The impact of the crisis on the working class in Britain

Issue: 136

Laura Cooke

Throughout the crisis sensationalist claims have emerged on both the right and the left that the crisis would lead to a catastrophic and immediate rise in joblessness or, conversely, that it is really not that bad. This article examines exactly what has, and what hasn’t, happened to the labour market during the latest recession and how this compares to the labour market impact of previous crises.

Large quarterly falls in employment in the first half of 2009 led commentators to predict a jobless total exceeding 3 million by the end of that year.1 In reality, this did not materialise, and the three-month employment level actually rose, compared to the preceding three months, for 22 out of the 33 three-month periods between July to September 2009 and the latest set of data.2 The unemployment level has so far peaked at 2.69 million in the three months to November 2011, falling back since then, to 2.58 million in the latest set of figures.

Although this figure is almost a million higher than it was before the crisis took hold, the fact that unemployment has not risen as quickly or as far as expected has itself prompted claims that the impacts of the recession are not as bad as they could or should have been, given the depth of the crisis.3

While it is true that crisis has not thus far translated into long-term job losses on the scale witnessed in previous recessions, the economic recovery is the weakest on record, and the world economy remains precarious. Other countries are witnessing unemployment on the scale we might expect, while economists in the UK are puzzling about why this is not the case here. It may well be the case that there is worse in store for British workers as the economy continues to stall.

What has happened?

In December 2007, at the beginning of the crisis, there were 29.4 million people in employment in the UK.4 Of these, 23.4 million worked in the private sector and 6 million in the public sector. In March 2012, as the economy went into double-dip recession, there were 29.2 million people in employment, of which 23.4 million were employed in the private sector, and the remaining 5.9 million in the public sector. Between these two dates the figures have fluctuated, with total employment reaching a low of 28.8 million in the three months to February 2010. Private sector employment fell by almost a million between December 2007 and December 2009, before rising to just 20,000 short of 2007 levels by the first quarter of this year. In the public sector the pattern was reversed, as employment grew by 300,000 in the first two years of the crisis and then fell by 600,000 during 2010 and 2011. The latest figures show that the overall level of employment in the three months to May 2012 is just 50,000 lower than it was in the three months to December 2007.

Overall employment declined rapidly from the start of 2008, with this decline intensifying in 2009. Job losses at this point were confined to the private sector, with manufacturing suffering most heavily, but other industries, particularly retail, distribution and construction, also seeing sizeable reductions. Parts of the financial sector, saved from collapse by government intervention and merger, also made large numbers of workers redundant. Between the final quarter of 2007 and the third quarter of 2010, there was a decline of 137,000 in the number of people employed in financial and insurance activities. Although the decline reversed slightly through 2011, recent announcements of further job losses in the sector (HSBC 3,100 jobs, National Australia Group 730 jobs, Royal Bank of Scotland 600 jobs) suggest a potential return to declining employment in the sector in the coming months.

In wholesale and retail,5 which is now the largest industrial sector in the UK in employment terms, employment grew throughout 2008, before falling by around 300,000 in 2009. Employment in the sector is currently 200,000 lower than it was at the end of 2007, standing at 4 million, with many of the large supermarkets promising job creation in the 2012/13 financial year.

The pattern of employment in the manufacturing sector over this period is particularly interesting. Since 1997, when comparable data on employment by industry began, manufacturing employment has been in steady decline. There were 4.4 million workers employed in manufacturing in the three months to March 1997, falling to 3.2 million by the three months to December 2007. Although the speed of this decline increased throughout 2008, from the beginning of 2009 onwards manufacturing employment appears to have stabilised, remaining at around 2.8 million.

There is an apparent disparity between the sustained rise in unemployment and the change in the employment level since the start of the recession, with close to a million extra unemployed people but the employment level only 50,000 lower than it was at the end of 2007. This is explained by a growth in the number of people looking for work. Unemployment figures are best understood not simply as the number of people out of work, but as the number of people who are out of work who are actively looking for work. This is a significant distinction, because it explains how there can be a rise in unemployment with no corresponding fall in employment. If, for example, the introduction of university fees meant that a million extra students needed to work while at university, there would be a rise of 1 million in the number of people looking for work (the economically active population). If no existing workers lost their jobs, but no new jobs were created, this would lead to a rise in the unemployment level of 1 million. There has been an overall rise of 920,000 in the economically active population between 2007 and 2012, of which 435,000 are men and 486,000 are women.

Have women workers borne the brunt of the crisis?

It has been claimed that women have been more heavily impacted by the crisis in employment terms than men. The figures for the unemployment levels of men and women respectively do not appear to support this. Women’s unemployment has increased by 412,000 since the end of 2007 to 1.1 million, while male unemployment is 563,000 higher in the three months to the end of May 2012 than it was at the end of 2007. The figures for total employment for men and women show that women’s employment has actually risen by 74,000 since the end of 2007, while male employment has fallen by 129,000 over the same period.

But headline employment levels may not be the best way to measure the recession’s impact on women. As I will explain in detail below, the impacts of the current recession are being felt more as a general squeeze on pay and terms and conditions of employment, rather than on employment per se. As some of the lowest-paid workers in the economy, women will be disproportionately affected by attacks on wages. Women also continue to shoulder the bulk of caring responsibilities, so are more likely to rely on precisely the types of employment benefits, such as holidays and flexible working, that are being attacked.


Although the total number of people in employment does not appear to have seen a lasting decrease so far, this does not mean that the types of jobs that people are doing have not changed. There has been a shift, since the start of the recession, in the number of people working full and part time. Between the end of 2007 and the latest set of data there has been an increase of 500,000 in the number of people working part time, and a corresponding fall of just under 600,000 in the number of people working full time. There has also been a significant rise in the proportion of part-time workers who are working part time because they are unable to find a full-time job, from just under 10 percent at the end of 2007 to just under 18 percent (4.8 percent of all people in employment) in the three months to May 2012.

The number of self-employed people has increased by about 350,000 since the start of 2007, with 200,000 of these newly self-employed people working part time. There is something of a debate around what this signifies. John Philpott, of the Chartered Institute of Personnel and Development, argues that this is a sign of the worsening effect of the crisis on employment, pointing out that, according to the Office for National Statistics (ONS), a quarter of the rise is accounted for by people working on a self-employed basis in the lowest occupational category, “elementary occupations”. This signals an increase, he argues, in “odd-jobbers”, people working part time in low-skilled occupations providing childcare, home tutoring or handyman-type services. But the ONS figures also show that over 50 percent of the rise has taken place among the top two occupational categories, “managers and senior officials” and “associate professional and technical”. This accounts for the other side of the argument, that many of the people who are losing their jobs in the recession are setting up their own business or providing consultancy services.

Looking at the figures by industry, the most significant increases in self-employment have taken place in education (75,000), information and communication (45,000) and administrative and support services (39,000). By contrast, the three industries with the typically largest shares of self-employment-construction, professional, scientific and technical activities and wholesale, retail and repair of motor vehicles-have seen relatively little change. Although this appears to indicate that much of the new self-employment may be accounted for by consultancy-type roles, there are some indications that part of this growth is accounted for by employers taking advantage of the current economic situation to force new employees to accept bogus “freelance” contracts. This is a sort of phoney self-employment, which often means being paid less than other workers in the company as well as having no entitlement to paid holidays, pensions or other benefits and having to pay tax and National Insurance contributions independently.

Long-term unemployment

The Claimant Count is an alternative measure of unemployment, showing the number of people claiming Jobseeker’s Allowance (JSA). The figures for Claimant Count flows show the number of new claimants, and the number of people who stop claiming, each month. These figures show that while around 300,000 are beginning claiming JSA each month, the same number are stopping claiming, for one reason or another. The main reason for people stopping claiming is usually that they have found a job.

Despite this churn in the labour market, figures for long-term unemployment show a worrying trend. Long-term unemployment is often experienced by the most vulnerable workers, those whose skills have become outdated or unneeded, older workers, and women. At present, the majority of unemployed people have been out of work for less than six months. But since the start of the recession the numbers of workers unemployed both for more than a year and for more than two years have more than doubled, with 878,000 unemployed for more than a year and a further 438,000 unemployed for more than two.

A young people’s recession

Although media reports of almost two in five young people unemployed are somewhat sensationalised, it is certainly true that young people are bearing the brunt of the crisis in employment terms. In the three months to May 2012 the unemployment rate among 16 to 24 year olds was 36.7 percent, up from 25 percent at the end of 2007. This does not mean, as some reports have claimed, that 36.5 percent of all those aged 16 to 24 are unemployed, but that 36.5 percent of those looking for work in that age group are unemployed. This equates to 14 percent of all 16 to 24 year olds. Either way, the figure is exceptionally high. In real terms, the number of young unemployed people has risen by 340,000 since the end of 2007, surpassing the 1 million mark for the first time since comparable records began in 1992. Unlike the figures for the whole population, where rising unemployment has been accounted for largely by an increase in economic activity, rising youth unemployment is coupled with a fall in employment levels for this age group, signalling that young people are having difficulty entering the labour market. As the crisis began in 2007 there were 4.23 million people aged 16 to 24 in employment. This figure has been falling more or less steadily since then, and has stood at around 3.6 million since the end of 2011.

These figures are likely to be exacerbated by the recent announcement of a 9 percent fall in university applications among English students, as the hike in tuition fees to £9,000 a year comes into effect in September. The removal of the Education Maintenance Allowance paid to post-compulsory students from impoverished backgrounds is already believed to have impacted negatively on the participation rate in further education among 16 to 19 year olds.6 Figures from the ONS on the number of 16 and 17 year olds in education show that the steady increase in this number that had been happening since around 1994 has stalled from 2010 onwards.

Labour market impacts of previous recessions

The recession of the 1970s had very little impact on employment compared with the recessions that have followed it. The employment level remained more or less stable throughout the recession period (1973-5) and thereafter, though unemployment rose by 400,000 following the end of the recession to 1.4 million, a level at which it would remain until the crisis of the 1980s.

The recession of 1980-2 had the most profound impact on employment of the crises covered by current labour market data. Unemployment had doubled by the end of 1982 and continued to rise after the recession had officially ended. By the end of 1983 unemployment had surpassed 3 million (3.2 million in October-December 1983). A corresponding fall of 1.5 million in the number of people in employment signalled that the rise in unemployment was being sparked by job cuts, not just an increase in people looking for work. Unemployment continued to rise, reaching a peak of 3.3 million in March to May 1984, before falling slightly, but would remain above the 3 million mark until the middle of 1987. It then began to fall, reaching 2 million by the autumn of 1989. Unemployment stayed at this level until the autumn of 1990, when it began rising again.

The crisis of the early 1990s saw unemployment once more surpass the 3 million mark, again coupled with a fall in employment. Unemployment had increased by 900,000 by the end of the 1990s recession, and peaked at just over 3 million in the first quarter of 1993, staying above 3 million for just two consecutive months. It fell only slightly during 1993, and remained at 2.9 million in the final quarter. The unemployment level then began on a slow downward trajectory, bottoming out at around 1.4 million in the mid-2000s. Only as the latest recession began to take hold did unemployment once again start to rise.

How women and young people fared in the past

At 13.6 million, there are currently more women in employment than ever before. The proportion of women who are economically active has risen from 44 percent in 1971 when comparable records began, to 56 percent today. There are an extra 4.5 million women in work than there were in 1971. An increase in the number of single parent families over the last 30 to 40 years means that more families rely on the wages of women to survive, and in two-adult households women’s earnings now account for a greater proportion of overall income. These factors alone mean that women are feeling the impact of the current recession more directly than they did in the past.

Looking at unemployment levels, the current recession has now surpassed the 1990s recession in the number of women unemployed, but at 1.1 million, the unemployment level for women is still some way off its 1984 peak of 1.4 million. This may change. A third of all women in work are employed in the public sector, compared to 15 percent of men. The fact that current attacks on jobs appear for the time being at least to be confined to the public sector means that job cuts are likely to begin impacting on women in a much more pronounced way than to date. Recent reports showing that only between 10 and 20 percent of the planned public sector cuts have yet taken place means we might expect to see women’s unemployment increase markedly over coming months.

Although the figures for unemployment by age group only go back as far as 1992, a report7 by the ONS in February this year showed that youth unemployment, both as a proportion of all young people and as an absolute number, has not reached the peak of the 1980s recession. Youth unemployment currently stands at 1.02 million, higher than the 1990s peak of 924,000, but still below the level it reached in the 1980s recession of 1.2 million in 1984. But the ONS points out that the shift into full-time education that has been taking place over the last 20 years is largely from employment, meaning that a lower participation rate in education among 16 to 24 year olds is likely to mean an increase in jobseekers in this age group.

How particular industries were affected

It is sometimes claimed that the current recession is more widespread than the recession of the 1980s, with the fact that job cuts in the 1980s were concentrated in manufacturing held up as evidence. The current figures for employment by industry do not go back as far as the 1980s, but a separate series, called “Workforce jobs by industry”, does shed some light on this argument. This series shows that, in fact, jobs were lost in 11 out of the 19 industrial sectors between December 1979 and December 1983, compared with nine out of 19 between December 2007 and December 2011. Large numbers of job losses were indeed concentrated in the manufacturing industry in the 1980s recession, but this is to be expected, given that manufacturing accounted for 25 percent of UK jobs at the time, compared to less than 10 percent today.

What lies behind the current state of the labour market?

Different crises have had differing impacts on employment in Britain. This has tended to be a result of the industrial makeup of the country at the time of each crisis, and whether it has been possible for the capitalist class as a whole to allow certain industries to die off while expanding other ones. The crisis of the 1980s in particular came at a time when what had become low-profit manufacturing industries accounted for a large proportion of both GDP and employment, and these low-profit industries could be cleared out and replaced with newer service industries.

At present it is unclear where British capitalism can go next. In the private services sector investment in new technology has not yet allowed capital to do away with workers on a mass scale, though some steps in that direction do appear to be being taken (automated tills in shops, for example). It is also difficult for employers in the retail, distribution, food service and hospitality industries, which together account for around a quarter of UK employment, to simply close down their UK operations and move them to a developing economy, in the way that manufacturers have tended to do.

As a result, rather than leading to lasting changes to the industrial makeup of the private sector of the economy, and the permanent or semi-permanent job losses that such changes incur, the current crisis has led to a full-scale attack on pay and hours and on terms and conditions of employment in both the public and private sectors. Plant shutdowns and short-time working were widespread in the car industry in 2009, for example. At its Ellesmere Port plant in Cheshire, Vauxhall introduced a short working week between February and July 2009. Shifts or hours were also cut at BMW, Toyota, Ford, Jaguar Land Rover and Honda, as well as at various car components plants. Although working time was later restored at all of these companies, there are signs that short-time working may be starting to re-emerge as the recession continues.

Attacks on pensions have been widespread in both the public and private sectors, especially where final salary pension schemes are still in place. Workers at Unilever, BT and Ford, as well as workers across the public sector, have seen their pensions come under fire since the start of the crisis. More generalised attacks on other terms and conditions of employment, such as holidays, overtime rates and shift premiums, have also been common, at Superdrug, Boots and local authorities, for example.

Although actual wage cuts have been rare (with the exception of those related to short-time working), and have so far been mainly confined to the public sector, real wages, that is, wage rises adjusted for inflation, have been falling since 2010. Pay freezes were instituted at a third of organisations across the economy in 2009, mainly in the private sector. This was followed by pay freezes across the public sector from 2010 onwards. In the private sector wage freezes have become much less frequent from 2010 onwards, but in both 2010 and 2011 wage rises were far below the level of inflation, meaning real-terms pay cuts for most workers. And in some cases employers have been introducing new, lower rates of pay at the bottom end of pay structures, though this has often been an attempt to avoid the Agency Workers Regulations, rather than being a direct response to the crisis.

The driving down of real wages, coupled with benefit changes that are forcing people onto JSA from other types of social security benefit, such as Disability Living Allowance, goes some way to explaining the increase in the numbers of people looking for jobs. And as we saw earlier, increased economic activity has led to an inflated unemployment rate.

The fact that capital is attempting to recover from crisis through a generalised attack on pay and conditions, rather than through job cuts, may also explain why young people are facing such a high unemployment rate, despite large increases in unemployment not being seen elsewhere. Young people appear to be fulfilling the role of the “reserve army of labour” deliberately harnessed by the capitalist class in order to drive down the pay and conditions of workers across the economy. Employers are playing up the threat of unemployment in order to drive through cuts in pay and conditions that otherwise workers may not allow to be pushed through. It is much easier for your boss to tell you he’s cutting your pay by 5 percent if he can also point to a million young workers poised to replace you if you protest.

The fact that capital has as yet not been able to reverse the crisis, and the knowledge that the majority of public sector cuts are yet to come, means that attacks on workers look set to continue for the immediate future at least. It is important for socialists to understand where we are at now, in terms of the impacts of the crisis, if we are to come up with an effective strategy for fighting further attacks on workers as the crisis continues.


1: Faulkner, 2009.

2: For the three months to May 2012.

3: For example, Gregg and Wadsworth, 2011.

4: All statistics, unless stated, are taken from Office for National Statistics, 2012b. Any disparity between whole-economy totals and the sum of their constituent parts is due to rounding.

5: This industrial sector also includes the repair of motor vehicles.

6: House of Commons Education Committee, 2011.

7: Office for National Statistics, 2012a.


Faulkner, Neil, 2009, “From Bubble to Black Hole: The Neoliberal Implosion”, International Socialism 122 (spring),

Gregg, Paul, and Jonathan Wadsworth (eds), 2011, The Labour Market in Winter (Oxford University Press).

House of Commons Education Committee, 2011, “Participation by 16-19 year-olds in education or training” (July),

Office for National Statistics, 2012a, “Characteristics of Young Unemployed People” (February).

Office for National Statistics, 2012b, “Labour market statistics-July 2012”,