Far from full employment

The recently released Taylor review was widely covered as an attempt to get to grips with the gig economy amid the growing sense that too much work in the UK was not ‘fair and decent’. The review comes on the back of five years of robust employment growth but stagnant wages and the proliferation of various forms of atypical work, from self-employment to zero hours contracts. Given this one could be convinced that the UK has solved the problem of getting people into employment and what was now needed was a concerted push to improve the world of work.

While there is some truth in this characterisation it risks ignoring the fact that a lack of labour force participation, under- and unemployment are still big problems. As the newly published Resolution Foundation book ‘Work in Brexit Britain’ shows, the UK is still far short of reaching full employment and will face the twin challenges of an ageing population and the prospect of significantly reduced migration in the future.

Although employment is at a record high, for many groups and in many parts of the country rates remain low. While half of all people with disabilities are in work in the South East, less than a third in Northern Ireland are. 70 per cent of single parents in East Anglia are in work, but this figure is just over half in the West Midlands. By closing these gaps we could reap significant rewards: our estimates suggest that helping relatively disadvantaged groups could result in 2.6 million more people in work and an employment rate of 78 per cent by 2020-21.

So how do we go about doing this? Three key groups and three specific policy areas stand out. First is the need to avoid a reversal in the success we have achieved in helping single parents and second earners into work. In the past two decades we have seen a dramatic improvement in the share of single parents and second earners in employment, yet the change from tax credits to Universal Credit risks undermining this. Under UC – following a succession of budget cuts – it is likely that single parents may be incentivised to work fewer hours than under tax credits.

Second we need to do more to support those with disabilities and long-term health problems. Currently policy is too-focused on helping people into work and insufficiently concerned with job retention, despite the fact that more people leave work for health reasons than move into work from health-related inactivity. We propose that there should be a statutory ‘right to return’ period of one year for those absent from work due to sickness. To encourage employers to actively support people back into work, the government should also offer a rebate on Statutory Sick Pay (SSP).

Finally we need to do more to support older workers. This is partly about improving the financial incentives, for instance by making it easier to partially draw down the state pension. It is also about encouraging firms to create, and employees to request, flexible working arrangements.

There is a danger that constantly reaching new highs in terms of employment every month breeds complacency. It is important to remember that amongst significant parts of the population and in many places lots of people still do not participate in the labour market. While the government is right to be concerned about the quality of work, concerns about quantity remain just as relevant.

This post originally appeared on the ERSA blog.