The events of the past two weeks have been significant. Last but not least, they have reminded us of the Queen’s steadfastness in our lives and through nearly a century of our national history. Regardless of your views on the monarchy, Queen Elizabeth clearly kept the promise she made on her 21st birthdaySt birthday 75 years ago that she would dedicate her life to the ministry. This week, however, politics has started again – and instead of consistency and stability, ‘normal’ service will resume with a new prime minister (our fourth in six years), an economic crisis and an emergency (mini) budget this week. Of course, this turmoil partly reflects the challenges we face in our economy. But while much of the focus and debate this week will be on whether proposed tax cuts can boost demand, this “new” government also needs a new plan, fast, to do a lot more on supply – to help more people, Finding work, addressing labor and skills shortages, and supporting growth and reducing inflation.
This month’s The employment figures in particular make this case clearer than ever. Unemployment is at its lowest level in almost 50 years, but this is being driven by people retiring from the workforce altogether – with a record number of people not working due to long-term illness (which is rising at an all-time high) and more than 600,000 older people more unemployed than before the pandemic began. At the same time, job vacancies remain near all-time highs as employers struggle to fill vacancies without investing heavily in wages and manpower, meaning for the first time in our lives we have more vacancies than unemployed. These labor shortages are holding back growth and contributing to higher inflation, with both “core” inflation (which screens out volatile energy and food costs) and services inflation above 5 percent and rising.
These problems have been piling up for over a year now, and part of the problem is that the government was preparing for a very different crisis in the labor market – one of mass unemployment, long-term unemployment and weak demand. They have acted quickly to tackle these issues, first through the furlough scheme in 2020 and then the spending review in 2021, and have allocated around £10bn in employment and skills support for the unemployed. But while the crises have changed, the government’s response to the labor market has remained largely the same. The new Way to Work campaign focuses mainly on reducing short-term unemployment (which is at its lowest ever level), even if the Kickstart scheme – for unemployed young people – was underspent by at least £700m, and Restart – for the long-term unemployed – is on the way to spend £1bn less as the £2.9bn set aside and thousands of Jobcentre Plus work coaches hired during the pandemic laid off.
Just to be clear, I was one of those people who thought (and said) in the summer of 2020 that we were headed for an unemployment crisis. But since the facts have changed, I’ve changed my mind. And when the ministers change, the government must do the same. I think there are now four areas where we need to see action, starting with Friday’s budget.
First, what we need most is a significant and rapid expansion of access to employment support for those who are unemployed and need help getting back into work. Currently, our job placement services are almost exclusively limited to those in the ‘job search’. (i.e. unemployed) group of Universal Credit. However, the vast majority of the three million people who are unemployed and looking for a job are not unemployed at all: 1.7 million people are considered “inactive” and receive either under-benefits or no benefits at all (this is especially true for older people) . We need much more access to regular employment services – on a voluntary basis – for these people, but also much more investment in professional support, especially for older people, parents and people with health problems. However, the good news is that there is at least £2bn of underspending from the Plan for Jobs that we could take advantage of.
Second, this needs to be anchored in local areas and partnerships so that we can reach people closer to where they live. This should mean more merging and outreach of Jobcentre Plus work coaches and support, but also recognizing that Jobcentre Plus is often not best placed to deliver specialized services itself – such as individual placement and support, help for the elderly who do not receive benefits or help meet complex requirements. So we need to build on some of the pilot projects that are already going ahead and on models such as the Local Government Association’s Work Local proposals and the Greater London Authority’s No Wrong Door approach.
Third, we need to have a much better conversation with employers who often seem to be sitting between three or four chairs in government on labor market, employment and skills. Even if we don’t to have a single Ministry of Labor, we need Act like We do this with a unified, coherent approach to workforce planning, decent work, hiring and retention, workplace skills and broader support. A new employment law appears to be off the table again (despite representations from both companies and unions), but we can expect more from employers and do more to help too – particularly on recruitment, retention and job quality. In the meantime, the local government steps in (ours recent work for the LGA sets out some of this).
Finally, in connection with this, we must respond to both skill and labor needs. The reality is that labor shortages are likely to become a permanent rather than a temporary feature of the UK labor market and as a result we need to do much more to help the employed and unemployed to improve their skills and productivity and make progress . This should first include making the training model more flexible so that we can mobilize more employer investment; Extending the training available under the successful model of sectoral work academies and expanding skills boot camps. But in the longer term, we need a more coherent, stable and integrated approach to how we invest in adult learning collectively and coordinate this across sectors and locations.
Of course, doing all this in less turbulent times with an established and functioning government would still be a major challenge; to do it now, given the turmoil we’ve had, might be asking too much. But if we don’t do something now to address the supply issues we face in the labor market, then much of the demand stimulus planned for this Friday’s fiscal budget — in labor costs, corporate taxes and stimulus — will do more for inflation than for that growth, which will further erode living standards and push up interest rates.
With everything that has changed in the past few weeks, we now have an opportunity to act; and the scale of the challenges we face means we must seize this opportunity.