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The fear of Unemployment

“Unemployment” is a most complex phenomenon, and still poorly understood. It was Nicholas Ridley, when a Tory Minister in the 1980s, who infamously said that the fear of employment was “only in the mind”, seeming to dismiss it for that reason.  But there was an element of truth in what he said.  For  all fear lies in the realm of expectation, “in the mind”.  And fear must be addressed politically as a distinct phenomenon, quite independently of the phenomenon to which it relates.   

In the case of unemployment, it is rarely the loss of the job itself which generates anxiety, although it is possible to imagine such circumstances.  What is feared is the loss of income flowing from unemployment, the disruption of family and social life triggered by loss of income, indeed for some the perceived loss of social status in becoming “unemployed”.  Our society has become one in which the employment system, the realm of paid-work, constitutes the primary network for the socially-acceptable distribution of wealth, and the primary source of social status and perceived self-worth.  “New” Labour chose deliberately to reinforce that institutional emphasis.  Gordon Brown has committed his entire political reputation to the cultivation of paid “work” as the primary institution of society.  Our educational and examination systems are being systematically changed into an institutional network for the training of employees.   Educational qualifications are construed principally as passports to higher salaries.   

Nor is this emphasis “wrong”, in any political or absolute sense.   It is evident that all societies need to encourage productive activity rather than wasteful inactivity.  All evidence suggests that an active body of citizens is much more likely to be prosperous, successful, confident, capable of solving the multitudinous problems of their very survival.  Gordon Brown’s zealous cultivation of “work” is certainly not misplaced. 

Yet the very success of the work ethic has had some adverse consequences.   There are many casualties.  More and more people now fear the very prospect of being without work, unemployed – indeed, that fear is perhaps now more corrosive than it ever was, even in the “Great Depression” of the 1930s.  For most of our fellow-citizens now have much more to lose than they did then, if unemployment strikes.  And the fear of unemployment, by casting its shadow before it, can depress consumer demand, which in the modern consumer economy is fatal to its success.  That is one of the factors inhibiting the revival of ailing Japanese economy. There is no doubt that all modern societies face a growing problem, not only with unemployment, but with the fear of unemployment. 

As the Liberals’ Yellow Book famously asked in 1929 - What is to be done?   I believe that socialists have a vital contribution to make to the answer.   First,  we should gradually reduce people’s dependence upon work-systems as the primary network for the distribution of wealth.  We must deploy the power of the State to assist our fellow citizens.  In certain sectors, the public tax/benefit system should perform a wider function, by way of the payment of universal, non means-tested benefits.  The universal Child Benefit, an earlier socialist innovation, remains a glittering success, and it should be retained.  But Child Benefit should be supplemented, for any parent remaining out of the labour market to look after young children full-time, by a substantial Guardianship Allowance (not less than £5,000 pa at current rates): that would meet the “second-wage” requirement of most families, and reduce family dependence upon the paid-work system.  Gordon Brown, with his “Working Families Tax Credit”, has been misled by his obsession with the paid-work system: a Guardianship Allowance would be more dignified, and would be far more effective in calming peoples’ fears.   

We should pay School Attendance Allowance to all children remaining in full-time education above 16, thus reducing still further their family’s dependence on paid-work.  We should create a new system of repayable Student Support Benefit for the 18+ year-olds, not structured as a Loan but triggering an obligation to repay (with interest) only by way of an Income Tax supplement, related by a fixed percentage to any actual Income Tax subsequently payable.  The weight of parental contributions to higher-education costs should be significantly reduced, thus leaving more resources with parents, for their own purposes.  If the Benefit-funded student did not graduate or achieve an appropriate qualification, the Benefit re-claim would simply be written off.  If the graduate spent life in very low-paid employment, or unemployed, or in voluntary work, the Benefit might never be repaid in full. The graduate who joined a monastery, on an unpaid basis, and who never paid any Income Tax, would be under no obligation to repay the Benefit at all.  But those who could afford to repay, over their lifetime, would be legally required to do so, making the repayments as a tax.  Upon the graduate’s death, however, any Benefit re-claim would be written off, and would not stand as a claw-back against the estate.  

These measures would all reduce the relative significance of paid-employment as a wealth-dstributor, allowing the State to share that function more extensively.   But secondly, we should devise new forms of “employment security”, and stand firm against the idea that particular jobs should simply be “more effectively protected”, or conserved.  Tony Blair has been widely criticised for his attack on Continental welfare-state systems, for the inflexibility of their labour markets – but he is in the right.  Indeed, there are disturbing signs that the UK trade unions, influenced by the apparent success of Continental trade unions, may be reverting to this form of job protectionism.  Yet these conventions and legal devices, which indeed do still characterise many Continental countries, are themselves destructive, weakening national economies and obstructing desirable social and economic change.  Nothing should be done to prevent employing organisations (in both the private/market and public/managed sectors) reducing their workforces if their management considers it necessary do so: indeed, all obstacles to rapid change should be dismantled.   

How then, is the fear of unemployment to be allayed?   We need new, and more sophisticated, forms of collective reassurance.  As socialists, we must ensure that the financial burden of these changes falls on the shoulders of those best able to bear it, namely (a) the employer and (b) the State.   Workers should not bear the burden.  In France, although the rate of unemployment remains persistently high (at 10%), there is no sign of consumer demand being weakened by the fear of unemployment.  That is because Unemployment Benefit is held at high-levels, paying a high proportion of a worker’s prior salary for a period of nine months.  

This suggests that in the UK we should introduce, in place of Redundancy Payments, a new form of Adjustment Pay, payable for six months following any termination of employment (unless for gross misconduct).   Responsibility for paying Adjustment Pay would in the first instance lie with the employer, and it would not take the form of a lump-sum: rather, the employee should simply continue to receive periodic wages, post-Tax and post-NI, precisely as before but without having to work during the adjustment period.   The employer would have an incentive to find each worker alternative employment, because upon the identification of comparable alternative employment, the obligation to pay Adjustment Pay would cease.  The funding of Adjustment Pay would be the subject of negotiation between the government and employers’ organisations, perhaps with the Government making contributions to a Common Fund, to pay adjustment pay in the event of an employer’s failure or liquidation.  Employers would have a great deal to gain from this change - (a) it would replace the Redundancy Payments system entirely; (b) it would remove the social and public opprobrium associated with “destroying jobs”;  (c) it would drastically reduce the number of Industrial Tribunal proceedings for unfair dismissal, most of which end up in any event with lump-sum payments of less than six-months’ wages; and (d) the conscientious employer could reduce its liability still further by assisting its employees to find suitable new job, e.g. by appointing an employment agency to work on its behalf.  

The certainty that Adjustment Pay would be payable in the event of dismissal, and that the life of no household could be disrupted at less than six months’ notice, would make huge inroads into the fear of unemployment, without going as far as the expensive French commitment. 

The fear of Old Age

This is the oldest and most corrosive fear of all, and it remains with us.  In poorer societies, with weak state systems, this is the fear underpinning high birth-rates, and the determination to ensure that the family will support parents in their old age.  The fear perssists: even the wealthy may harbour the fear that they will lose all their wealth, and have to face old age in impoverishment.  Indeed in our own ways we all seem to fear the loss of usefulness, the loss of earning power, the prospect of being unable to maintain the wherewithal of life in old age.  In this case, the diagnosis is straightforward, and cannot be greatly embellished.  The question is - “What is to be done about it?” 

The fear is in part addressed indirectly, in other ways, by overlapping policy initiatives.  For example, a health service which succeeded in satisfying all citizens that the old would at all times be properly treated regardless of old age, would greatly reduce the incidence of anxiety generally.  For it is not only the aged who fear the inadequacy of public provision - it is their offspring and other members of their family, upon whom the financial burden of NHS failure might fall, if it were to occur.  Evidence of such failure therefore has an unsettling effect in two ways, increasing anxiety levels.  While 75-year-old Grandma may fear for herself and her future, her 50-year-old daughter may well fear both for the effect of her mother’s inadequate care upon the well-being of her own family and the prospect of the same thing happening to her, when she reaches 75.  Media reports of old people disregarded by the NHS can have a complex “anxiety effect”, rippling out to other age-groups.  Fears interact, and play upon each other. 

But the principal concern lies with old age pensions, coupled with the fear (for a home-owning society) of being forced to sell “the family home” to pay the costs of life’s final stages.  Labour has not yet found satisfactory means of countering either of these fears.  It is true that the Government has greatly improved the actual standard of living of today’s poorer pensioners, by using a means-tested minimum income guarantee: that is an important achievement, and should not be disregarded.  

But this does little to counter the fear of impoverishment in old age, as it affects the 30-somethings, 40-somethings, and 50-somethings.  Here, it is now quite apparent that the only satisfactory solution will be the reinstatement, as a matter of egalitarian socialist principle, of a satisfactory State Old Age Pension.  And by that I mean (at current monetary values) the equivalent of £7,500 per annum for each person, eliminating the marriage-abatement introduced in 1927.  Every pensioner-couple should be entitled to receive £15,000 pa by way of a flat-rate, non means-tested pension, at current monetary values.  With a less-than-complete contribution record, that pension would be correspondingly abated.  That pension would be indexed to the average wage, thus ensuring that pensioners always shared in any rise (or fall) in the society’s overall standard of living.   For my part, I accept that the full State Old Age Pension should not be payable until the age of 67, although I recognise that many socialists will dispute that.  Provision should certainly be made for limited payments to be made from 60 onwards, as of right and with predetermined consequences, thus facilitating the acceptance of low-wage or part-time work in the period 60/67.   And the private pensions industry would be well-placed to sell supplementary pensions package, facilitating earlier full retirement, if required.  

This change-of-direction will be difficult to achieve, because Labour has devoted so much effort since 1997 rowing away from it, in the direction of funded private-sector provision.  That has already proved a will-o’-th’-wisp, a chimera.  Those aspirations, which were rejected by many socialists as a matter of principle, have now been falsified as a matter of fact.  The Thatcherite juggernaut has finally ground to a halt, with Labour Ministers tragically at the controls.    

As a variation on the private-pension theme, Labour’s 2001 Stakeholder Pension scheme has been in part successful, driving down the City’s plundering of pension-funds by way of commission and management-fees.  But it is already clear that the Stakeholder Pension, a contributory private pension regulated by the State, will be unsuccessful in meeting the growing pensions gap, at least if it remains on its present footing.  Socialists should oppose the payment of any substantial subsidies into the scheme, just to salvage it.  The weakening of the Stock Market, the disaster of Equitable Life, the withdrawal of employers from final-salary pension schemes, and the dramatic effect of disclosure on the perceived stability of private pension schemes have all eroded public confidence.  Now, to all the other fears of old age must be added the well-founded fear of pension-fund collapse.   

Only the State can counter these deep-seated worries, this corrosive fear.  It is not a matter of debating whether or not society “can afford it”.  Relieving all our citizens of their principal anxiety about old age is a precondition of a decent, liberal, human, society.  The socialist priority is to create a social order in which this primordial fear of old age is finally laid to rest. 

Compared with the central importance of this socialist commitment, other measures fall into insignificance.   But there are nevertheless two other measures which I commend, and which would strengthen the confidence of the middle-aged, in all their futures.   

First: National Savings should be expanded to cater for supplementary personal pension provision.  NS should accept personal savings contributions on the footing that they would carry an attractive guaranteed flat-rate of interest, which might in current conditions be 5% (in this respect analogous to the present Pensioner Bonds, although with interest-rates capable of adjustment from time to time).  NS would be free to invest the proceeds elsewhere, to earn higher-rates of interest to offset the cost of the guarantee.  But the State would give to the saver the assurance of a guaranteed cumulative rate-of-return.  Savings could not be drawn out until after the age of 55, after which they could be withdrawn at any time, for expenditure or for conversion into annuities to supplement the State Pension from age-60 onwards.  There may be a case for permitting National Savings to offer state-guaranteed annuities, thus enhancing public confidence still further. 

Second: Many pensioners are concerned with the risk of “losing their home”, if they have to enter public residential care, and are required to sell the property to meet the costs of residential care.  There is real anxiety abroad about this, affecting many families.   The Government has so far refused to do anything about this fear, and I recognise that it is difficult to find any convincing “socialist” reason for intervening.   

Nevertheless, given the widespread incidence of this fear, I consider that Labour should take action.   We should give to every one of our fellow citizens the absolute assurance that, whatever medical or other vicissitudes old age should bring, they will never re required to sell their principal private residence.  Even the non-socialist United States has decided not to require the sale of the principal family home, in the administration of welfare benefits: if other funds run out, the family home is protected, and the cost-risk passes to the State.  As a matter of common-sense, this would be an effective way of reducing the uncertainties of old-age.  We should do the same. 

”In Place of Fear”, 1952.  Aneurin Bevan’s perceptions are still alive, provocative, and capable of generating socialist strategies for the next generation.  I get tired of learned lectures entitled “Whither Socialism?” or “The End of Socialism”.  The challenges of socialism are live and urgent, and demand the greatest resources of ingenuity and energy that we can muster.