Economic history · Thatcher's Economic Policy
Five steps, about eight minutes, a question at each. You need no economics and no preparation, only a willingness to guess before you are told.
The government had raised interest rates to bring prices down. That works by taking spending out of the economy, so firms sold less before prices fell.
Between 1979 and 1981 British factories lost about a sixth of everything they made. Output was back to its 1979 level by 1988, nine years after it left it.
The jobs were not: manufacturing employed 6.7 million people in 1979 and 4.9 million in 1990. Many of the council districts that lost that work still have lower employment and lower pay four decades on.
This module covers what closed, where, and what the government did about three million people claiming benefit in 1986.
What this module covers
Written for every level. Tap any underlined word for what it means, and open the boxes below for the economics behind each decision. If you already know the theory, skip both and the history reads straight through.
Step 1 of 5
Factories close quickly and open again slowly, if they open again at all.
British factories lost about a sixth of their between the middle of 1979 and the start of 1981.
The did not fall evenly across the economy. It fell hardest on the firms that made things, for reasons that had nothing to do with how well they were run or with what they made.
A rise in interest rates reaches a factory twice. Borrowing costs more, so firms put off orders for machines and buildings. Higher interest rates also draw foreign money into pounds, and that raises the pound's value. A pound worth more makes the same British product cost a foreign buyer more. A shop or an office feels the first of those. A firm selling abroad feels both.
Production in the last quarter of 1981 was fourteen per cent below its 1979 average.
Take a guess. You are not expected to know the answers, and being wrong is what makes a number stick.
Put these four moments in order by how much British factories were making, most first.
For scale. The fall itself took two years, from the middle of 1979 to the start of 1981. The climb back to where it started took longer than the fall.
Twelve council districts lost the largest share of their jobs between 1981 and 1991, and the jobs lost in them were not only factory jobs.
The loss was counted district by district rather than nationally, because a national figure averages the places that were fine with the places that were not. One district is one council area, about the size of a town.
The count covered every job of every kind in those twelve districts, over the ten years from 1981.
The districts that lost the most factory jobs still have lower pay today, so where the loss fell is part of what it cost.
In those twelve districts, what share of all their jobs, of every kind, disappeared between 1981 and 1991?
For scale. Over the same ten years the gap in output per person between the best and worst regions roughly doubled.
In January 1982 passed three million for the first time, a figure Britain had not seen since the 1930s.
There are two ways to count. One asks people whether they are looking for work, whatever benefit they get. The other counts the people receiving a particular benefit. The second is cheap, because the government already has the list. It also moves whenever the rules for who qualifies move.
Three million was the figure published at the time. The same claims, counted by one set of rules for every year, come to 2.4 million in January 1982. They do not reach three million until 1986, because the rules for who qualified kept changing.
Those out of work for more than a year numbered 1.6 million in January 1982, against 0.6 million three years earlier.
Three million people were out of work in January 1982. What share of the workforce was that?
For scale. It had been 5.4% in 1979, when the government took office.
It is January 1986, and more people are drawing unemployment benefit than at any time since the war.
Many of them have been out of work for over a year, in towns where the firm that employed them will not open again.
Those out of work for over a year had gone from 0.6 million in 1979 to 1.6 million in 1982.
Two schemes are running and neither is aimed at adults out of work over a year. The Community Programme has paid for temporary work since October 1982, and the Youth Training Scheme has trained 16 and 17 year olds leaving school since September 1983.
You are the government. Three million people are drawing unemployment benefit, most of them where the factories were. What do you do?
Anyone out of work for over a year was called in from July 1986 and asked what they had done to find work. Anybody who did not come, or could not answer, could have their benefit stopped. The training schemes carried on beside it.
What followedThe number drawing unemployment benefit fell from 3.09 million in July 1986 to 1.74 million three years later. Over the same years the number drawing sickness and disability benefits rose.
Whether calling people in caused that fall is still argued, and both explanations accept the same figures.
One reading One reading is that the tightening did it. The conditions on unemployment benefit were tightened through the second half of the 1980s, and the fall in the count came with a rise in claims for sickness and disability benefits at the same time.
The other reading The other reading is that the economy was growing strongly by 1987 and the count would have fallen anyway. It fell faster over those three years than the schemes alone could have moved it.
Manufacturing employed 6.7 million people in 1979 and 4.9 million in 1990, while its output came back.
Output and employment are two different things, and in these years the two stopped moving together.
Factories open at the end of the decade made more than the factories of 1979 had made, with far fewer people. Job losses did not stop when the recession did.
The output came back and the jobs did not, and many of the districts that lost them still have lower pay today.
Factory jobs lost. Which period lost more of them?
A tie counts as correct either way.
For scale. Output over the same eleven years finished slightly higher than it started.
Module 3 of 13 in Thatcher's Economic Policy
How long factory took to get back to its 1979 level
nine yearsCouncil districts that lost more than a fifth of all their jobs, 1981 to 1991
12Out of work in January 1982, as a share of the workforce
12.5%What was done about it in July 1986
an interview for anyone out of work over a yearFactory jobs gone between 1979 and 1990, and when
1.8 million, five in six by 1983You met three terms in this module
, ,
Output was back by 1988 and 1.8 million factory jobs were not. Many council districts that lost them still have lower pay today.
[1] What the factories made: ONS series K22A, index of production, manufacturing, chained volume measure. 1979 Q2 = 50.6, the trough 1981 Q1 = 41.8, a fall of 17.4%. The first quarter back above the 1979 level is 1988 Q1 at 51.2; 1987 Q4 reached 50.2 and fell short. Annual: 1979 = 49.3, 1981 = 42.3, 1988 = 52.4.
[2] Factory jobs: ONS series JWR7, workforce jobs, manufacturing, United Kingdom. 6,704,000 in 1979, 5,175,000 in 1983, 4,925,000 in 1990. The difference between 1979 and 1990 is 1.78 million jobs, and between 1979 and 1983 alone it is 1.53 million.
[3] People claiming: ONS series BCJD, claimant count, United Kingdom, seasonally adjusted. 2,402,800 in January 1982, when the headline figure was three million. The count passes three million in 1986 and peaks at 3,090,000 in July 1986. It then falls: 2,764,000 in July 1987, 2,214,400 in July 1988, 1,743,000 in July 1989.
[4] Out of work: ONS series MGSX, unemployment rate, aged 16 and over, seasonally adjusted. 5.4% in 1979, 11.8% in 1984, 7.1% in 1990, as annual averages. The monthly peak is 11.9% in March 1984, on the same series. The ONS measure is used throughout the modules in preference to the count of people claiming benefit, which was redefined repeatedly during the 1980s.
[5] The winter it passed three million: Bank of England Quarterly Bulletin, March 1982, economic commentary. The total of unemployed exceeded three million, 12.5% of the labour force, for the first time in January. Manufacturing production in the fourth quarter was 14% below the 1979 average. Those out of work for more than a year numbered 1.6 million in January, against 0.6 million three years earlier.
[6] Why there are two figures: House of Commons Library, A tale of two unemployment statistics. The claimant count does not set out to measure unemployment. It counts people receiving a particular benefit, so a change in who qualifies moves the count without anybody's working life changing.
[7] What was tried: House of Commons Library, Employment and Training Schemes for the Unemployed, Research Paper 95/51. The Community Programme from October 1982, up to a year of temporary work on projects of benefit to the community. The Youth Training Scheme from September 1983, for school leavers of 16 and 17. Restart from a pilot in January 1986 and nationally from July 1986, a compulsory counselling interview at the Jobcentre for those out of work a long time. Employment Training from September 1988.
[8] Where the losses fell: Resolution Foundation, The Thatcher legacy. In twelve local authorities more than a fifth of all jobs were lost between 1981 and 1991. The spread of output per head across regions roughly doubled over the same period. Manufacturing employment fell 22% between the second quarter of 1979 and the end of 1983.
[9] Where the claims went: Office for Budget Responsibility, the working-age health-related welfare system. The tightening of the conditions attached to unemployment benefit in the second half of the 1980s was followed by a fall in the claimant count and a rise in claims for health-related benefits at the same time.
[10] What was left behind: Institute for Fiscal Studies, Catching up or falling behind. Many places are still living with the legacy of the industrial closures of this period, in employment rates and in earnings, four decades on.
[11] The decade in outline: House of Lords Library, The UK economy in the 1980s. 1.5 million manufacturing jobs were lost between 1979 and 1983 alone. High interest rates strengthened the pound, which made life harder for the firms selling abroad.
Country data from the World Bank (CC BY 4.0) and the UNDP Human Development Report (CC BY 3.0 IGO)
Games · Learn · Atlas · Privacy