Full employment ‘not just a dream’
Cutting unemployment should become an explicit goal of governments for the first time since the 1970s, an IPPR report has concluded.
The centre-left thinktank's study, which challenges the orthodoxy of pursuing a stable inflation rate at the expense of everything else, envisages a major improvement in employment among 18- to 24-year-olds and those aged between 50 and 64.
Pursuing such a goal would result in trade-offs affecting inflation, productivity and real wages. It would involve rejecting the "male breadwinner" model entirely and accept that not all economic inactivity – for example full-time education or caring – is negative.
But the IPPR argues achieving full employment – which it defines as five per cent unemployment and an 80% employment rate for the non-student working age population – could make a big difference to the UK.
"If a large proportion of the 2.5 million people who are looking for work in the UK were in employment, they would be materially and psychologically better off, the economy would be stronger and the government would find it much easier to get to grips with its fiscal deficit," the report argues.
"Preventing long-term unemployment by aggressively responding to increases in short-term unemployment is also the best way of heading off the risk of hysteresis (an increase in inactivity)."
There are currently one million more people out of work in Britain than was the case before the 2008 financial crash and the unemployment rate currently stands at over eight per cent.
The IPPR does not deny that achieving full employment would present policymakers on Whitehall with a difficult challenge.
It says the government would have to make it "the central aim of all its economic policies" and identify what it looks like in terms of employment rates for specific groups, more sustainable welfare provision and public services and a greater focus on job creation.
Such reforms might address tensions over benefit 'scroungers' and cut back inactivity, easing the burden on the tax system.
But they will only be achieved with political support – and none of the main parties look sufficiently interested in the proposal for it to gain traction ahead of the next general election.
The report suggested a detailed outline of policies towards full employment could generate its own popularity for the reforms.
"A clear vision of what full employment would look like could also help to mobilise opinion in favour of the policies the government needs to put in place to achieve an employment rate well above its previous peak of 73%, to ensure that fewer people are claiming out-of-work benefits and to deliver higher real wages – and ultimately it is having these policies in place that is important," it stated.