Reform wants people off benefits. But where are the jobs?

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Robert Jenrick MP, the former Tory who now skulks beside Nigel Farage on the Reform bench in Parliament, thinks Britain has what he calls a welfare problem. In itself, that is not a term I recognise. The UK's social safety net is not a welfare system; it provides social security.

But the real issue is not that: I think Jenrick has deliberately missed a much bigger problem, which is that Britain has an employment problem. If he is pointing a finger of blame, he is doing so in the wrong direction.

Writing in the Telegraph to promote Reform UK's proposed reform of disability and sickness benefits, Jenrick argues that too many people, particularly young people with mental health problems, are being abandoned on benefits when they should instead be helped back into work.

His argument is that work provides a person with structure, purpose and social contact and that, as a result, putting people on long-term benefits can sometimes make their situation worse rather than better.

There is an element of truth in that argument. There is nothing compassionate about abandoning someone who wants to work to a life in which no one asks what they might be able to do, what support they need, or how they might participate in society. It is true that work can provide some people with purpose, company, income and a sense of belonging. I agree that a social security system should not presume that someone who has experienced anxiety, depression or another illness has nothing to contribute through work.

But Jenrick's argument has a gaping hole in it. He assumes that if people currently receiving benefits could be persuaded, encouraged or, most especially, compelled to look for work, employment would be available for them. He offers almost no evidence that this is true.

I am sure that there is good reason for that. He must know that those jobs do not exist. The latest official figures from the Office for National Statistics make that clear. UK unemployment is now around five per cent. The situation among young people is considerably worse, with unemployment exceeding ten per cent on the usual measures.

At the same time, vacancies have been falling. There are already substantially more officially unemployed people than there are jobs available, with the ONS saying there are 2.5 unemployed people for every vacancy in the UK at present, even before Jenrick potentially adds millions of people to the queue who are currently receiving sickness and disability benefits.

This matters because Jenrick is confusing two quite different economic issues. Some people who have been unable to work can reach the point where they want to. They can receive treatment, advice and support to do so. I do not dispute that. They may want the structure, income, and social life that employment can provide. But none of those things will create a job for them.

Jenrick is, in other words, offering a microeconomic explanation without providing a macroeconomic explanation for why his proposal will work. He is looking at an individual who is not working and asking what is wrong with that person's incentives, circumstances or state of mind. But unemployment cannot be understood simply by adding together millions of individual decisions about whether or not to work.

As Keynes explained almost a century ago, the economy must also have sufficient demand for labour. If there are fewer jobs than people wanting them, some people must, as a matter of arithmetic, remain unemployed. Jenrick is ignoring that and is instead seeking to make matters much worse for those currently receiving social security payments to help them manage their situations.

There is another dimension to this.  An extraordinary contradiction at the heart of current British economic policy is almost always ignored when discussion turns to employment. Most politicians seem to have overlooked the fact that the Bank of England has deliberately maintained high interest rates as part of its attempt to control inflation, and that the purpose of that policy is to suppress demand in the economy.

Those setting these high rates assume they will discourage investment, increase borrowing costs, reduce disposable incomes, and constrain consumption. As a result, they believe businesses facing weaker demand will invest less and require fewer workers. That is the outcome they seek. In that case, a weaker labour market is not simply an unfortunate and unforeseen consequence of tight monetary policy. It is one of the mechanisms through which that policy is intended to reduce inflation.

We do, therefore, have one part of the British state (of which the Bank of England is most definitely a part) pursuing an economic policy intended to weaken demand for labour while politicians, seemingly totally unaware of this,  simultaneously complain that too many people are not working. The Bank of England is deliberately creating the conditions in which unemployment is rising, while Robert Jenrick is proposing that people who cannot find employment should suffer income reductions because they have failed to obtain jobs that economic policy has deliberately ensured do not exist.

That contradiction destroys much of the logic underpinning Jenrick's proposal. To demonstrate that,  just suppose, for the sake of argument, that his reforms worked exactly as intended. Suppose hundreds of thousands of people currently receiving sickness and disability benefits were reassessed, received treatment and employment support, and became willing and able to work. What would happen? They would simply join an already substantial queue of people seeking an inadequate number of jobs, and may receive very little financial support while searching in vain for a job the Bank of England is deliberately denying them.

Jenrick does, therefore, need to answer a question that is almost entirely absent from his argument, which is where are the jobs he thinks people should be taking?  But this is just one of several critical questions he must answer.

If he wants potentially millions more people to enter the labour market, how many additional jobs does he expect the economy to create?

Why will it create them?

Where will the new demand come from, especially as his party is planning deep cuts in government spending?

What economic policy does he propose that will create the additional demand required to employ all these people?

Where will those jobs be located?

What skills will they require?

What will they pay?

Will employers recruit people who have histories of mental ill health, disability or prolonged periods outside employment when others might be available?

What happens in those parts of the country where suitable vacancies simply do not exist?

In other words, just what macroeconomic policy underpins his microeconomic thinking? There seems to be none.

That is reflected by failings elsewhere in his argument.  What he ignores, or is unaware of, is that if benefits are withdrawn from people who cannot find work, their spending will fall. Those people will then buy less from their local shops and businesses. Aggregate demand will consequently fall, and businesses facing lower demand might employ fewer people. At sufficient scale, this means that a programme supposedly intended to increase employment could contribute to the destruction of employment. This looks much less like a strategy for getting people into work than an austerity programme presented in what Jenrick might think is the language of compassion, but which is anything but that.

(Speaking of language, see my separate post on Jenrick's choice of language on this issue, here).

The real issue, then, is not whether work can be beneficial. Of course it can. Nor is it whether people who can and want to work should be supported in doing so. They should be. The issue is whether our economy actually provides the opportunities that politicians insist people must take.

If Jenrick wants millions more people in employment, he must explain how millions more suitable employment opportunities will be created. He must explain how that objective is compatible with a monetary policy deliberately designed to constrain demand. He must explain what happens when several people are already competing for every vacancy before his reforms add still more people to the labour market. And he must explain why taking income away from someone for whom there is no suitable employment will somehow create a job for them.

Until he answers those questions, Reform's proposal should not be described as a programme for getting people into work. It is a programme for getting people off benefits, and those are very different things.

You cannot solve unemployment by increasing the number of people competing for jobs that do not exist. That is neoliberal thinking gone mad. Nor can politicians claim compassion for people experiencing mental ill health while threatening their incomes and ignoring an economic policy that deliberately suppresses the demand for their labour.

But let me reiterate my key point. If Reform really wants to make social security work, the first question Jenrick must answer is simple: where are the jobs that provide its alternative? Without a policy to create them, nothing Jenrick might say makes any sense.

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