In a stark assessment of the human impact of the cuts the coalition says are required to tackle the ballooning deficit, the Chartered Institute of Personnel and Development, says unemployment will rise to a peak of 2.95 million in the second half of 2012 and remain near that level until 2015, the entire period of the coalition government.
However, the CIPD has this entirely wrong.
As I have argued, a year ago, with the situation now being worse than then:
To cut spending by 10% overall £57 billion of extra cuts are required on top of the sacking 500,000 people to eliminate their employment cost. These savings would need to be made up of:
1. Reduced benefits, which will result in reduced consumer spending, or
2. Reduced payments to private sector contractors to provide work to the government.
Either way there is reduced demand. £57 billion of reduced demand. Of which 65% approximately will go to labour based on the share of labour in GDP. That’s £37 billion of labour cuts then. At £25,000 or so a head (approximately, given that's the average wage) that’s over 1.5 million more unemployed in the private sector on top of those made redundant in the state sector.
That, with the losses from the public sector adds more than 2 million to unemployment – making well over 4 million in all.
In other words - the CIPD is being wholly unrealistic in thinking job cuts can be contained n the public sector. That's not true. What's more - it is inevitable that cuts in spending of the scale planned will result in more private sector than public sector job losses.
The irony of the private sector begging for this outcome has yet to dawn on them.