Does growing the economy create UK jobs?

I'm not an economist, so this is very much a layperson's view, but somebody asked me this question so here's my attempt an answer.

Once upon a time, it was all so simple. A growing economy increased employment and hence created jobs. The ready availability of employment in an otherwise stable labour market meant that employers had to pay more to get good workers and hence wages rose.

Is this model still even remotely true?

I suspect it is not. There are several reasons for this:

1. Many manufacturing jobs are now heavily automated. Growth comes as a result of capital investment, thus increasing the productivity of the workforce. It does not come about primarily by investing more in labour.
   
   Interestingly, the recent upturn in the UK economy has not been marked with any increase in productivity, suggesting that people are not investing heavily in improving factory equipment. To that extent, the growth is increasing employment, but commentators (including the government) see this as a source of concern. They argue that if the growth is to be long-term, productivity has to be increased. As it is, although unemployment is increasing, real wages continue to drop. So we are increasing UK employment, but we are not increasing the overall wealth of the labour force by nearly as much.
   I have seen analyses that suggest that since the increase of computerised and automated production systems in the late 20th century there has been a profound disconnect between increases in GDP and increases in the overall value of labour. That is, either the same number of workers are producing more goods for the same money or, although skilled workers may be earning more money, there are fewer of them.
   
2. In a globalised labour market, there is a race to the bottom in wage rates. Increasing numbers of consumer items are now being made in Third World countries where workers are paid, by European standards, ludicrously low wages. The growth in consumer spending in this country is fed by cheap electronics and cheap clothing, both of which are largely produced in Far East factories. Prawns that are harvested in Europe are sent to the Far East for processing before being returned to Europe for sale, because processing costs are much cheaper. Improved communications mean that even time sensitive goods can be produced in remote locations to save money. For example, newspapers, which used to be seen as a classic example of something that had to be produced near the point of sale, can now be printed in Eastern Europe and moved by autobahn well into Western Europe in time to be sold the next morning. Eastern European print rates are, obviously, lower than those in the West.
   
   Paradoxically, the knowledge economy makes this much easier. Whilst physical goods have to be shipped, intangible goods and services can be provided remotely without shipping costs. Thus legal firms in London will dictate documents for typing in India and the finished product will be printed out in London the next morning with nothing but electrons having left the country. The system is actually more efficient than overnight typing in the UK, as differences in time zone mean that the typing is done during regular office hours. 
   
   Free movement of labour within the EU means that employers can obtain offshore labour rates in their own country. Workers from Eastern Europe are often prepared to work for much lower wage rates than local workers. They are often supporting families in their own countries and the money that they send home, although seen as pathetically inadequate in the UK, is seen by their families as enough to justify their leaving to work abroad. As a student, my son took casual work in a local factory where he was the only one of a significant workforce whose first language was English. There are obviously massive advantages to having a ready supply of cheap labour. Many care homes would be unable to survive economically if they did not rely on carers from Eastern European countries. The NHS is increasingly reliant on nurses from abroad. I am not arguing for or against a liberal immigration policy – simply pointing out that if you have a substantial supply whose economic conditions in their home countries mean that they are prepared to work more cheaply than UK labour, then increasing the demand for workers will not necessarily increase wages.
   
   
3. The UK economy is dominated by the financial sector. In 2011, financial and insurance services contributed £125.4 billion in gross value added (GVA) to the UK economy, 9.4% of total value added. The nature of financial services is that the value of the service to the economy there is little relation to the size of its labour force. In fact, the UK financial and insurance services industry employs only 3.6% of the UK workforce.
   Note that these figures are for 2011. It is likely that financial services accounts or even more of the U.K.'s economic output now and it did then.

     
So, no, I don't see us building a high wage economy just by growing GDP. What's the answer? That's another question for another post.