UK/Eurozone Economy Failing
UK Employment Situation “Alarming”
I realise that I’ve banged on about emergency funds quite a bit recently, but I make no apology for it, as a disturbing news release by the ILO (International Labour Organisation) last week shouts from the rooftops that the the current employment situation is “alarming” and unlikely to improve any time soon.
40% Out of Work for >1 Year
Traditional wisdom surrounding emergency funds states you should have somewhere between 3-6 months of expenses saved up. Worryingly, the ILO found that more than 40% of jobseekers in advanced economies had been without work for over a year, indicating that it was taking much longer for people to find jobs.
When you consider the Eurozone statistics – Spain’s unemployment rate is almost tipping 25%, France has had its 11th consecutive unemployment rise in as many months, and the UK is expected to top almost 9% over the summer period – things are bleak, particularly with forecasters from Centre for Economics and Business Research (CEBR) today warning it is likely to keep rising for the next 5 years.
Forced Retirement at 65
When you couple this with a recent supreme court ruling that employers can force retirement at 65, and UK company insolvencies are back on the rise again, there has never been a more important period in our recent history to have as much cash stashed as possible.
Public Sector Cuts Backfiring
David Cameron and the coalition government is slashing the public sector, with 20% cuts in almost every department. But it’s ok, because “the private sector will pick up the slack”, he said. Alarming statistics from Markit shows the eurozone composite purchasing managers’ index (PMI) fell to 46.7 in April from March’s 49.2 however, a figure described by Howard Archer from IHS Global Insight as “truly dire” as that indicates the private sector is actually sharply contracting, and not expanding to ‘take up the slack’ in the slightest.
Oh, and in case you missed it, just to add the final insult – the UK is back in recession, too.
Unfortunately in these turbulent times there is unlikely to be any such thing as a ‘safe job’. Certainly some will be safer than others but gone are the days of jobs for life.
Do More, With Less
Companies are demanding more of their employees, and those who are unwilling to give are readily shown the door under the guise of ‘performance management’. After all, there isn’t exactly a shortage of people looking for work.
At least one company I know of takes the view “be grateful you have a job. Now accept this re-trebling of your workload or, you know where the door is.”
I can see their point. Companies need to do more with less. They need to streamline and make efficiencies, else they may not exist this time next year. But how far is too far when it comes to businesses taking their pound of flesh from their employees?
Bottom line: Your emergency fund probably isn’t big enough. Start growing yours today, for a safer tomorrow!
Tags: International Labour Organisation, stress, Unemployment
Category Economics, Employment
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You know Lee it’s pretty frightening when you know what’s happening and what’s not being widely reported.
Like you say we all need to put more aside, however with the cost of living it’s getting harder to put much more away.
You should perhaps warn your readership that under the proposed Universal Credit there is an absolute cutoff for anyone with capital savings of more that £16k and a possible tapering effect from 6k
Which makes it a hellaciously hard call. Either you go all the way and pitch for finacial independence, which is a BIG ask. Or you need to stay under the £6k radar. It’s a long stretch from £16k to FI, more than 10x. Fi is somewhere north of £200k for a UK individual to match NMW, and about twice that for a household to match average UK household income of £26k. It’s a long way from here to there…
All excellent points, ermine. As a naturally pessimistic thinker, I half think that the welfare state as we currently know it, won’t exist for that much longer. It is a tough call to decide whether you stick to 6k and hope for the best, or go above and beyond that in the belief that the welfare system will collapse and not help you when you need it.
A real dilemma!
Those are some scary statistics. I’ve been thinking a lot about quitting my job lately and starting up on my own. I have to wonder though “what happens if it doesn’t work out?”. With the economy in this state, the answer “well, I’d just go back to work” doesn’t seem too meaningful.
Agreed – I’m terrified of this kind of thing! Actually, my dream is not to work for myself (yet) but to travel long term (haha, oh my poor finances) but there’s that awful question of getting a job again when I get back. I was unemployed for 6 months and it was horrible!
Some alarming statistics here. The mainstream media doesn’t report a lot of these types of things, and I see so many people overspending and undersaving. The best thing we can do right now is save, save, save.
Hi Lee! Just thought I’d make a comment since you say ‘your emergency fund is not big enough’ to let you know that I am working on increasing mmine (it’s what my latest post was about actually).
Chin up, eh?
Keep banging on about emergency funds!
Following the mid 90s and the period up to 1998, there’s a whole generation of people who have never known what it’s like to fear unemployment. Even the most difficult days of the credit crunch following the Lehman Bros collapse had only a mild impact on UK jobs.
At some point – perhaps as a result of a a Euro crisis, perhaps due to something else – we will see a more significant crunch in the UK labour market and mean that anyone unlucky enought to lose their job will struggle to find anything for months.
I don’t think that three months’ worth of cash is enough for this situation.
Aim for an emergency fund equal to six months’ post-tax income. Then if it gets really bad, you can probably eke it out to nine months by swapping real food for canned beans, etc.