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Why Fraser Nelson is wrong about a jobs ‘miracle’

16 April 2014

In his blog earlier today, Fraser Nelson argues:

‘The UK jobs miracle is happening mainly due to radical welfare reform – the type Labour ducked in office..Under Labour, record numbers of people in work were celebrate as an end in itself – but most of the increase was accounted for by immigration. So more jobs did not mean less poverty – not if a quarter of Glasgow and Liverpool were still languishing on the dole at the peak of a boom. This time, it’s different. The welfare reforms are restoring the see saw link between jobs and dole queues.’

I suppose I should by now get over the fact that intelligent, articulate journalists feel able to write with such certainty about data they simply don’t understand. It cannot be repeated too many times that the explosion in the numbers of people ‘on the dole’ (by which Fraser means the number on ‘out of work benefits’, including lone parents on income support and those on incapacity benefits) occurred in the period from 1979 to the mid 1990s, after which it began to fall:



So the rise occurred despite the low immigration of the 1980s; and the fall continued through the high immigration 2000s, in large part (I would argue) because of the success of welfare reform and of tax credits in improving work incentives.

But that’s by the by – Fraser’s main point here is that the fall should have been even sharper, had policy been even more radical; and that things are very different now. Of course, it’s very difficult to establish the counterfactual. But it’s easy to verify Fraser’s last statement: the link, or lack of it, between jobs and welfare reforms, in the 2000s and now. Here is a chart of the simple ratio between overall employment (from the LFS) and the number of people on out of work benefits (from DWP), between August 1997 and August 2013. This gives you a pretty rough and ready measure of the extent to which the availability of jobs (total employment) relates to the number of people on the dole (out of work benefits).


The ratio rose steadily throughout the 2000s, until the recession, when it fell very sharply. It’s since recovered, so we’re now back to where we were in 2007; that is, there are almost 7 people in work for 1 on out of work benefits, compared to a ratio of 5 to 1 in 1997. That’s good news. But the idea that there wasn’t progress up to 2007, and that there has since been sort of step change is nonsense. What we’ve seen is, abstracting from the macroeconomic environment, continued slow and steady progress, not some sort of miracle. It doesn’t make a good headline, and politicians on all sides (or their journalistic acolytes) don’t particularly like to hear it, but the story of welfare reform over the last two decades is mostly one of continuity.

Jonathan Portes is Director of the National Institute of Economic and Social Research

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  • bearsall

    “I suppose I should by now get over the fact that intelligent, articulate journalists feel able to write with such certainty about data they simply don’t understand.”

    Yes, if it’s patronising first, arrogant second and rude third it must be Jonathan Portes.

    As for “the success of . . . tax credits in improving work incentives”, don’t make me laugh. Tax credits just subsidise low pay. And they’re manipulated by the low paid, who, mysteriously, work exactly the right number of part-time hours to extract maximum benefit from the system.

    If I want to read the effluvia of the Confirmation Biased I can subscribe to the Guardian. Surely the Speccie can do better?

  • GraveDave

    Fraser Nelson and Isabel Hardman. Chuckle chuckle….

  • HJ777

    I think the factor that Jonathan Portes is not taking into account is that everybody now surely realises that from about 2001/2002 onwards until the crash, there was a huge and unsustainable credit boom accompanied by an equally unsustainable (because it relied on tax revenue from the credit boom plus a deficit) public sector spending boom.

    If we could strip out the effects of the credit/public sector boom to see the underlying state of the ‘real’ economy, then a rather different picture would emerge.

  • gerontius

    Jonathan Portes??
    I have cancelled my direct debit.

  • dado_trunking

    The author adds some good points yet fails to describe how the ‘in work’ category has been comprehensively altered – that is the main indicator which all his analysis appears to be based on (as does Fraser’s).

  • Patrick

    Growth left of the dip in the ratio graph was public sector, right of the dip private sector. That’s a pretty fundamental difference you haven’t pointed out and is the basic story of the Brown years vs the coalition isn’t it?

    • Luke

      Possibly. But how many jobs previously in the public sector have been outsourced to the private sector, so now count as private sector jobs? (That may be a perfectly sensible thing to do, but it’s not really the same as the private sector booming.)

      • JonBW

        Most of the outsourcing of public sector jobs took place before 2010.

    • telemachus

      The dip was the Lehman recession
      The upturn started after Brown’s rescue of the world banks and the economic stimulus of the econonomy by capital investment orchestrated by Darling and Brown
      You note the flattening of the curve in 2010 when Osborne choked off capital investment

      • gerontius

        “The upturn started after Brown’s rescue of the world banks ”

        Brown rescued the world’s bank????
        Telemachus, you are insane

        • telemachus

          Read the G 20 minutes
          Ask Bush and Obama

          • Kitty MLB

            Have you been speaking to Bush and Obama
            again, telemachus. You know this little
            island is quite capable of thinking for its self
            and coming to its own correct conclusions.
            Next time you speak to your fellow socialist
            Obama, send my warmest regards.

          • gerontius

            Why, did you ask them yourself Telemachus? Did they tell you how your hero Gordon Brown saved the world?

            Yeah right!

            At the weekend Telemachus will be discussing Military Strategy with Napoleon Bonaparte. You can pay a penny to go and watch him down at the Bethlehem madhouse. (Though you will have to pretend that you can see Napoleon).

        • Kitty MLB

          He might be. His job as he clandestinely wanders around is
          to discombobulate and shock. If Lefties had an original thought
          it would be in isolation. That place for the insane, who just
          happen to cohabitate the Labour Party.
          Einstein said there was a fine line between sanity and insanity,
          and that party proves his point superbly. Brown recued the world banks, like he rescued the world…Bonkers!
          You need to watch Telemachus, he hopes Balls is plotting
          against Milipede to become leader after the next election.

  • saffrin

    Tax credits; masking the unemployment figures by getting the taxpayer to subsidies part-time work with full-time pay.
    In the mean time, Brussels and LibLabCon advertise real full-time jobs abroad in the hundreds of thousands, with the sole intention of flooding the country with evermore immigrants who benefit no one but the multitude of buy to let landlords, property developers and Houses of Parliament troughers building property portfolios funded by Parliamentary expenses fiddles.

  • HookesLaw

    Whenever I see people use ‘ratios’ I become confused – alright, suspicious.

    Anyway, ‘Full fact’ gives the figure of 2 million for disability living allowance in 1997/98.
    It gives a figure of about 3.3 million for 2010/11.
    This does not look like any kind of ‘fall’ to me.

    • Luke

      Hookes Law,

      “Whenever I see people use ‘ratios’ I become confused”

      Can I suggest then that you don’t involve yourself in discussions about statistics?

      • Dai Station

        Indeed, but ratios don’t do a lot to improve understanding of what has been going on. It is possible that both sides of the ratio increased but not at the same rate. As there are various reasons why the people giving rise to the increased numbers in work are a different population from those claiming out of work benefits, I’m doubtful of what can be deduced from these data about cause and effect.

        • Luke

          ? If both sides of the ratio have increased, but at different rates, the ratio will have changed. So the changed ratio tells you something has changed. I’m not really arguing for or against the post, or Fraser’s to which it responds. I am just saying that if you are, by your own admission, utterly innumerate, best to steer clear of discussions about numbers.

    • Dai Station

      DLA has no direct relevance to this issue. DLA is a non means tested benefit intended to help cover additional costs that arise from having significant levels of disability. It is granted regardless of whether or not the recipient if in work

    • Smithersjones2013

      Whenever I see people use ‘ratios’ I become confused

      I thought being confused was your natural state…..

  • Mike Barnes

    Impossible stuff. Things were perfect in 1997, nobody was on the dole or incapacity then Labour ruined everything.

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