The employment figures attached to large projects tend to be codswallop.
By George Monbiot. Published in the Guardian 1st April 2008
There is no nonsense so gross that it cannot be justified by the creation of jobs. The Ministry of Defence has just announced that it’s spending £13bn of our money – via a fantastically complicated private finance scheme – on a fleet of refuelling planes. Do we need them? Only if we intend to attack another defenceless country. But it’s worthwhile, because the new contract will “create up to 600 jobs at AirTanker Ltd, and will safeguard up to 3,000 jobs directly at British sites, with thousands more sustained indirectly.”(1)
John Hutton claims that new nuclear power stations will generate not only the energy we need, but also 100,000 new jobs(2). When and how? Here or in France? Northumberland County Council has revealed that it is spending £3.6 million on one new roundabout, at Haltwhistle. A staggering waste of public money? No, “it will both attract new jobs to the town and secure existing employment.”(3)
It is true that investment creates employment. But jobs are used to justify anything and everything. If recession strikes, the political value of any scheme which boosts them will rise. Projects which in more prosperous times might have been rejected by planners or ministers will suddenly find favour. Anyone who stands in their way – however daft the schemes may be – will be walloped as an anti-social Luddite.
But the big question is asked very rarely in the press: how reliable are these promises? Whenever a new defence contract or superstore or road or airport is announced, the papers and broadcasters repeat the employment figures without questioning them. They rarely return to the story to discover whether the claims were true.
The Guardian’s research service was able to find only two stories which challenged individual claims about job creation. One, from 2003, covered a National Audit Office investigation into the government’s grants to companies in deprived areas(4). The grants cost the taxpayer £1.4bn and were meant to have created or protected 300,000 jobs. But the auditors found that only 45% of these jobs were additional: the rest would have been saved or created if the grants hadn’t existed. Of these, 11% displaced other jobs in the same region, even when the multiplier effect (jobs creating further jobs) was taken into account(5). The schemes had worked, but not as well as the government had claimed.
The other story, in February this year, reported an odd but quite common phenomenom: a private equity boss attacking his own industry. Jon Moulton, the founder of Alchemy Partners, berated his own trade body for using “very dodgy statistics”(6). The British Venture Capital Association had claimed that jobs at private equity firms have risen by 8% a year over the past five years, while in publicly-listed companies jobs have grown by only 0.4% a year(7).
Speaking at the industry’s SuperReturn 2008 conference, Moulton pointed out that the association’s figures excluded the private equity firms that had gone out of business. “If you use an adjusted figure, the number should be more like zero. We’re putting these things out as fact and we shouldn’t.”
Many of the published figures have to be wrong. At the beginning of his nuclear speech, John Hutton praised the efforts of Dougie Rooney, the energy officer for the trade union Unite, for his “unique contribution to nuclear’s renaissance in the UK”. But they can’t get their story straight. Rooney has claimed that the nuclear programme will generate 10,000 new jobs: one tenth of Hutton’s figure(8).
Ten years ago, a research organisation called the National Retail Planning Forum – financed by Sainsbury, Tesco, Marks and Spencer, Boots and John Lewis – published a report on the superstores’ impact on employment. It found that there is “strong evidence that new out-of-centre superstores have a negative net impact on retail employment up to 15 km away.”(9) The 93 stores the forum studied were responsible for the net loss of 25,685 employees: every time a large supermarket opened, 276 people lost their jobs. This is hardly surprising. The New Economics Foundation has calculated that every £50,000 spent in small local shops creates one job. You must spend £250,000 in superstores for the same result(10).
But the press – especially the local papers – reports Eldorado every time a new store opens. In the past few days the Telegraph and Argus claimed that Marks and Spencer will create 2,500 new jobs in Bradford(11); the Halifax Evening Courier announced that the local B&Q will hatch an extra 60 jobs by moving to bigger premises(12); the BBC published a story headlined “Morrisons site creates 1,000 jobs”(13). Seldom is there a word about the employment these schemes will destroy.
To produce a definitive account of the gap between the claims made by companies promoting new schemes and the jobs they really deliver would take years. Instead, I asked a researcher, Nicola Cutcher, to conduct a rough sampling exercise. She took the latest year for which job figures are broken down by the size of employer are available – 2006 – and selected the middle week of each quarter. She then went through all the stories that mentioned the word “jobs” in a press database(14), selecting those which reported new openings or closures by large enterprises (over 250 staff) that were definitely taking place. She ensured that each claim was counted only once. To produce a rough average for the year, she multiplied the four weeks by 13.
The government reports that the number of jobs among large enterprises rose by 189,000 between 2005 and 2006(15). Our rough sample suggests a net gain of 1.4 million, or 7.4 times the official rate. If the same exaggeration applied to the whole economy, there would be 218 million workers in the United Kingdom(16).
This exercise has severe limitations. Job figures tend to be quite lumpy. Some of the posts take several years to create, so they won’t show up in the 2006 figures; though 2006, of course, harvested the jobs announced in previous years. But the gains among large employers this decade have fluctuated between 160,000 and 330,000(17): in no year has anything like 1.4 million net jobs been created.
Should we be surprised by such exaggerations? Of course not. Though the papers are generally good at reporting job cuts, they rely for the good news on companies and government departments that have an interest in talking up the benefits of their schemes. There is also plenty of confusion, often cunningly sown in corporate press releases, about whether the new jobs are being created directly or indirectly. When claiming wider benefits for their schemes, employers use the most generous possible multiplier effects. The indirect employment claimed by one company is the direct employment created by another. As they all declare responsibility for work created elsewhere, new jobs in this wacky world are generated several times over.
We need some reliable research into the reporting of employment claims. We need journalists to start asking questions about the figures they are fed; perhaps to refuse to print them unless they have been independently audited. And we all need to make a simple demand whenever a shiny new scheme promises to solve the community’s problems: prove it.
1. MoD, 27th March 2008. £13 billion deal for new Tanker Aircraft signed. Press release. http://www.mod.uk/DefenceInternet/DefenceNews/EquipmentAndLogistics/13BillionDealForNewTankerAircraftSigned.htm
2. John Hutton, 26 March 2008. New Nuclear Build: How do we make progress?
3. No author, 28th March 2008. £3m road scheme to aid jobs. The Cumberland News.
4. David Hencke, 17th June 2003. £100m jobs subsidy scheme is poor value, say auditors. The Guardian.
5. National Audit Office, 17th June 2003. The Department for Trade and Industry: Regional Grants in England. http://www.nao.org.uk/publications/nao_reports/02-03/0203702.pdf
6. Siobhan Kennedy, 27th February 2008. High-profile buyout chief turns on his peer group. The Times.
7. The British Venture Capital Association, 13th February 2008. The Economic Impact of Private Equity in the UK 2007. http://www.bvca.co.uk/pdf.php?id=842&filename=the_economic_impact_of_private_equity_in_the_uk_2007
8. No author, 26th March 2008. ‘Thousands of jobs’ in nuclear design licences
The Herald. http://www.theherald.co.uk/news/other/display.var.2145944.0.Thousands_of_jobs_in_nuclear_design_licences.php
9. Sam Porter, Paul Raistrick, January 1998. The Impact of Out-of-Centre Food Superstores on Local Retail Employment. The National Retail Planning Forum, c/o Corporate Analysis, Boots Company PLC, Nottingham.
10. Emma Hallett, New Economics Foundation, April 1998, pers comm.
11. Jo Winrow, 27th March 2008. D-day looms for massive jobs project. The Telegraph and Argus.
12. Carmel Harrison, 28th March 2008. DIY superstore prepares to open. Evening Courier.
13. No author, 19th March 2008. Morrisons site creates 1,000 jobs.
14. UK News.
16. The latest total figure is here: http://www.statistics.gov.uk/pdfdir/lmsuk0307.pdf
17. All the tables are here: http://stats.berr.gov.uk/ed/sme/index.htm