No one should imagine it will be easy to achieve
David Cameron has said that a Conservative government would create two million new jobs in the next five years. Putting aside the fact that – unless they are in the public sector – businesses create jobs, not governments, is this a realistic ambition?
Looking back over the last five years, and setting aside for the moment very real concerns about the quality of the new jobs created, it would appear that it is. Since May 2010, employment in the UK has increased by 1.75 million. All that has to happen is for the next five years to be a little better than the last five.
But if two million new jobs were created in the next five years, it would take the Office for Budget Responsibility by surprise. In its latest forecasts, published alongside the budget, it predicted an increase in employment in the UK from 31.0 million in the first quarter of this year to 32.0 million in the first quarter of 2020 – half the increase that David Cameron believes is possible.
The very different starting point now, compared to 2010, makes creating two million new jobs a lot harder over the next five years. In May 2010, the employment rate was 70.4 per cent and unemployment was 7.9 per cent. According to the latest figures from the Office for National Statistics, the employment rate is now 73.3 per cent – the highest level since records began in 1971 – and unemployment has fallen to 5.7 per cent.
The OBR’s forecast assumes that the employment rate will remain broadly flat over the next five years – all the increase in employment comes about as a result of an increase in the working age population. If we assume that the OBR has got its population projections right – and this includes net migration well above the tens of thousands level that David Cameron says he is still targeting – then creating two million jobs will require an increase in the employment rate to 75.5 per cent. Currently, within Europe, only Iceland, Norway and Switzerland have a higher employment rate, suggesting this is an ambitious target.
It is also ambitious because the people that would have to be drawn into work to reach such an employment rate are further from the labour market than those that have been brought into work in the last five years. Unemployment could be pushed down a little further – but it has not been below 4.7 per cent since 1975.
To get to an employment rate of 75.5 per cent will require increasing activity rates among groups that have traditionally had relatively low employment rates: women with young children, those with disabilities, people with few or no qualifications and those living in areas that have suffered most from deindustrialisation.
This would be a very good outcome for the UK. Employment is one of the biggest determinants of personal wellbeing. It would also be good in a more general sense. The underlying constraint on the post-war settlement – that full employment was a necessary condition for a high level of public service provision and welfare support – has reasserted itself. A higher employment rate would reduce the scale of required public spending cuts (or tax increases).
Achieving a higher employment rate by reducing inactivity is, however, going to be a lot harder, and will require much more in the way of proactive policy than getting back into work people who have recently been made unemployed. It will mean, for example, improvements in the provision of affordable childcare to support the return to work of mothers with young children and targeted support for people with disabilities.
Getting the UK economy to create two million jobs over the next five years is, therefore, a good target to have. But no one should imagine that it will be easy to achieve – and it certainly won’t happen without active government policies designed to bring people who currently feel excluded from the world of work closer to the labour market.
Tony Dolphin is chief economist at IPPR
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27 Responses to “Can David Cameron really create another two million jobs?”
Dave Stewart
Public sector workers are also tax payers by the way.
madasafish
So?
They still cost money to employ. There is no magic money tree..
Dave Stewart
You insinuated whether intentional or otherwise that only private sector employees were tax payers hence my comment.
You are of course correct there is no magic money tree however when more people have well paid employment tax returns increase, also the more money in the hands of workers in general (public and private sector) the more money is spent into the economy which allows business to grow and employ more people thus also increasing tax receipts. It has been described as the virtuous circle and is postulated that this is what caused the great prosperity in the post war period both here and in the USA.
Government spending on public sector workers as well as providing public services (which are used by the private sector and enable it to operate) gets spent back into the economy many times over (the money multiplier effect) and thus has positive effects on the economy as a whole.
It is not as simple to say that money spent on public sector workers is simply a drain on the government as you seem to be suggesting.
madasafish
So based on what you write, Britain would be more profitable if all workers were employed by the state.
Risible.
Try living in the real world..
Dave Stewart
Firstly kindly refrain from ad hominem attacks. I clearly live in the real world otherwise I wouldn’t be able to respond to your post because I would be fictional. I would very much like to keep debate cordial.
No where did I say that Britain would be more profitable if all workers were employed by the state and neither did my comment suggest that. I think my final line in the previous comment makes my point pretty clearly, the situation is far more complex than you were painting. Public sector employment is not simply a drain on public finances as you seem to be painting it as. It can in fact stimulate growth and tax returns given the right circumstances.
Furthermore I haven’t even begun to discuss how without the services provided by the public sector (and government generally) business would not be able to succeed. Law and order for instance. So while public sector employment may cost the government money it enables the private sector to thrive thus benefiting the economy generally as well as generally having positive effects on the economy at large.
I also find the idea of a nation being profitable peculiar. The government is not and should not be in the business of making the nation state profitable, what would that even mean? States don’t need to be profitable as they are not businesses. However generally most people (including myself) will agree that states should try to improve the business environment within said state to help business be profitable. Where I expect we differ here though is that I think that there are many other priorities for the state before business profitability such as raising people out of poverty, reducing inequality and protecting the environment.
While I expect you didn’t actually mean Britain as in the nation state I do find it interesting that that is what you said. Perhaps it gives something away as to your general world views. In addition you have presumably willfully misinterpreted what I said so I don’t feel bad about doing the same to you.