Government must adopt a new “post crisis” approach to reach full employment

2.4 million more Britons in work is the prize for a bold new focus on boosting participation and  helping people stay in employment

A radical new “post crisis” approach to employment is needed to help 2.4 million more people into work and make the government’s full employment target a reality, according to the final report of the Resolution Foundation investigation into securing full employment published today (Thursday).

The road to full employment – the final report of the Foundation’s nine-month investigation – shows that eight years on from the crisis, with employment at record highs but still a long way off full employment, now is the time to adopt a new “post crisis” approach.

The report calls for an ambitious new focus on boosting labour market participation rather than just reducing the out-of-work benefits bill. This could lead to a 2.4 million increase in employment over the parliament, with the headline employment rate rising from its current level of 74.1 per cent to 78 per cent.

The Foundation says that this post crisis approach is needed because three quarters of the 2.4 million workless people that need to be brought into the labour market are economically inactive, rather than unemployed, and have little interaction with the benefits system or welfare-to-work provision.

A new Public Employment Service should be central to this new approach, combining the traditional role of Jobcentre Plus with local authority provision, careers advice, and new powers being handed down in devolution deals. This integrated, local streamlining of services would provide support and training for people who aren’t receiving Jobseeker’s Allowance (as well as those who are) and continue to support people to progress once in work.

The road to full employment also calls for clearer routes for non-graduate school leavers to successfully transition from learning to earning – and says that the government should set target for half of all new traineeships and apprenticeships going to school leavers or those who are already out of work.

But the report warns that even a renewed push to get far more people to enter work will still fall short of the gains needed to secure full employment. It calls for an additional focus on preventing people from leaving the workforce in the first place.

It highlights how falling workplace exits have led to a huge increase in maternal employment over recent decades – backed by financial incentives (tax credits and childcare support) and obligations on both employers (extended parental leave) and individuals (job search requirements). The Foundation wants to see a similar package of measures for disabled and older workers.

Preventing involuntary or premature exits from work is key to this post crisis approach. Currently 330,000 people move from employment to Employment and Support Allowance (ESA) every year as a result of ill-health – an alarming figure that can be reduced significantly with the right policy action.

The report calls for the creation of a new right to return to work following a period of ill-health to of up to 12 months, mirroring rights to return for mothers after childbirth. It also calls for greater flexibility in pensions drawdown to allow older people to continue working at reduced hours while maintaining income levels.

The report also argues that location is as important as scale when it comes to jobs growth. It highlights alarming employment gaps across the UK, including gaps of over 20 percentage points for disabled people in Northern Ireland and single parents in Merseyside, compared to the high-performing East of England.

To support shared jobs growth throughout the UK, the report calls for full employment to be embedded in the government’s new infrastructure plans, which must be aligned with the strengthened local economic leadership that newly elected City mayors should bring.

The report also highlights the additional barriers to employment that many groups face, with the poor employment prospects facing black, Asian and minority ethnic (BAME) people in the rural North East, Merseyside and West Yorkshire a major concern. To counter the discrimination that can work against BAME candidates, the report calls for government to put further weight behind the recent push to encourage ‘name-blind’ recruitment.

The Foundation says that the successful pursuit of full employment will be essential to boosting living standards over the parliament. And with the 2.4 million Britons missing from work concentrated in the poorest half of the income distribution, moving towards full employment could also help reduce inequality.

Laura Gardiner, Senior Policy Analyst at the Resolution Foundation, said:

“The government’s ambition to secure full employment is hugely welcome. But up to now it has said very little about what full employment actually constitutes, let alone how it intends to get there.

“Securing full employment will mean finding jobs for 2.4 million people. And with three quarters of those missing workers currently inactive, we need to a new ‘post-crisis’ approach to support them into work. That means a new focus on boosting participation and helping people to stay in employment for longer.

“Full employment is perhaps the most challenging economic target of this parliament. But moving closer towards it could provide the biggest single driver of improved living standards this parliament, so it’s a prize worth pursuing.”

Paul Gregg, Professor of Economics at Bath University and Associate of the Resolution Foundation, said:

“The UK has recorded strong employment gains and continues to break new ground. But beneath this impressive growth lie alarming regional jobs gaps for groups including young people, the over 50s, BAME people and those with a disability or ill-health. It’s crucial that support is targeted at these groups.

“For young and low-qualified people, this will mean more help in making the transition from education to employment. For many disabled and older workers it will mean new rights to help prevent ill-health or caring responsibilities spelling the end of their working lives.

“The success of the government’s full employment drive also depends on boosting participation beyond London and the South East. It therefore needs to be a top priority at all levels of government, from Westminster  to newly-elected Mayors and local authorities throughout the UK.”

Breakdown of full employment gains over the parliament across the UK