How far we are from recovery and the policies required to bring it about are both addressed in a new paper published today (14 December) by The Work Foundation, just ahead of the latest labour market statistics due out this week. Recession and Recovery examines if we have yet reached the economic turning point in this recession and assesses how long it might take to reach pre-recession levels of output and employment. It charts which jobs and industries have suffered the most and demonstrates where the new jobs will emerge between now and 2020.
The study, by Associate Director Ian Brinkley, has been conducted as part of a two-year programme of detailed research to identify what is required to create a thriving and sustainable economy by 2020. Reviewing the UK’s current situation, he outlines the likely factors that will determine growth over the next decade. He argues that the labour market recovery is likely to be faster than the recovery following previous downturns, citing three reasons:
the massive government fiscal and monetary stimulus combined with direct intervention in the banking sector;
welfare reforms along with effective national and local labour market interventions introduced by successive governments since the last recession;
more flexibility around pay and hours with a greater willingness to engage actively in addressing long-term worklessness.
The paper demonstrates how the knowledge economy has been at the heart of recovery in previous recessions. It also shows how the return to full employment this time will be even more dependent on jobs in the knowledge based industries: advanced manufacturing, high tech and business services and non-taxpayer funded education and healthcare services. Brinkley said, “Post-recession recovery tactics need to focus on ensuring that all these sectors are able to grow and prosper through industrial policies and those around the labour market, enterprise, skills, education and innovation. The government should also shape a strategic approach to what role particular sectors should have in the economy of the future.”
In what he describes as “industrial activism”, Brinkley outlines the top priorities that should help shape recovery in the 2020 economy: “First, the finance sector should never again be able to threaten destabilisation of the whole economy and risk a second Great Depression. It should be capable of supplying long-term capital at competitive prices to the expanding knowledge based industries and enterprises of the future. If existing institutions are judged incapable of doing so, we must think about whether new ones are needed to fill the gap.”
He added: “Advanced manufacturing must be given the right conditions and support to allow it to reach its full potential as a cutting edge recovery sector, driving innovation and growth across the economy in both high value services as well as high value manufactured goods.”