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Friday, August 15, 2014

Fact check: Can we take Danny Alexander's "3 million jobs" threat seriously?

In June, Liberal Democrat Chief Secretary to the Treasury Danny Alexander said that, according to Treasury analysis, more than three million British jobs would be at risk if Britain left the European Union. This is what he said:
“Indeed, the latest Treasury analysis shows that 3.3 million British jobs are connected to Britain’s place in Europe. That is the measure of the risk that isolationists would have us take.”
What new analysis could this be? So we asked the Treasury. You can read the full response here, but this is perhaps the key part:
“As set out by the Chief Secretary to the Treasury, the Treasury estimate that 3.3 million jobs in the UK may be related to exports to other European Union countries. This figure is based on the assumption that the share of UK employment associated with UK exports to the EU is equal to the share of output that is exported to the EU, making allowance for the composition of the UK economy. It is not an estimate of the impact of EU membership on employment.”
The Times also reported on the FOI response today. Now, there are at least three things that are problematic with Mr Alexander's claims:

1. First of all, this is not in fact 'new' analysis. As the response to our FOI makes clear, Mr Alexander's remarks were based on the following methodology, which has been used and cited countless times before. In 2003, Ruth Kelly told Parliament that:
"The Treasury estimates that 3 million jobs in the UK are linked, directly and indirectly, to the export of goods and services to the European Union. This figure is based on the assumption that the share of total UK employment associated with UK exports to the EU is equal to the share of total UK value added (GVA) generated by UK exports to the EU. The information necessary to apply the same method to derive comparable estimates for England, Scotland, Wales and Northern Ireland is not available."
In February 2014, Lord Livingston again confirmed this methodology as follows:
"The estimate of 3.5 million jobs linked to trade with the European Union is based on the assumption that the share of UK employment linked to trade with the EU is equal to the share of total UK value added (GDP) generated in the production of goods and services exported to the EU." 
"The calculation uses data from UK Input-Output tables to estimate the proportion of UK value-added content generated in exports of goods and services and applies this to the values of UK exports to the EU. This is then divided by total UK GDP and the resultant proportion then applied to the total UK labour force to estimate the proportion of the labour force linked to EU exports on a value-added basis."
In short, the methodology dates back more than ten years and does not seem to have been updated at all.

2. Perhaps most crucially, as the Treasury's response makes clear, this study "is not an estimate of the impact of EU membership on employment." So it is rather misleading, to say the least, of Mr Alexander to suggest that these jobs are at "risk". To say that X number of jobs are linked (directly or indirectly) to exports to the EU is clearly not the same thing as suggesting that they are dependent on EU membership. To be fair to Mr Alexander the Treasury's position on this is somewhat confused itself - it claims that this is not an estimate of the impact of EU membership on employment, however, that is exactly what the simplistic calculation and, importantly, its flawed counterfactual seem to suggest (see below). 

3. Thirdly,  is immediately apparent, it is a very simple approximation, not detailed analysis which one might have expected from HMT on such an important question. The methodology used is very simplistic, for a number of reasons:
  • A flawed counter-factual: We have always stressed the importance of the counter-factual when assessing the future of the EU/UK relationship. The counter-factual here is essentially that these jobs would not exist without the EU.  This is odd for at least two reasons: first, it effectively assumes an end to all exports to Europe should the UK withdraw from the EU. We can argue about the level of market access a post-Brexit UK may be granted (we've done a lot of work on this) but one thing is clear: there will be exports from the UK to the EU under any scenario. Secondly, by definition the analysis assumes that all value added by jobs related to EU exports would not exist without the EU membership. A simple common sense check suggests that, actually many of these jobs may still produce some value even if the goods did not find their way to the EU and that the resources could be alternatively employed.
  • Assumes productivity is the same across the UK economy: While it is claimed that the calculation "takes account of the composition of the UK economy" it is not clear exactly how this is done. On the surface the calculation also seems to implicitly assume that labour productivity (broadly output per worker or per hour) is the same across the entire economy (by saying the basic proportion of output corresponds to the same proportion of employment). Fundamentally we know this is not true - on the most basic level, we know that skilled and unskilled jobs will have different productivity levels. A quick glance at the most recent ONS labour productivity statistics confirms this and highlights that over the decade since this methodology was created, different sectors' and regions' productivity rates have grown in different ways. Unless this is accounted for in a detailed way in the methodology it is likely to distort the figure.
The final point above suggests that there is either some continuing lack of transparency with regards to the calculation or it really is just overly simplistic (if not both). This is all quite ironic given that UKIP and Better Off Outers in general are often criticised - and often justifiably so - for not establishing a credible counter-factual whilst relying on heroic assumptions.

Mr Alexander should know better.


Rollo said...

When does spin become a deliberate deceit? The study showed that Exports to the EU were 5 % of our economy, so 5% of our working hours are involved, so 3 million people are involved.
There is absolutely nothing that says that any of these 3 million jobs would be lost. The only losses would be the gravy train jobs, the Kinnocky sorts of jobs, the jobs which spend our money without any return; the sort Danny Alexander obviously fancies for himself. So much so that he is prepared to lie to us all.

Rollo said...

Our jobs are at risk because we are shackled to the sinking ship of the EU. We need to get out into the real world, which is vibrant and growing (REIDsteel exports to 130 countries: not in the EU)

Rik said...

Of course it is complete nonsense.
However this was always to come up, like Salmond's Pound was.

Good however to have the discussion now so the public knows that it is nowhere near that when the relevant election takes place. Simply opens up the opportunity to discuss it in public and have more than sufficient time to do so.

This is making people afraid with doom scenario stuff. To do that effectively it should either be extremely complicated (which this isnot) or short before the electiondate (which isnot either).
Simply bad timing by Mr Alexander.

Could even open the possibility for the Out camp to make clear to the public that effectively the only added value feature of the EU is the Single Market (for which a membership in the current form is not strictly necessary).
A fact almost certainly not known to the general public and very likely a vote winner for the out camp and those that are in it. They still own the public an answer on the truckload of rules which status becomes unclear when there would be a straight exit. Might be a good occasion as well to do it, like the pound this will always play up.

Anonymous said...

what would he know--hes nobody

Average Englishman said...

Indeed, Mr. Alexander should know better than to try and con the UK voter with such rubbish. However, he is only following the party line from his 'dear leader' Nick Clegg. Mr. 'no tuition fees' Clegg, Mr. 'only 7% of the UK's legislation comes from the EU' Clegg, Mr. 'the EU does not have military ambitions' Clegg.

The policy of the Liberal Democrat Party seems to be the same as has been practised by the other main parties over the years regarding the EU and many other matters:
- the electorate cannot be trusted with the truth, so don't give it to them;
- tell the electorate anything that will justify the party line;
- change party policy at any time it seems expedient to curry favour with the voters and to hang with principle;
- confuse wherever possible in order to deceive (e.g. in one of the TV debates with Nigel Farage, Nick Clegg said that because UKIP wants the UK to leave the EUSSR they must also want to do away with gay rights, women's rights and the modern world in general; complete nonsense just put out as a slur.

In short, Alexander is just continuing with Tony B. Liar's approach to politics and it stinks. The Average Englishman demands better from his or her politicians, (as I told my MP recently to his face to no discernible effect). A change is long overdue.

Denis Cooper said...

But we know that this is complete tosh, and so does Alexander.

Alan Douglas said...

Alexander WAS the only Liberal Dem I could ever stomach. Sorry, I've had to rush upstairs ....

Alan Douglas

Anonymous said...

Clegg and Alexander need to face trial for their deliberate deceit when it comes to EU-related facts and figures.

Thank goodness that we will see the last of the disastrous Lib/Dems come the next election.

Naïve and incompetent.


Adiblake said...

Facts no longer a norm !

Adiblake said...

Playing games with words an phrases that have no substance with todays politicians !

ukfred said...

@ Rik

When you mentioned Salmond's pound, were you taking about http://yamadonkey.com/2014/03/31/twinty-poonds/

It has as much relevance to reality as anything any limp dumb will ever manage to say.

Anonymous said...

In reply to the question posed.... No!

Nailer said...

This was always complete garbage. I remember Peter Hitchens tearing away at Sarah Teather MP about it when she brought it up on BBC1 "Question Time" a few years ago. She couldn't back it up, or name the source. It is pure scaremongering propaganda.

I have a draft copy of a briefing document issued by the Commons Library for MPs, with "positive points to make about our EU membership" during the Commons debate on an EU referendum. Even a 6th-former could take them apart, they were so nebulous and manufactured.

A survey by a French think tank issued about a year ago said that 6 million jobs in the EU depend on the UK's membership.

This is cheap and easily destructible propaganda, it will ramp up in volume and sophistication if we do get a referendum, which of course, we won't.

Anonymous said...

Clegg has wheeled out this argument many times. What he really meant was 'a job for £3million' might be lost - the one he hopes to collect if he can deliver the UK on a plate to Brussels.

WitteringsfromWitney said...

You people at Open Europe amaze me as you seem to believe nothing is news unless you give it.

This lie about 3 million jobs was exposed as such way back. I even the link to a blogpost I wrote recently and which should have had the link (which I forgot to include) to the original article I wrote nearly three years ago.


but of course you never bothered to offer a rebuttal, something which speaks for itself.

This is not the first time you have played 'catch-up' - and it no doubt will not be the last.

Open Europe blog team said...

Thanks for your comment. We too, have of course looked at this figure numerous time. For example here http://openeuropeblog.blogspot.co.uk/2013/11/mind-counterfactual.html , here http://openeuropeblog.blogspot.co.uk/2014/03/fact-checking-clegg-v-farage-eu-debate.html or much further back here in 2008 when used by Jim Murphy http://openeuropeblog.blogspot.co.uk/2008/01/you-are-feeling-very-sleepy.html and in 2006 when used by Geoff Hoon http://openeuropeblog.blogspot.co.uk/2006/10/fire-up-fco-word-processor.html The reason for this particular FOI request was the suggestion by Danny Alexander that this was ‘new’ research, which it obviously is not, having gone rogue many years earlier.

Rik said...

Salmond's pound is both moronic as well that it was almost certainly to come up (and with good arguments).
I tried to make the point that Salmond made a huge strategic miss here. He should have had a plan B, but he hasnot.
Rather similar to Alexander/Clegg. Assuming effectively that the UK is totally uncompetitive when not an EU member is as stupid. They only run the risk to be exposed as scaremongers and not very competent on the issue.
However they have a fall back position (uncertanty how an exit will work out on UK legislation).

This is not an academic discussion. This is about convincing the general public for both the general election and a likely referendum.
In that respect it hardly mattered that from a more academic pov it is complete nonsense. It is convincing the general public that this is not a thing to worry about. Which simply means repeat, repeat, repeat, until you got that message through to all that might determine their voting on that. Just look at Salmond's Pound half a year ago it was clear it was nonsense. However it took months to get this message through to the electorate.

In other words this should be repeated until it becomes general knowledge and we simply are not even close there at this moment. Not even to mention the legislation issue, that public discussion how to deal with that has not even started yet.