Stuart Gentle Publisher at Onrec

Government needs to do more to support private sector job creation

The UK faces a long and difficult path back to full employment according to a new report published today by the think tank IPPR. The report highlights the scale of the challenge facing the UK labour market with between 1.5 and 2 million jobs needing to be created to return the employment rate to its pre-recession level of 73 per cent

The UK faces a long and difficult path back to full employment according to a new report published today by the think tank IPPR. The report highlights the scale of the challenge facing the UK labour market with between 1.5 and 2 million jobs needing to be created to return the employment rate to its pre-recession level of 73 per cent.

The report argues that the public sector has been filling in for insufficient private sector job creation over the last two decades, a trend which will have to be reversed as the government cuts to public sector employment will put the onus on the private sector to create hundreds of thousands of jobs over the next five years. The Office for Budget Responsibility (OBR) forecasts that the private sector will create 1.5 million jobs over the next five years, but this will not be sufficient to replace jobs lost in the public sector, bring down unemployment and mop up new entrants to the labour market.

The report shows that mainstream economic forecasters, including the OBR, believe the UK will still be some way short of full employment by the beginning of 2016, eight years after the recession began. The report argues that this slow recovery in the labour market increases the risk that people will become discouraged from work and permanently leave the workforce as their skills become redundant.

The report highlights substantial regional disparities in employment growth over the last 20 years. Between 1993 and early 2008, employment increased by 27 per cent in London, but by only 10 per cent in the North East and the North West. It argues that there will have to be a massive turnaround in private sector employment growth in the North East, Yorkshire and Humberside, the West Midlands and Scotland.

IPPR’s analysis shows that technological change and globalisation will continue to cause the nature of jobs to change. In the last economic cycle, while 4.8 million net new jobs were created, 1.3 million jobs were lost in manufacturing. The vast majority of jobs created over the next decade will come in the private service sector. The report argues that if the government is to achieve its aim of rebalancing the economy, a greater proportion of those jobs will have to be in tradable sectors than in the past (over the last 14 years the number of jobs in the tradable sector fell by 0.8 million, while the number in the non-tradable sector increased by 3.3 million). Key industries will include professional, business and scientific services and the information, communication and creative industries.

The report also argues that most jobs created in the UK over the next decade will be skilled jobs, while ‘traditional’ low-skilled jobs will continue to disappear, to be replaced by more work in areas such as social care and personal services.

IPPR analysis also shows that some groups – in particular those with few or no skills, people with a disability, some ethnic minority groups and older people who previously worked in low value-added declining industries – will be particularly disadvantaged in the labour market in coming years and will need extra support to help them into work.

In the long-term, the report argues the UK’s employment rate needs to be increased significantly: from less than 71 per cent to around 80 per cent. This would increase tax and national insurance revenues by up to £20 billion, making it easier for the government to provide first-rate universal services such as education and health.

Among the reports recommendations are:

  • The Government should introduce a job guarantee scheme for those who have been out of work for twelve months
  • Work Programme providers should be given a clear role to play in the promotion of apprenticeships
  • The Government should encourage the better provision of local labour market information
  • Encouragement should be given to workers newly made redundant to retrain, and to employers to undertake some of this training
  • The Government should respond to the poor short-term economic outlook by increasing its capital spending
  • The provision of universal childcare should be a medium-term priority to support a higher employment rate

Tony Dolphin, IPPR Associate Director for Economic Policy, said:

“Promoting a speedy return to full employment in the UK should be a priority for the government. There is little evidence to suggest the private sector will be able to meet the challenge over the next four years without help from government.

“Cutting corporate tax rates, deregulation and the creation of new Enterprise Zones are an inadequate response to the challenge, The government should work with others, including skills providers and welfare-to-work providers, to do more to support growth in the short-term and to avoid the problem of discouraged workers leaving the labour market by doing more to encourage retraining, to improve job-matching and to get the long-term unemployed back into work

“The longer someone is unemployed, the less likely they are ever to return to work. If we are going to provide decent services for our ageing population and clear the deficit, we need as many people in work as possible to maximise tax revenues. We cannot afford to let people permanently drift away from the jobs market.”

The research was sponsored by employment and skills experts Working Links.

 Kenny Boyle, Director of Working Links, said:

 “In these difficult times, Work Programme providers have a vital role to play in bringing their knowledge, expertise and innovation to the fore, collaborating with the best private, public and voluntary organisations to provide the right help for people out of work.

 “It is important for organisations like Working Links to continue to monitor labour market trends and work closely with employers to ensure jobseekers find jobs they are capable of doing. Training, whether it is to top up existing skills or retraining for a new career, is important not only for personal development but will also help Britain recover from the economic downturn in a better position. We work closely with employers and sector skills councils to deliver tailored training to the exact needs of employers with our extensive knowledge of local, regional and national labour markets, enabling firms to take on job-ready long-term unemployed people.

 “Going forward, it is important to highlight the benefits that Apprenticeship schemes can bring to employers of all sizes. Our recent research shows that 80% of employers believe apprenticeships will help reduce youth unemployment and an overwhelming 100% of employers felt that Apprenticeships give young people the skills they need to find lasting work. It is vital to recognise the types of qualities and skills that employers value most and how best to provide these to young people. The pre-Apprenticeship training that Working Links is helping to deliver is especially key because it is the first step to ensuring candidates are work-ready and have the necessary soft skills needed to succeed.”