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Dan Watkins: Today's employment figures show we are creating jobs for those struggling at the margins of the economy

Watkins DanDan Watkins is a London-based entrepreneur – he founded Contact Law and is now a director of Energy Alert . Dan is also the Deputy Chairman of Tooting Conservatives Association.

Amidst the gloom of the media’s economic coverage, little has been made of what looks to be a very positive development in the labour market, namely strong employment growth. It’s a pity that commentators have spent such little time focussing on this trend, because if you asked the man on the street whether he’d rather have GDP or jobs growth, you’d get a universal vote for the latter.

Looking at the figures, employment has been growing steadily over the past two years, and now stands at 29.4million, despite stalled economic growth. This is half a million higher than when the Coalition came to power, and only 200,000 beneath the all-time high achieved at the end of the boom in early 2008. We should be wary of making extrapolations given the propensity for economic data to surprise, but if we do, we would surpass the 2008 peak at the end of this year.

In fact, the 500,000 new job figure masks an even stronger underlying trend. The economy has lost about 400,000 public sector jobs since the UK started bringing its public finances back under control, meaning that the level of private sector job creation has been close to one million during these two years. So despite high oil prices and the Eurozone crisis, the British labour market has performed very well.

Assuming the GDP data is broadly correct, then to square the circle of flat GDP with increased employment, we must be creating a larger number of low productivity jobs than usual. Economic commentators frequently bemoan this, presumably because they prefer that everyone be in a highly skilled, highly paid job. But the reality is that not everyone is capable of filling such roles. Many of today’s adults missed out on the good parenting and schooling that are the foundation of developing high productivity skills, and we should be pleased that we are creating lower skilled opportunities that allow them to earn a living and start developing workplace skills on the job.

But where do these lower skilled jobs come from? Little research has been done on this topic, but as an entrepreneur I can offer a suggestion. In recent years, Britain has seen a big increase in the adoption of services marketed on the internet, which in turn facilitate the expansion of lower skilled jobs.

So for example, if you Google "handyman" or "gardener" you will find several regional or nationwide businesses with sophisticated websites that make it simple for consumers to hire a good value and reliable tradesman to do a few hours of work for them. Prior to the web, the transaction costs associated with offering these low value services meant that it wasn’t economic for such companies to exist, and many consumers would leave these tasks un-done.

Now there is a win-win not just for consumers and suppliers, but also for the workers who do the gardening or handyman work. Previously these individuals could have touted for such jobs on a self-employed basis in their local area. But without basic skills in literacy and numeracy, the challenge of running a business would be too much for many to overcome. Now they can work as employees for one of these "website" businesses, collecting a wage for the jobs they are asked to fulfill.

This development is not just restricted to manual service industry jobs, but also home-based clerical and semi-skilled working too, where web companies are marketing a whole host of personal and business services online, as diverse as health & beauty services or data entry. The workers in these industries will likely have some skills, and are often able to work on a self-employed basis, but typically will lack the capital and business development skills required to generate work. As such, lead generation websites reduce the barriers for these workers to move into (self) employment.

By looking at the official data, we should also be encouraged that many of these new jobs appear to be full-time, since the proportion of the workforce which is part-time has only increased by 2% in the past few years.

In the long-term, I am optimistic that the educational, welfare and other supply-side reforms put in place by the Conservatives will produce more highly skilled individuals who will fulfill higher productivity jobs. But in the meantime, we can be pleased that we have an economy able to create jobs for those formerly struggling at the margins of the economy.


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