Just Keep Moving

On Friday Iain Duncan Smith advised the unemployed to 'get on a bus' to find work. As well as being incredibly patronising, this talk of the 'flexible labour market' ignores both economic theory and observable reality.

For a start, there is no economic rule that there will ever be enough jobs for everyone. At the moment, jobseekers outnumber vacancies to an almost farcical degree in economically weaker areas of the country. In the area of Wales Iain was discussing in his speech, for instance, there are approximately nine unemployed people for every vacancy. Presumably Mr. Duncan Smith would suggest that all those unable to get a job either commute further or move out of Wales.

Helpfully, the government will be making both options much more expensive in coming months and years. The costs of road, rail and bus travel will all rise. Petrol prices are creeping up again, VAT hits 20% in January, and the fuel escalator kicks back in next year. Road pricing is back on the cards. Bus subsidies are being cut by 20%. Rail fares will rise by 3% plus the Retail Price Index (currently 4.6%) each of the next three years. In fact, it looks like the best option will indeed be to get on your bike, as Norman Tebbit so famously suggested. Unfortunately, cycling from Wales to London on a daily basis is scarcely practical.

Moving house to get a job, though, would be even harder. Housing benefit is being substantially cut, the affordable housing budget has been hung, drawn and quartered (post on this to follow), and those in social housing have a newly created massive disincentive to move. New social tenancies will be on a novel and deceptively named 'affordable rent' basis, constituting 80% of market rent. That might sound reasonable, but in London would result in rents tripling. In Cambridge, I gather social rent would double under the new terms. Existing tenancies will remain on the same terms as they were created. If moving house would inevitably result in a vast increase in your rent, it would take a very attractive job to get you packing.

As with all the policy currently being made, Iain Duncan Smith's approach is entirely predicated on reducing spending, in this case on welfare. The Department of Work and Pensions isn't trying to strengthen the economy, reduce regional inequality, tackle long-term unemployment, or improve business confidence. It is assumed that swiftly reducing the deficit will cause these things to magically occur all by themselves. A number of nobel prize winning economists are sceptical of this.

Crudely cutting benefits, especially housing benefit, isn't going to make the labour market more flexible or create jobs. Indeed, jobs will be rapidly lost as the cuts bite. Encouraging people to move, or indeed forcing them to, is useless when there aren't jobs available. In the UK, housing costs strongly correlate with job availability, as house building has failed to keep up with demand in successful areas. Cuts to housing benefit and the affordable housing budget will move the unemployed away from jobs. Further away than they can commute, even if travel costs weren't rising steeply.

There's another significant problem here, and it concerns the Big Society. If communities are to unite in order to provide their own public services, as the coalition expects, they will need to be stable and cohesive. Housing benefit cuts will force hundreds of thousands of people to move, causing huge social upheaval. What hope have unsettled and precarious communities of successfully running libraries, community centres, and schools?

High levels of spending on welfare are a symptom of a geographically unbalanced economy and hugely dysfunctional housing market. Coalition policy is ignoring these causes in favour of the idea that anyone without a job just isn't trying hard enough. Again, it's hard to reconcile this insistence on believing the worst of people with a sudden flowering of voluntary work and community enterprise. All I can conclude is the government doesn't understand that things are connected, things like jobs and housing and transport. I wouldn't have thought that was too complex an idea to grasp, but unfortunately the Diary of a Civil Servant confirms that it is.