Full employment: A new kind of announcement

It’s on. The UK is going for full employment. Or, to state the Chancellor’s commitment precisely, we’re going for fuller employment than anyone else in the G7 (we’re fourth at the moment). It’s the latest event in the global race.

The form of the commitment took most people by surprise. Government typically announces an ambition first, then it sorts out the policy and implementation afterwards. This is what happened with Universal Credit, and as a consequence the ambition keeps receding into the distance. The Chancellor though had already announced the policies in this case – for example, an Employment Allowance of £2,000 per employer to reduce national insurance costs, and many of them fall into place this week with the start of the new financial year. What he did yesterday was to describe the ambition that these existing policies would help to deliver.

Though this breaks the usual logic of Government announcements, it is a better approach to public administration. This time last year, while still a civil servant, I helped to write a report for Government on how to improve the delivery of major projects. They’re a different type of endeavour to achieving full employment but the same principle applies: what the best organisations do is to figure out first if they have the ideas, the capabilities and the money to deliver a major commitment, usually they get started on it to test their assumptions against the reality, and only then do they announce that it’s what they’re aiming for.

Hence people looking for the new policies that will go alongside the Chancellor’s commitment are likely to be disappointed. His commitment is a bet on the success of current policies, not a mandate to make new ones.

So how is that bet likely to turn out? Well, he hasn’t set a deadline by which he plans to hit the target – further evidence of his prudence – so all he needs to show at least for the next period is that the UK is moving in the right direction. That is likely to be the case. But we should watch for what else is happening at the same time.

First, the largest jump in employment in the latest figures was in self-employment. The numbers of people in jobs other than self-employment actually fell. This might mean we’re finally becoming more entrepreneurial. Equally the new self-employed might be people who are in insecure work, even in zero hours contracts by another name. If we’re moving to fuller employment, then it’s important to know whether that is via a new generation of entrepreneurship or a resurgence in casual and perhaps temporary employment. The ONS has said today that their next set of productivity statistics will include specific calculations for the self-employed. This could be hugely helpful in working out what sort of self-employment is going on.

Secondly, that issue of productivity itself. The latest figures show a small increase in output per hour. It remains a long way below where it was before the crash. Depending on how much employment keeps rising, productivity growth is likely to remain pretty low, not least because many of the people now moving into jobs are more likely to be lower-skilled or unskilled – on the assumption that people with higher skills got hired before them or were better able to keep hold of their jobs.

In a way, we shouldn’t complain about low productivity growth if there are lots of new jobs instead. However, it would be good to know if productivity is rising among those already in work. And is it too much hope that we can have both?

Again, we should be thinking about taking the same approach that the Chancellor has done on full employment. Create the policies first, policies that promote training and the acquisition of new skills, new investment in other capital that will increase productivity, and then set an ambition. The clearest way to set that ambition may be in terms of wages.

Yesterday the Chancellor understood that, with the policies already announced, any excitement about his new commitment could only be created by bold words, he couldn’t just say ‘and, by the way, as you will have worked out already using your models, the upshot of my policies is that . . . ‘. Hence he spoke about ‘full employment’, claiming that term from Labour, and targeting the highest rate of employment among the G7. A similarly positive ambition on productivity growth could be expressed by saying that the ambition is to increase the minimum wage by a significant chunk, he could talk about aiming for £7 per hour, for example . . . Oh wait, is it possible that there is a pattern here, and a plan?


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