‘Full employment’, for so long considered an unreachable relic of a bygone age, is back on the agenda. That it is once again part of economic and political debates is testament to the UK’s remarkably strong employment performance in recent years. A record-high employment rate is something few people would have thought possible this soon after the most sustained economic downturn in living memory. Expectations of what may be possible are shifting, and the question of how much further we might expect to go is increasing in relevance.
It is in this context that the Chancellor has committed to full employment as an ambition for the government, targeting the highest employment rate of G7 economies and a 2 million employment increase within this parliament under this banner.
Welcome though such ambition is, with no universally-agreed definition of full employment and no further detail on the government’s approach at present, it is not clear just what these targets represent, who they benefit, or how they should be achieved. This report – the conclusion of a nine-month investigation into full employment by the Resolution Foundation – addresses these questions. It sets out a vision of further employment growth on the road to full employment that delivers the strongest social and economic benefits, and it provides policy directions for how we might get there.
Based on detailed analysis of the UK labour market over the past two decades, we come to a full employment benchmark that entails the 16-64 year old employment rate reaching 78 per cent by 2020-21. This would represent an additional 2 million people in work relative to today, pushing the total number of people in work to 33.9 million. Compared to the end of the previous parliament – the point from which the Chancellor’s set his ambition for a 2 million jobs boost – our full employment measure entails an increase in the number of people in work of 2.4 million. Our measure is therefore slightly more stretching that the Chancellor’s, and provides a picture of what his commitment could constitute and how it could be achieved.
Beneath this headline total, some important features of our full employment measure are worth highlighting:
- The majority of the employment increase (75 per cent) is a result of rising participation, that is, new entrants to the labour force. This underscores the limitations of a full employment agenda solely focused on driving unemployment downwards.
- Those in traditionally-disadvantaged group (which we term ‘low activity’) experience large increases in their employment rates, in particular disabled people, the low-qualified and black, Asian and minority ethnic (BAME) groups. For example, our measure entails an increase of almost 1 million in the number of disabled people in work.
- The lowest-performing parts of the country experience the greatest employment gains, with an increase in the employment rate of more than 10 percentage points in Merseyside and the rural North East.