Liverpool's recovery reflects jobs market in transition

If Britain is the "jobs factory of Europe", in the words of David Cameron, prime minister, then Liverpool is one machine that seems to be whirring unexpectedly well.

The northwest port city, heavily reliant on public-sector employment and home to some of the poorest neighbourhoods in the country, seemed in danger of an unemployment spike in 2010 as the UK began a five-year programme of public spending cuts.

Yet in all four of Liverpool's parliamentary constituencies, the proportion of residents who claim unemployment benefits is lower than before the financial crisis. These "claimant count rates" - a different measure of unemployment to the headline rate - have fallen from between 4.3 and 6.1 per cent in 2007 to between 3.2 and 4.5 per cent in March this year. The figures are still higher than the UK rate, which was 2.1 per cent in March, but the disparity is smaller than at any time in the past decade.

The story behind these numbers is complex. There are good private-sector jobs being created in Liverpool and more people are starting their own businesses. At the same time, workers, charities and the city's mayor (a Labour politician) report an increase in low-paid, insecure work that they say does little to boost living standards. Liverpool's experience sheds some light on the trade-offs involved in Britain's so-called jobs miracle, and why Mr Cameron has struggled to gain a decisive poll lead in this election campaign in spite of it.

It is not hard to spot signs of job creation in Liverpool's revitalised city centre. Tourists thrust out selfie sticks - handheld poles on which to mount a smartphone - and diners cram into restaurants such as East Avenue Bakehouse, where the spring lamb rump with chive polenta costs £16.95. The hotels sold 20 per cent more beds last year than the year before.

On the docks, workers are driving piles into the river bed for a new container terminal. ACL, a shipping company, has expanded its workforce from about 100 to 170 since 2013, ordered five ships and plans to build a head office. "It'll be the first time a shipping line has built its own building in Liverpool since 1932, I think," managing director Ian Higby says chirpily. "I talk to lots of other businesses and the feeling is good."

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"Beforehand you had families on benefits, and families in work, and there was a real divide there. That's gone now," says Heather Brent, the bureau's director. "You've got working families who are in as much poverty as people on very low benefits."

Jimmy Nolan has a zero-hours job, which pays the minimum wage of £6.50 an hour. Every night at 6pm he waits for a text message to find out if he will be called to work in the factory the next day. "You're on tenterhooks the whole time and you can't plan anything," he says. Once when he arrived at work at 7am he was sent to sit in the canteen, then told there was no work for him and he should go home. "It cost me £11.40 to get home that day."

For Peter Kilfoyle, who was the Labour member of parliament for Liverpool Walton between 1991 and 2010, this is reminiscent of the insecurity faced by the city's dock workers many decades ago. "I worked on the dock as a young man and you could turn up every day and not get any work, there was nothing you could do," he says.

Zero-hours contracts have become a flashpoint in the UK's election debate over the pros and cons of the country's flexible labour market. Labour complains of "Victorian practices that have no place in the 21st century", while the Conservatives say the flexibility of the workforce is what has allowed employment to rise so much faster than in continental Europe.

In a kitchen in Walton, the neighbourhood 10 minutes from the centre that has seen the sharpest fall in Jobseeker's Allowance claimants, Gillian Blackall suggests another explanation for the decline. "They're all making cakes!" she says, laughing, as she dips a marshmallow into a bowl of pale pink chocolate.

She is only half joking. When she was made redundant five years ago from her £32,000-a-year local council job, she started a business called Create that runs cake-making classes.

Many of her customers have been inspired to start their own cake businesses, she says. "People come as a hobby and it snowballs."

Nationally, self-employment has been an important engine of the jobs recovery, accounting for almost a third of the growth in employment since 2010. In Liverpool, the government's New Enterprise Allowance, a scheme to help people on unemployment benefits start their own businesses, has been particularly popular: more people have used the programme here than in any other local authority.

Ms Blackall loves her business. But staff at the local CAB say some jobseekers have been pushed into self-employment by their "Work Programme" providers - organisations the government pays by results to help people find work.

The CAB also has clients who have left Jobseeker's Allowance to go on to disability benefits, or who cycle endlessly between the two types of benefits without finding work. Some people have simply stopped claiming benefits and drifted into the black economy, CAB staff say.

The figures on the number of Liverpudlians in employment are indeed less buoyant than the jobless benefit claimant data, although they are also less up-to-date. Between 2009 and 2013 the number of employees in the city barely changed. Under the surface, though, public-sector job cuts were twice as deep as the UK total, yet private sector employment grew a little faster.

For better or worse, says Jonathan Portes, director of the National Institute of Economic and Social Research, the accumulation of 30 years of flexible labour market reforms, welfare reforms and trade union decline have kept a lid on unemployment in places like Liverpool.

"In the short term, are these places better off with people doing relatively unproductive and not terribly fulfilling jobs than they are being paid by the state to sit around? On balance probably yes," he says. "But could we be better in trying to at least offer people in these positions career ladders that offer hope of progression? Yes clearly we could."

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