Economic miracle or economic mire?

It now seems there have been more miracles attributed to the Tories than to Jesus Christ himself. So many economic miracles the Tory press don’t know who to raise to political sainthood.

They seem to be opting for either Saint Ian Duncan Smith or Saint George Osborne. Tough choice.

It’s Duncan Smith for those who attribute the “jobs miracle” to welfare reforms for driving – as the Tories see it – the feckless and lazy off benefit and into work. And it’s Osborne for the overall economic miracle by cutting taxes and “making work pay”.

Just recall the scene in the Life of Brian when the blind man declares he can now see and – when he obviously can’t – steps into a pit. Self-delusion is a wonderful thing.

The Tories claim two million jobs have been created since 2010. If that is true – and it’s a big if – what type of jobs have been created, how, and does everything add up to an economic miracle?

Half the jobs created since 2010 have been filled by migrant workers lured by employers with the promise of a better life and a job that can’t be filled but needs to be done.

These jobs being created and filled cannot possibly then be put down to welfare reforms – in Tory eyes – pushing lazy Brits off welfare and into work.

Welfare reforms

There is little to suggest that welfare reforms have played any role in job creation and filling vacancies. In fact people working for benefits only, under the work programme count as being fully employed.

And job creation can’t be attributed to “making work pay” for UK workers. Not if they are being filled by economic migrants.

If you want to know what an economic migrant is, and if you are old enough, just think of Auf Weidersehn, Pet about the Brits who went to work in Germany. Without them filling jobs, a lot of services come to a halt.

But what type of jobs are being created? A variety of low-paid low-skill work where the earnings are not enough to pay much tax.

Since 2012 the number on zero hours contracts has tripled from around 200,000 to over 600,000. Zero hours means no guaranteed income at all.

And 1.3m people are in enforced part-time working. That is they are prepared to work more hours, but the work is not available.

Self-employment has also been on the rise. Of the 1.1m jobs added to the workforce from 2008 and 2014, three out of four were self-employed.

Still sounds promising? Drill down a bit and you find a subsistence living often on very low income. But these workers are out of the work programme, free from the sanctions regime and onto tax credits.

So low paid, precarious work – including full-time work –with little security of either job or income. Doesn’t exactly sound like a miracle does it?

And we know that tax income has been hit because of low pay. As the government budget deficit grew by around 14 per cent, tax revenues only grew by 1 per cent.

Real wages fallen

According to the Institute of Fiscal Studies, real wages – taking account of the impact of inflation – have fallen by 5.7 per cent since 2010. And that’s an average across the UK; some areas are reporting cuts in the buying power of pay of nearly twice that.

Wages are performing a bit better in relation to inflation. But it could be many years before they recover to pre-banking crash levels, if they recover at all.

And what about economic growth, or the lack of it? Much of recent economic growth has been attributed to population growth – more people producing more goods and services to meet the demand of a growing population. That is a virtuous circle, not a miracle.

And it exposes one big problem. While more people in work means increased economic growth overall (as Gross Domestic Product), how much we each create has been stagnant since the banking crash.

We’re making more because there are more of us, not because we’re getting better at it. So productivity – how much we each create – has not increased. That is not a miracle either.

And two further problems have also arrived. Growth has taken a nosedive in the most recent three months with much of Europe now outperforming the UK.

Inflation has also dropped because of falling oil and supermarket prices. That could be temporary or take an even worse turn.

One other big problem is with us. There is now a chronic trade deficit. That means we are importing more into the country than we are exporting.

Low levels of growth, very low inflation, the value of wages knocked badly followed by poor wage growth, a chronic trade deficit, job creation but at subsistence levels of pay and poor productivity.

That does not point to an economic miracle. It points to an economic mire.