Full employment is a sham

The latest employment figures are out today. For too long, we have allowed Tories to tell tales on the labour market, because to listen to Boris Johnson at PMQs, you would be forgiven for thinking that the UK economy is doing well.

In classic Mr Toad fashion, he’s boasts of economic statistics — however fallaciously — as yet another great personal triumph. It is the fault of the rest of us that we cannot see his brilliance. We are all just like Moley, blind to Toad Hall genius. Employment up! Unemployment down! What more could anyone want?

Unfortunately, like Mr Toad, Boris Johnson’s boasts are nonsense. He doesn’t know what’s really going on: an economy that has been pulled out of shape by huge forces outside itself. We urgently need a better strategy. Boris Johnson is just a bullshitter, making it up.

Until he is replaced, working people will pay the price.

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Here’s the reality: full employment is a sham if it doesn’t bring better chances and more money to everyone who is at work.

Low unemployment — as we now have — should bring prosperity and security to all in the UK, but despite the Prime Minister’s claims, something big has happened in our economy and the Government have failed to even notice much less act.

The Tory Jobs Plan is a failure. Tory oversights and errors are costing British people. Here are four facts everyone should know about work in Britain right now:

1. The high vacancy rate is not reducing unemployment as much as it should

Ben Broadbent, Bank of England deputy governor, clarified this point in December. We would normally expect there to be an economic-see-saw between job vacancies and unemployment. When there are plenty of openings for employees, unemployment goes down. When there are fewer vacancies, the see-saw tips and unemployment heads upwards. Hiring employees is not quick or easy, so the picture we see reported in data can lag what is really going on in the economy. But as Broadbent pointed out, relative to pre-pandemic numbers, vacancies are rising faster than unemployment is falling. If this keeps happening, the link between a growing economy and better chances for people will be broken.

2. The growth in vacancies we have is not coming from growth as much as Brexit plus Covid

But there is a bigger problem. Normally, you would expect rising job vacancies in a healthy, growing economy. But as the forecasting think-tank NIESR pointed out back in November, the UK economy has been stagnant for some time with growth rates way below previous decades. Our increased vacancies aren’t the product of strong growth. They are due to shocks outside the economy, for example, Boris Johnson’s failed Brexit arrangement and people leaving the labour market for other reasons, including the impact of Covid.

Our vacancy rate is as much a sign of a problem as a sign of opportunity.

3. This is why the Department for Work and Pensions ‘Plan for Jobs’ failed

Rishi Sunak claimed that his Plan for Jobs would support, protect and create jobs. In July 2020, he announced a ‘jobs retention bonus’ to the tune of up to £9.4bn, and told the House of Commons that he would spend enough for ‘hundreds of thousands’ of Kickstart jobs, a program based on Labour’s Future Jobs Fund of 2009. Later in the year, he added the similar Restart programme for older adults.

Programmes like this made sense when a sudden drop in the demand for employees might harm our country’s long-term prospects. But when the real problem is the combination of historic low growth and a broken link between rising vacancies and falling unemployment, these schemes just miss the point. As a result, this plan has delivered very little. The jobs retention bonus was rightly cancelled. Kickstart was very slow, and as of December only reached 112,000 jobs, rather than the 250,000 envisioned. The only upside of the current situation for the country might be if, as Boris Johnson continually claims, the tight labour market was providing employees with better pay.

4. The high vacancy rate isn’t raising wages either

However, for all the claims ministers make about employment, most people are not having an easy time.

Poor wage growth has been underpinned by productivity stagnation and chronic uncertainty in the labour market: people at the bottom end are ground down by having to work harder to get ahead. The minimum wage has saved us from worse inequality but despite labour shortages, millions of people have no real bargaining power over their wages.

NIESR have reported this week on how challenging our future could be. This is not some full employment dream economy. This is the stagnating, slow-growth, low-wage, underperformance we have learnt to live with.

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So, can it be fixed? And importantly, can we return the UK to growth, including in productivity, which will sustain wage rises for years to come?

Sustainable wage growth is possible

The UK used to be an outlier in Europe for the dynamism of its economy. The Tories, wittingly or otherwise, have thrown sand in the gears, holding back our prospects.

Yet there are serious opportunities to improve our prospects left begging now, for want of leadership and the right policies.

The most sustainable way for wages to grow is via stronger productivity. Productivity growth has been very uneven across different places and industries over the past decade. Dealing with this was supposed to be the priority of the Government — levelling up — but at the last spending review, only one of their targets mentioned rebalancing. This is despite clear evidence that unequal productivity growth, which is the central driver of regional economic inequality, is getting worse, not better. The IFS review of the Levelling Up white paper makes this clear.

For too long, the Tories have got productivity wrong. It’s not all about high-tech firms. Improving to raise wages productivity requires change to help those in the everyday economy. Quite shockingly, as this Resolution Foundation report documents, we have the largest percentage of people working below their skill level — around 18 percent — since records began.

Nearly one-in-five are earning less than they are worth. This is a waste of people’s talent and time, and we must do better.

How? First by tackling insecurity at work.

From the rise of zero hours to the charges for employment tribunals, the Tories’ time in office has seen increasing uncertainty for employees, disincentivising businesses to invest in their staff. Labour will change this.

We want a partnership with business. We all have a shared in driving up productivity and can work together to achieve it. Just look at the apprenticeships levy underspend for example: handing precious skills funding money back to the Treasury unused. This failure demonstrates the inability of the Tories to make any real difference to the skills and talents of the UK workforce. This must change. And we must go further to take on the structural challenges holding the economy back.

This means focus on childcare, where limited options are stifling parents’ work choices particularly before children are two years old, and once after school care is needed.

It means confronting the reality that the Government’s own review of pay progression uncovered that many people (especially women) are working below their skill level for caring reasons. At the micro-level, that holds down pay, and at the macro-level, this holds back our whole economy, and we need change.

And it means finally sorting out the basics: job choice for many is limited by local transport. Better buses are better for business, and definitely better for productivity, but ask any local leader how hard it is to get bus companies to serve areas that need it most. It’s almost impossible.

Finally, we must not ignore the damage that our poor management culture does. As the FT’s Sarah O’Connor recently put it: “If you run an organisation where bad managers are overlooked or ever rewarded, no amount of free fruit or employee meditation apps will fix it.”

Increased trade union membership is a route towards a better work culture. The #Metoo movement shows that calling out bad cultures only gets you so far. Changing it requires detailed reform of policy and practice. That’s hard for employees to do alone, and the structures and solidarity of trade union organisation are needed now more than ever. There is evidence available to businesses too of the financial gains of a happier workforce. I would hope no leader really thinks that employee misery is a price worth paying for short-term profit, but if they need to be persuaded, it isn’t a hard case to argue.

To conclude, for our labour market, as everything else, we need better leadership.

We need to focus on the structural causes of low growth and low wage growth. That means tackling institutional failure: DWP itself, and more broadly across government, on childcare, transport and local government. It means thinking about the economy from the point of view of the 1 in 5 people currently working below their skill level.

It means no longer consigning their talents to the waste bin, and giving our economy strength for the future.