How Many Million Unemployables?

Tyler has just attended a rather depressing event hosted by a normally rather upbeat think tank. It was a seminar on a question we've mulled many times - Where will all the new jobs come from?

The correct answer of course is that nobody knows.

Nobody knows because nobody ever knows ahead of time where the new jobs will come from. And as we've blogged before, the best thing government can do to assist is to cut taxes, cut regulation, cut working age welfare and the minimum wage, break up public sector monopolies, decentralise, and cap mass immigration.

And that's pretty well all we can say. Other than reminding people that in the three decades following the invigorating pro-market reforms of St Maggs, our "Sick Man Of Europe" economy managed to throw off its bedclothes and create 6 million new jobs - and that net of 4 million fewer jobs in manufacturing (see this blog).

To be fair, none of today's panel members disagreed with the St Maggs' prescription for private sector jobs growth (well, OK, a couple of panelists weren't keen on welfare cuts). But that's mainly because her prescription wasn't really mentioned at all.

Instead, there was much talk of difficulties with people whose "labour market characteristics" make them unappealing to potential employers.

Labour market characteristics?

Yes, that's things you will know better as motivation, work ethic, and previous employment record. Labour market characteristics turns out to be a euphemism for unemployable. And according to one of the panelists, such characteristics now cripple large swathes of the working age population in the old high unemployment blackspots we've blogged so often.

So how many people are affected? Just how many million unemployables have we now got? We've taken a quick look.

Overall, Britain has 40 million people aged between 16 and 64 (the age band the ONS counts as working age adults). Of those, 11.7 million are not in employment. So that's roughly 70% of the working age population working, and 30% not working.

Fortunately, not all of those 30% are people suffering from labour market characteristics. A big chunk of the younger ones are still in full-time education, and hopefully will find employment in due course. And a big chunk of the older ones either have working partners supporting them, or they're plutocrats who don't need to work.

Stripping out those groups, the hardcore unemployables are among the 5 million people of working age who are entirely dependent on welfare handouts - about 12% of the working age population.

So how many of those 5 million are unemployable?

In truth we don't know. But up until 2008 our economy had experienced the longest period of boom since records began. Between the beginning of 1997 and mid-2008, 2.8 million new jobs were created (net). It's surely reasonable to think that anyone who really wanted a job should have been able to get one.

Indeed, so keen were UK employers to fill those jobs that they actually imported new workers from overseas. Foreign workers flooded in, and as things stand today, 86% of the new jobs created since 1997 are filled by workers born overseas. 86%!

Even at the peak of the boom, we still had 4.3 million working age people dependent on welfare - over 10% of our working age population.

4.3 million apparently unemployable people.

Depressing.

Both for us and for them.

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Who Has Our Children?

The Major's very bad dream

Following yesterday's blog on the problem of bad parents, we've taken another look at who is actually having Britain's children.

The Major is constantly telling us (eg see here) that the welfare state has produced far too many children at the bottom of the heap. He reckons that by paying the poor and feckless to have children we've given ourselves a monstrous problem. Generation upon generation of feckless no-hopers, reproducing like Fibonacci's rabbits, and threatening to undermine a billion years of Darwinian progress.

And while the Major does tend to put things somewhat bluntly, round our way that is a very widely shared view.

The trouble is - as we saw here - actual facts are very thin on the ground.

But we've now taken a closer look at the latest Office for National Statistics data on income distribution across households of different types (see here). And we've extracted the number of children in households according to their income level.

Across the whole country there are 12.9 million dependent children spread across 19.1m non-retired households, an average of 0.67 children per household. But when you look at the distribution of children across each household income level, you find that households in the bottom 20% of incomes have an average of 1.03 children, while those in the top 20% have an average of 0.34.

What that means is that the poorest 20% of (non-retired) households have over 30% of Britain's children. Whereas the richest 20% only have 10% of the children. That is a pretty striking contrast - our economically least successful households have nearly one-third of our children.

Here's the complete picture (note - 20% income bands are known as quintiles):

And to put some more flesh on this, the gross income of the bottom 20% of households before taking account of welfare benefits averages just £7600 pa. Cash welfare benefits add a further £6300 pa.

So what should we make of this? Is the Major right?

Well, it's clearly the case that the poor have considerably more children in their households than the rich. Yes, some of that is because the rich tend to be a bit older, and their kids may have flown the nest. But even if we restrict the comparison just to households with children, those at the bottom have an average of 2 children, whereas those at the top top have just 1.5.

And it's also true that welfare constitutes a big chunk of household income for the poor - getting on for half their average gross income.

But does that mean it's welfare that's delivered all those poor kids?

In an age of readily available contraception where child labour has long since been abolished, simple economics suggests that the poor should have fewer children than those with higher incomes. That's surely straightforward.

And it's also straightforward that paying welfare based on a household's number of children, must increase the attraction of having children.

But does that prove the Major's right?

What if the poor comprise a whole bunch of people who are incapable of thinking and behaving according to economic rationality? It must be said none of us are always great at doing that.

What if we cut child welfare payments only to find ourselves with just as many poor kids, only now they're starving?

Well, it could happen - we can never answer these questions ahead of time, and in the abstract anything is possible.

But Tyler has seen enough to know there's a serious problem with our current welfare system. Nobody wants children starving in gutters, but it can't make sense to subsidise the 20% of our poorest households to produce 30% of our children.

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First Choose Your Parents

As regular readers will know, BOM has always had the highest regard for Frank "think the unthinkable" Field. So we were very pleased when Cam appointed him Poverty Czar with a brief to take a good hard look at what we can actually do about it. In particular, what can be done about child poverty?

Today we got his report, and it contains a giant helping of what the Major calls good old fashion common sense.

To begin with, Field wallops Labour's obsession with its meaningless child poverty target - ie the aim to ensure by 2020 that no child lives in a household below an arbitrary line drawn at 60% of median income. Field says:

"The anti-poverty agenda is driven along a single track of hunting down families who live below this line and then marking up a success as a family is moved across the line, no matter how marginal is the advance in their income. It does little to concentrate on those children who endure persistent poverty. Worse still, this approach has prevented a much more comprehensive strategy emerging on how best, in the longer run, to counter child poverty in a way that prevents poor children from becoming poor adults."

Spot on Frank. We have long believed that dishing out yet more cash to poor families is missing the point. In general, even the lowest incomes today have moved far above what most of us mean by poverty (eg see this blog). Here's what happened to incomes on that 60% benchmark over the last half century (in real terms, adjusted for inflation):

As we can see, income on Labour's definition of the Poverty Line more than doubled from around £6k pa to nearly £13k. That is not a meaningful definition of poverty.

What's more, taxpayers can no longer afford to fund poverty relief on that scale. As Field says:

"To meet a target of cutting child poverty to 5 per cent of all children by 2020 a further £37 billion per annum in tax credit transfers is required... an unthinkable sum in current conditions. Can anyone seriously maintain that sums of these sizes will be forthcoming over the decade, to 2020?"

Much more usefully, Field focuses on the real problem - what on earth can we do to prevent poor children from becoming poor adults?

And here, he spells out something we all know, but which PC squeamishness has for too long excluded from the public debate on child poverty:

"Even if the money were available to lift all children out of income poverty in the short term, it is far from clear that this move would in itself close the achievement gap.

... there is much more beyond just improving short-term family incomes in determining the life chances of poor children. A healthy pregnancy, positive but authoritative parenting, high quality childcare, a positive approach to learning at home and an improvement in parents’ qualifications together, can transform children’s life chances, and trump class background and parental income.

A child growing up in a family with these attributes, even if the family is poor, has every chance of succeeding in life."

That resonates so strongly with Tyler. As he's blogged many times, he had the great good fortune to grow up in a family with little money but absolutely outstanding parents. And when it comes to a choice between those two, there is no choice - first, choose your parents.

Fine. Common sense.

Except unfortunately, there just aren't enough good parents to go round. And there are especially not enough to go round down in the depths of welfare dependency.

So what to do? How do we get those problem parents we've blogged so often take their responsibilities seriously? And even if we manage that, how do we get them capable of discharging those responsibilities?

Frank's solution is to expand the support services available to help. He wants organised training for parents. He wants to refocus the floundering Sure Start programme on helping the weakest parents who really need the help. He wants pre-school foundation programmes to have resource priority ahead of more spending on Child Tax Credits. He wants to get charities and voluntary groups more involved. And he wants to formalise the responsibilities of local councils and schools for lifting the attainment levels of disadvantaged kids.

Now all of that sounds quite sensible - certainly the way Frank tells it. The whole thing is geared to breaking the dire intergenerational spiral of dependency and decline visited on us by the welfare state. And it has to be better than Labour's bone-headed pursuit of arbitrary income targets.

But what we don't want is to exchange Labour's socialist poverty disaster, with a different socialist poverty disaster.

Because although this report points in the right general direction - ie less reliance on ever-expanding welfare payments and more reliance on the poor taking back responsibility for their own lives - Frank is still a socialist. Deep down he may still believe that government can find technical solutions - ways of applying the very best brains to crack even the toughest problems.

And Tyler found himself shifting uncomfortably as he read the following (quoted approvingly by Frank from a couple of eminent education Profs):

"We seem to know as much in principle about how parental involvement and its impact on pupil achievement as Newton knew about the physics of motion in the seventeenth century. What we seem to lack is the ‘engineering science’ that helps us put our knowledge into practice. By 1650 Newton knew in theory how to put a missile on the moon. It took more than 300 years to learn how to do this in practice. The scientists who did this used Newton’s physics with modern engineering knowledge. We must not wait three hundred years to promote stellar advances in pupils’ achievement. We need urgently to learn how to apply the knowledge we already have in the field."

No, no, no.

You see, the problem with that is that physics is physics. Whereas pupil achievement is all about horribly messy human beings. Human beings who can't even manage their own behaviour, let alone manage the behaviour of other human beings.

Let's hope Frank doesn't really believe we can somehow engineer our way out of this.

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Who's To Blame?

You filthy English - we have brought you here to humiliate you

Here's the list of suspects identified by callers so far:

The BBC
Sepp Blatter
Deceitful FIFA bureaucrats on the take
Russian gangsters
Birmingham and Villa supporters
Foreigners

Tyler has already made his views clear, so he ought to be rejoicing.

Yet somehow he's not. It's one thing to believe we should never offer to host any of these tax-funded jamborees, but it's quite another to accept national humiliation at the hands of a bunch of jumped up council officials from countries that had never even heard of football until 30 years ago.

Why did it happen? Nobody seems to know, but the Major has come up with the following interesting fact. Of the 24 members of FIFA's Executive Committee - the guys who actually made the decision - no fewer than 15 represent countries which are either ex-colonies, or with which we have had at least one war in the last 200 years.

Hmm.

Everybody hates us and it turns out we do care.


Update - Some FIFA financials

I couldn't resist looking at FIFA's finances. In 2009 they had revenue of about $1bn. Of that, the vast bulk - $0.9bn - came from the World Cup (which only happens once every four years but the revenues are spread out across all years).

FIFA's world Cup revenues come from broadcast rights and marketing (mainly corporate sponsorship). World Cup ticket revenues go to the host organiser (which would be the FA here).

The biggest chunk is broadcasting rights which seem to have totalled well over $2bn for the last WC in South Africa. But the interesting thing is that the sources of this broadcasting revenue are highly concentrated. Well over 50% comes from Europe. Adding in Asia takes the total up to 80%. Yet despite this, Europe and Asia combined only get 50% of votes on the FIFA Executive Committee. And my bet is that if we could see a revenue breakdown within Europe and Asia, we'd find some even more startling concentrations.

The obvious question is why don't the footballing authorities in the major revenue generating countries get together and do a complete Premier League style breakaway from the sleazy dysfunctional FIFA? Organise their own World Cup, to be rotated between them. Of course, we'd expect the big Latin American countries to be included as well, but on my count, there'd be no more than ten in the core group. Which would give each of them the tournament once every 40 years.

Naturally every country in the world would be invited to compete, just as now. But the competition would always be held in one of the big footballing nations.

Oh, and the tournament would need to be entirely self-financing - no more taxpayer subs.

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Taxpayer Funded Environmentalism

The TPA has a new report out today on taxpayer funded environmentalism. That's the outrageous arrangement whereby we pay the hippies to campaign for more restrictions on our freedom to live in the 21st century. The TPA's Emma Boon explains it all in the vid.

Key points:

•A total of £10.1 million was given to a range of environmental groups by the UK Government and the European Union in 2009-10.

•The total includes £2.5 million from various UK local councils, departments and quangos.

•It also includes £7.6 million in European Commission grants to environmental NGOs.

•The Foreign and Commonwealth Office made the largest UK payment in 2009-10 of £342,929 to WWF UK.

•Hackney council made the largest payment in 2009-10 from a UK council at £141,246 to Global Action Plan.

Of course, nobody can object to the hippies' right to run their bonkers campaigns (well, nobody except the Major, that is). But we should all object to being forced to pay £10m pa of our friggin' money to fund those campaigns.
 
PS Humble apologies for getting the dates wrong yesterday on Pitt the younger. I reported that the Bank Governor had made highly disparaging Mervyn King style remarks about Pitt in 1780. However, as was pointed out by the inestimable William Norton in comments, Pitt "wasn't elected to the Commons until January 1781, and didn't become Chancellor until July 1782." Quite right Mr N - a correction has been made. It just goes to show you shouldn't believe everything you read in Google. Or in leaked US ambassadors' emails come to that.

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The Future Of The Marketing Director

Everyone’s writing self-serving pieces about the future of advertising, yet few of them seem to realise that the true subject is the future of marketing. Central to that is the future of the marketing director, an important role that has, all too often, relegated itself to some kind of administrator of outsourcing.

The reversal of that trend starts with knowing what marketing really is: acknowledging that it’s not just promotion, that it involves every touch-point with customers (how ever tangential) and knowing therefore that it includes the work of a lot of departments outside one’s own.

This means that the classic role of evangelist must be for much more than simply the product/service, it must also evangelise on behalf of marketing itself as well as its specific aims within the company. The future of the marketing director will therefore involve:

The marketing of marketing.

Firstly, the Board and senior management have to be convinced of the value of marketing as an integral part of the product/service (in accounting terms, an element of cost of goods sold rather than an expense). Until this is achieved, marketing will be under-valued.

Relating marketing to corporate strategy.

By relating it directly to corporate strategy, the business credibility of marketing is enhanced. It also serves to ties in all stakeholders, most notably customer-facing staff. Moreover, it encourages longevity of vision and consistency of voice and thereby reduces short-term gimmickry.

Marketing to third parties.

The outsourcing of the creation of certain marketing elements may be inevitable, but your partners will serve you better if they are convinced of your mission. Faking such conviction is part of their job spec, but it’s better if they can truly be persuaded.

Becoming the account manager.

Being the manager not the outsourcer (internally with other departments and externally with third-parties) ensures a flattening of hierarchy, a continuous exchange of ideas and information and an increased ability to oversee processes so that there’s no need for sudden deadlines and rushed creativity.

Realism regarding your customers.

Acknowledging that you’re not marketing to your colleagues, your agencies or your imagined self is key. Spend lots of time with them - not in focus groups but in the real world – and know everything they do in relation to your product/service and to the rest of their lives.

Shaping the culture.

Marketing by creating the culture is more effective than marketing by interrupting the culture. The goal is to shape the ecosystem around and within your business through your interactions as described above and by all your promotional activities.

The result can be a unified marketing effort and that, after all, is what a marketing director should be ensuring.

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That's Not Fair!

You said it, Bro

The Treasury has just published the Hutton Report on Fair Pay in the Public Sector.

As BOM readers will recall, back in the summer Mr Cam commissioned Will Hutton "... to investigate pay scales across the public sector, and make recommendations on how to ensure that no public sector manager can earn more than twenty times the lowest paid person in the organisation."

In other words, Hutton's job was to address the scandal of fatcat pay in the public sector - a scandal that was first exposed in a series of reports from the TaxPayers' Alliance (eg see here). And to work out how to implement a 20-to-1 cap on top public sector remuneration.

But predictably enough, left-winger Hutton has found it impossible to stick to that very clear remit. Instead, much of his 128 page report is a polemic on top pay in the private sector, driven by 1970s-style politics of envy.

He kicks off by charting how the pay of the top 1% has pulled away from the average:

No matter that this relates to just 1% of the population, and most them are being paid by the market not taxpayers, for Hutton it's a serious problem:

"Substantial and growing pay inequality poses a serious challenge to society and Government. Do high earners deserve such large rewards? And is it fair that a wide and growing gap should exist between the pay of those at the very top of the income scale and the rest of the population?"

Fair? This is the market, Will. The thing that in just two millenia has lifted us from mud huts to plasma tellies. Sounds fair to us.

He goes on:

"...chief executive pay for Britain‟s leading listed companies rose by around eight times between 1986 and 2010... It is increasingly doubtful whether this has been proportional to increases in performance, or even reflects the real demand and supply for executive services. Chief executives have become treated as business super-stars drawn from an ever narrower potential pool... benchmarking between firms locks them into a kind of arms race... Any one company that tries to stand out against the trend risks losing its top people and inviting markets and investors to view it as second rate. Little... seems capable of creating more rationality or slowing the pace of increase... There is widespread scepticism whether this degree of increase in executive pay is fair."

Fair - there it is again. Look Will, we don't care what private sector chief execs get paid - especially when the figures relate just to the 100 FTSE100 CEOs. We only care about what they do for us as customers, whether they deliver good returns to us as shareholders, and whether they stay within the law. Everything else is so much envious wibble.

Now public sector pay, that's a different matter entirely. Because we have to fund that through compulsory taxation. We're very interested indeed in what those guys get paid because it comes straight out of our wallets. We can't choose to take our custom elsewhere, and we can't sell our shares in their companies.

So what does he say on top public sector pay - ie the job he was asked to do.

First, he tells us that there are now no fewer than 20,000 public sector employees in the top 1% of income earners (earning over £117,523 pa). Well, actually he doesn't tell us that - he merely rehashes some numbers given on a recent Panorama programme.

Anyway, most of those 20,000 turn out to be doctors employed by the NHS (ah, those brilliant Simple Shopper pay deals). But there are also 4,000 managers distributed across the various bits of the public sector as follows:

These findings are broadly consistent with what the TPA has previously published in its Public Sector Rich Lists (eg here) - if anything, Hutton's overall fatcat number is a shade higher than the TPA's.

In terms of pay growth under Labour, Hutton confirms that top public sector managers generally did outstandingly well. For example, between 2000 and 2009 chief execs of NHS hospital trusts got an average 50% increase in real terms:

The bottom line is that Hutton pretty well agrees with everything the TPA has been saying on public sector fatcats. So naturally he offers his thanks to the TPA for their outstanding service to taxpayers.

Except... just a cotton pickin' minute... he doesn't offer his thanks.. Actually he suggests the TPA has been misleading the public:

" Top pay in the public sector has come under greater media scrutiny in recent years... But public understanding remains divorced from the data set out in this[report]...

Limited understanding feeds through into the wider debate. Campaign groups such as the Taxpayer' Alliance argue that the public sector must get value for money – which they define as paying the lowest amount to secure a suitable candidate – but that it does not currently achieve this...

A media narrative which over-concentrates on public sector 'fat cats' while not offering the same proper scepticism and focus over what is happening at the top of the private sector does not lead to understanding, and can undermine the desirable move to greater transparency over pay."

Allow me to translate:

The TPA has been far too successful in focusing the public's attention on the cavalier way in which the public sector wastes their hard-earned cash. The spotlight on fatcat pay, and the number of bureaucrats who get paid more than the Prime Minister, has resonated with taxpayers in a way that has caused huge discomfort for the promotors of big government. People like Hutton need to hit back, and they aim to throw taxpayers off the scent by suggesting the real problem is excessive pay in the private sector. Welcome back 1970s incomes policy and the politics of envy.

And what about the job Mr Cam actually asked him to do? That 20-to-1 pay ratio cap for the public sector?

Well, Hutton likes the idea. He likes it for a number of reasons, but in particular:

"A pay ratio is an easily understandable reference point, and could give the public confidence that public sector pay is being kept in check. Defined appropriately, this can have more flexibility than merely using the Prime Minister's salary as a benchmark."

In other words, by accepting this ratio cap, public bosses could maybe get taxpayers off their back, while simultaneously getting round the current de facto pay cap of the PM's salary. The latter clearly has to go, since post Cam's self-imposed cut, it's down to a measily £142,500 pa.

Are you ready to be fooled?

PS So should Mervyn King be fired as Bank Governor? The preposterous lefty Blanchflower reckons so, because of King's supposed political bias. But in truth, there is no bias. Like most of his predecessors, King almost certainly reckons everyone down the Westminster end of town is rubbish. The WikiLeaks "revelation" that he thought Cam and George inexperienced and too political is what all previous Governors have thought about all inexperienced politicos ever since 1694 - you should have heard what Governor William Ewer said about Pitt the Younger in 1782. Cam would be mad to sack King - we'd be straight back to the final bunker days of Mad Murdo McMad.

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