether that is those in low-paid roles, or emerging from university into a suppressed graduate job market. Joblessness at this period can have a lifelong impact on earnings and wealth building. It also delays things like family formation and home ownership, as well as correlating with poorer mental and physical health.

Coming towards the new Budget, it is hard to see how the Chancellor finds a fix for this. Further public spending cuts will be hard to square with the internal politics of the Labour Party. Labour’s pledge to avoid personal tax rises means its only real option is to levy them on business, so a roll back of the NI increase seems unlikely. Likewise, the workers’ rights bill is too important to the left and the union to be radically watered down. Labours squeeze on employment is hard for the party to escape from, unless it develops a better strategy or prioritisation and understanding of how the market actually works.

This should be no real surprise to us. Every Conservative knows that Labour has historically left unemployment higher than they inherited. Our party now need a find a way to exploit this, and in doing so re-establish ourselves as a political option for those of working age.

It is one of the things we can be proud of from our time in office. In 2010 the Conservatives inherited an unemployment rate that was high and rising after the global financial crisis. We turned it into the lowest levels of unemployment the country had ever seen. More people were in work, both in absolute and percentage terms than ever before. More than that,  swift action by the party ensured that COVID did not cause a further prolonged employment crisis. Even at its peak, unemployment in that period was lower than in 2006. It is a record to be proud of.

Taking the fight to Labour over this allows us to fight on this record. It also plays to our strengths as a party. We are a political outfit that does understand business, that does understand how jobs are created – and consequently knows what factors you need to balance to get people back into work. It is clear that Labour does not.

This discussion should also help the party reconnect with younger voters. It remains a major existential threat that our vote share has plummeted among those not just under 25, but under 65. We need an offering that connects conservatism with those of work – and what better to focus on than work itself. It should be an appealing approach to say that we are the party that will help you get into work, or help you get paid more, and help you build a career where you can depend on and support yourself, while Labour will fail to do that.

The harsh reality of opposition is that often all you can do is watch the government make mistakes. On employment, Labours errors have been readily predictable. Enacted separately, the NI increase and the workers’ rights bill would hamper employment, together they are an obvious detriment to it. They are errors born of a lack of strategic thinking and of understanding. The country, and the government will have to bear the consequences.

In Labours mistakes there is a chance of resurrection for the centre right. It gives us the ground to reassert ourselves as the party that understands the interconnectedness of the economy and which is able to empower businesses to create jobs and the growth that goes with it. Once again, Labour isn’t working and their failure to get to grips with employment is likely to undermine their broader economic goals. The Conservatives should be the ones to punish them for this.