Public sector fuelled the jobs boom
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The labour market has changed dramatically under Labour, with public service jobs playing a much more crucial role in driving the economy, particularly in the Midlands and for women workers, a Financial Times investigation shows.
Alistair Darling, the chancellor, and Gordon Brown, the prime minister, correctly claim that the number of jobs created under Labour is equivalent to the number on the dole under the Conservatives. But up to two-thirds would be classified by most people as being in the public sector.
The picture that emerges when the employment patterns of female workers are scrutinised is especially stark. According to the Office for National Statistics’ Annual Business Inquiry, of the 1.07m additional jobs taken by women between 1998 and 2006, 963,000 were in the sectors where the public sector predominates or is almost the sole purchaser of services, such as health, education, social care and public administration.
The number of jobs held by women in purely private sector parts of the economy has actually fallen in the West Midlands and the East Midlands, with negligible growth in Scotland, East Anglia, Yorkshire and Humberside, the south-east and the north-west.
In contrast, private sector employment has been more important in underpinning economic expansion and household incomes for male workers and also in two regions: Wales and the south-west.
The growth of employment in parts of the economy dominated by the public sector was high at 25 per cent, between 1998 and 2006, the latest year for which data is available. But it is clear that the majority of the new jobs for which men were hired were still in private sector parts of the economy.
The differing fates of the two sexes in the labour market over the past decade suggest that the public sector remains much more hospitable to women than the private sector, particularly in the case of older women with childcare responsibilities who want to work part time. These trends are verified by the ONS’s continuing Labour Force Survey, which asks people to classify the type of organisation for which they work.
The data also reveal an economy that is increasing its reliance on employment in public administration and the caring services at a rapid rate. A big growth in primary and nursery employment and other healthcare services has been the key driver. Many of these jobs are entirely funded by the public purse but, because workers are formally employed by a private company, the official figures record the growth in these areas as having been created by the private rather than the public sector.
It is clear that if unemployment rises rapidly as the recession bites, the share of overall jobs taken by the public sector will also rise further, so long as the government can continue to finance its spending programmes as it has over the past eight years.
Some may seize on the FT’s research to suggest that the widespread availability of public sector jobs has in effect “crowded out” private enterprise. In support of that contention is the argument that private sector employers would have had to offer even more attractive packages to compete for the same labour. However, undermining it is extensive evidence from employers that a lack of available labour or finance has not been regarded as a big barrier to expansion.
Official figures on public sector jobs, collected by asking public bodies, not including universities or general practitioners, how many people they directly employ, show a considerably smaller increase in the importance of the public sector in the economy over recent years.
However, although the definition of a public sector job can be problematic, there is little dispute that the set of ONS figures preferred by the government takes a very narrow view of the public sector.
Officials under pressure to reduce public sector headcount have an incentive to cut jobs and hire temporary staff instead, which flatter the numbers under the government’s measure.
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