thetruthaboutunemployment

Hi Red Phoenix, I don`t want to freak you out but I noticed that people from TLW were visiting my blog about unemployment (because of the wordpress stats I receive). Thanks for your interest in how unemployment is used as a weapon in the class war. The hidden policy of using unemployment to control wages is obviously one that can`t be defended publicly, especially at the same time as the unemployed are being demonised by politicians and the mainstream media. The extract you posted describes the Bank of England`s (BoE) concern in 1997 that the long-term unemployed don`t exert as much "downward pressure on wages" as the short-term unemployed. It just so happens that the BoE returned to that preoccupation yet again in August this year. Here`s an extract from the bank`s August Inflation Report (see page 28 under the heading "The equilibrium unemployment rate is affected by a range of factors that change over time") where it says: "The longer that people are out of work, the more their skills will deteriorate and as a result, the probability of them finding a job decreases — those who have been unemployed for over a year are, on average, around a third as likely to find work as the short-term unemployed. That is likely to mean that they will exert less downward pressure on wages and so the equilibrium unemployment rate in the medium term will remain elevated." http://www.bankofengland.co.uk/publications/Documents/inflationreport/2013/ir13aug.pdf The "equilibrium unemployment rate" is the rate of unemployment necessary to control inflation in the bank`s estimation. You may remember that the new governor of the Bank of England, Mark Carney, said in August that the bank would hold interest rates at their current very low level until unemployment fell to 7%. Although this was widely reported I didn`t hear any journalist explain the connection between interest rates & unemployment. The only instrument the BoE Monetary Policy Committee (MPC) has at its disposal is the interest rate. A higher interest rate will, by degree, reduce the number of new business start-ups, will force more struggling businesses to the wall, and will reduce the number of businesses choosing to borrow for expansion. Additionally, consumers will also have less money to spend on goods & services if more of their earnings go into paying their mortgage & any other variable-rate loans. These factors combine to reduce the demand for labour and, all other things being equal, will lead to higher unemployment and lower wages. This ensures higher profitablility and prevents businesses from striving to increase their profits through price increases (inflation). Other factors also affect the level of unemployment, most obviously at the moment the huge cuts in public spending. But the BoE`s Monetary Policy Committee is only concerned with the inflation target, which is set by the government.