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Slash & burn not working

As government austerity cuts deepen the recession, Frances O'Grady charts an alternative in the wake of the TUC's mammoth 'A Future that Works' demonstration.

The financial crash hit the UK just over five years ago and the recession started to bite soon after in the spring of 2008. Every month scary new records were being set for job losses. From the start of the recession to mid-2009, unemployment increased by 850,000. We'd got used to high employment rates after 15 years of continuous economic growth. The days of plentiful jobs, albeit with less healthy wage growth, seem a long way away today.

The recession was initially dubbed a 'middle class bust', with banking staff and accountants taking most of the places in the dole queue. But while the number of unemployed people previously working in these occupations has more than doubled since 2008, they account for less than a third of the rise in unemployment over the last four years. In fact, workers in low-skilled jobs have provided the single biggest group of dole queue recruits in recent years. And worryingly, once they lose their jobs, low-skilled workers are most likely to stay out of work for at least a year.

The unfortunate 'mancession' tag came next, as workers in the male-dominated manufacturing and construction sectors were the biggest labour market casualties. But economic forecasters failed to predict the resilience of firms, unions and, initially, government in holding back an unemployment bloodbath. More recently we've seen the damaging consequences of the coalition's assault on the public sector, which has sent female unemployment soar to a 20-year high.

The only good news about the recent recession is that job losses haven't been as bad as the 80s or early 90s yet. Everyone feared unemployment hitting at least three million. After all, joblessness had been higher in 1991 and for much of the 80s, and the current recession was deeper than those slumps.

But instead unemployment peaked at 2.5 million and then started to fall. This was partly because the then Labour government acted fast with a fiscal stimulus, jobs programmes and directing Jobcentre Plus to concentrate on getting help to groups, industries and districts facing large scale redundancies. There was an element of 'throw everything at the wall and see what sticks' to this, but there were some notable successes, like the Future Jobs Fund for young people.

Those whose livelihoods were saved by these schemes have not forgotten them, nor has the TUC: we campaigned for them in the first place. But for a Conservative led government with a devout faith in the free market and an unshakable determination to shrink the state, intervention on such a scale is ideologically unpalatable.

Another part of the recession story was the role of unions and employers. In many firms, especially in manufacturing, unions negotiated to keep jobs. This could mean temporary but tough concessions on wages or shared hours, but in exchange employers conceded job security agreements. Business, on the whole, has not used this recession to radically re-shape the workforce, as happened so brutally during the recessions under Thatcher and Major. Indeed, there is evidence that business has been 'labour hoarding' accepting lower output as the cost of hanging on to workers whose skills would be needed once the recovery returned.

Labour hoarding perhaps explains why unemployment is still falling, despite the UK going through its longest double dip recession since records began. But this cannot continue indefinitely unless the economy starts growing again we are likely to see a second wave of rising unemployment. Wages were stagnating long before the recession-leading many families to take on unsustainable levels of debt to get on the housing ladder and maintain living standards. Respected economists now agree with unions that such pay depression was a key cause of the crash. Since the recession began, many workers have endured years of real wage cuts, getting poorer every month, in order to stay in work. It will be a cruel blow if, after all that suffering, people still end up without jobs.

While the government prematurely celebrates modest signs of jobs recovery in the private sector, this has not been replicated in the public sector where four in ten women work. From council offices to hospital wards, women have been bearing the brunt of the government's attack on public services and its workforce.

As the New Statesman reports, nearly half of those economists who infamously signed up to the government's slash and burn policy for debt reduction are now having second thoughts. Those with longer memories make the case for public sector job creation as the best way to boost the tax take, reduce the benefit bill and increase demand to help the economy grow again. There is plenty of useful work that needs to be done, from building new homes to greening our infrastructure and expanding our care services.

Five years into the UK's 'lost decade' we can look back at some important lessons. Active government, active unions and active employers can make a difference. But it is possible to throw away everything that has been gained. Young people were the first to suffer in the recession, as they often are, but are faring little better today as the government cuts employment and education support, rather than investing in their futures.

Without growth-oriented policies and continuing stagnation we can expect to see unemployment rising again soon. If that happens, all of us will lose out; but it is likely that, once again, the vulnerable and unorganised will lose most.