Recession report #15: the social impacts of unemployment
Today we have published our 15th Recession Report. This will be our penultimate edition – in recognition of the recovery we will be moving to monthly Labour Market Reports and bi-monthly Economic Reports from March.
While a recovery in the labour market is a long way off, there are some positive signs. The claimant count has fallen for two consecutive months and vacancy levels have now been on the increase since the August to October rolling quarter. And where new jobs are being created, this is happening in both the public and private sectors. Between June-September private sector employment grew for the first time since the first quarter of 2008, with a quarterly increase of 29,000.
But while the headline labour market indicators are more positive than had been expected, there are still causes for concern. Full-time employment is still falling, and long-term unemployment keeps going up – 631,000 people currently have now been out of work for over 12 months.
We have also looked at how the recession has affected earnings. While some media reports of the differences between public and private sector pay have been incorrect, earnings have risen faster in the public sector during the recession. But broadly speaking earnings growth and levels for before the recession were often higher in the private sector (for example, in February 2008 average weekly earnings (total pay) in the private sector were £463, compared to £431 in the public sector – over five times the current gap between sectors), and over the longer term private sector earnings are likely to pick up. Since 1999, the average annual increase in total pay in the public sector has been 3.5 per cent, compared to 3.97 per cent in the private sector.
In the second section of the report Richard has reviewed the evidence on the social impacts of the recession. The analysis finds that unemployment has negative effects on poverty, happiness, family life, crime, drug and alcohol use and the prospects of the children of unemployed people.
Of particular interest, given the recent focus on family policy, is that unemployment is a strong predictor of relationship breakup. A study looking at three and a half thousand marriages and cohabitations in 15 waves of the British Household Panel Survey found that “any form of unemployment predicts partnership dissolution. The effect is similar when unemployment hits either a man or a woman.” According to Relate 25% of families say they are arguing more because of the recession and 22% of couples say they arguing more because of money worries. Two thirds of Relate Centres say that demand for their services has risen during the recession.
And the lives of children are badly affected by unemployment – children with unemployed parents are far more likely to live in poverty and to miss school and almost half of young people living with an unemployed head of household are not in employment, education or training (compared with one fourteenth where they are in full time work). The extreme impacts of parental unemployment for children are starkly illustrated by a comprehensive study of census data which concluded that the death rate for children of parents classified as never having worked or long-term unemployed was 13 times that for children whose parents worked in higher managerial or professional occupations.
There is also plenty of evidence on the particularly harmful impacts of youth unemployment, which may continue over the rest of a person’s life. For example, using the National Child Development Study, Bell and Blanchflower looked at the impact of youth unemployment on adult outcomes two decades later. They found that people who had been unemployed in their youth had lower average life satisfaction scores, were less likely to say that they were healthy, had lower average scores for satisfaction in their current jobs and had lower wages.
We conclude that in respect of some social impacts, such as homelessness, the UK is weathering this recession rather better than those of the 1980s and 1990s. Nonetheless, we can expect that the rise in unemployment will continue to cause damage: cutting back on investment would not only be economically regressive, it could create extreme social problems for years to come.