Full employment: we’re half way there

In early 2014 the then Chancellor, George Osborne committed to ‘fight for full employment’. At the time the employment rate (for those aged 16 – 64) was 72.9 per cent and the unemployment rate (for those over 16) 6.4 per cent. The Chancellor didn’t commit to a specific figure, but his goal was to have the highest employment rate in the G7.

Four years on and the employment rate has risen to a record 75.6 per cent, the unemployment rate is just 4 per cent and the UK now has the third highest employment rate in the G7, just behind Japan and Germany. This improvement should be celebrated. Although legitimate questions remain about the quality and security of many jobs – there are still 800,000 people working on a zero-hours contract – full-time jobs for an employer account over four-fifths of the rise in employment since April 2014.

So who has found work? The evidence shows that those on lower-incomes, and people that tend to find it hard to access the labour market, have been the main beneficiaries. Between 2008-09 and 2016-17 employment increased by 2.1 million. The figure below shows that over half (55 per cent) of the people that moved into work lived in households in the bottom third of the income distribution, two-thirds came from the poorer half of households.

Those moving into work were also much more likely to have relatively low levels of formal education. Grouping the population into three groups based on their highest qualification, we find that people in the bottom group account for 43 per cent of the increase in employment since 2008.

A healthy jobs market has also helped people that may find it hard to work because of health problems, caring commitments, or because of other barriers, such as discrimination. The figure below shows that ethnic minorities account for 46.6 per cent of the employment increase since 2008, while people with disabilities account for nearly a third.

Rising employment for these groups has provided a much-needed bright spark amidst the economic gloom since 2008. Despite this, their employment rates still lag behind. Ethnic minorities may account for almost half the increase in employment since 2008 but just 66 per cent of people from BAME backgrounds are in work, the equivalent figure for people with disabilities is 45 per cent. Furthermore all groups have employment rates well below that of highly qualified people aged 30 to 49 (the ‘high performing’ group), who do not face the same barriers to work.

That’s why it’s important to remember that despite these gains the UK is still a long way from full employment. Our research suggests that a rate of 78 per cent would probably achieve this, but that to do so the employment rates for these groups will need to continue to rise significantly. The employment rate for ethnic minorities will need to rise by 8 percentage points, for those with low qualifications it will need to rise by 9 percentage points, and for people with disabilities an increase of over 10 percentage points is needed.

Such improvements are daunting, and achieving them will require concerted action from government and employers. Nevertheless we should take heart from the fact that we have had success in the past. Paid maternity leave, working tax credits and a mixture of limited conditionality and job-search support helped raise employment amongst single parents and second earners with children.

Progress in future however will require new forms of support. In particular we need to ensure that Universal Credit does not weaken work incentives for second earners and do more to support those with health problems by creating a statutory ‘right to return’ period of one year for those absent from work due to sickness. We will also need to help people extend their working lives. Worryingly the issue of full employment is not receiving the attention it once was – Google Trends suggests that interest in the term is now 70 per cent lower than it was when George Osborne made his speech. So we should celebrate rather than take recent success for granted, while seeing it as just the first step on the road to full employment, rather than job done.