Why Cameron’s ‘full employment’ doesn’t guarantee you a job

There are various definitions of full employment. What it does not amount to is zero unemployment.

For economist William Beveridge, whose Beveridge Report created Britain’s post-war welfare state, it meant unemployment of under 3 per cent of the workforce.

During the heyday of “full employment” – the 1950s and 1960s – unemployment stayed below a million. In the early 1980s, under Margaret Thatcher, it hit three million before falling as the economy recovered.

A decade later, with unemployment rising again, the then chancellor Norman Lamont memorably said it was “a price well worth paying” to reduce inflation.

According to Ian Brinkley, chief economist at the Work Foundation, the Blair governments “shifted the goalposts” on full employment, talking instead about the “highest numbers in work, which the coalition has continued”.

Mr Brinkley told Channel 4 News he believes full employment is achieved when there are about 1.5 million people out of work (4-5 per cent of the workforce).

‘Everyone who wants to work can work’

To the prime minister, full employment means that “everyone who wants to work can work”, with “a higher rate of employment here in Britain than in any other advanced economy”.

So how close is Britain to achieving these targets? The latest figures from the Office for National Statistics show that there are 1.96 million unemployed people in Britain (6 per cent of the workforce).

Some 73 per cent of people aged from 16 to 64 are in work, a creditable achievement after the long recession. But looking at OECD statistics from 2013, other advanced economies – Switzerland, Sweden, Germany, Canada, Denmark and Australia – are doing better.

Like overall joblessness, youth unemployment has been falling for some time, but there are still 954,000 16 to 24s who are not in education, employment or training (13 per cent of the total).

One feature of the recovery is the growth in self-employment, with 4.53 million people in this sector in full or part-time work. The government hopes this is a sign of a new entrepreneuralism, with motivated people striking out on their own.

But it could also be a result of some jobseekers finding it difficult, if not impossible, to find full-time, “traditional” employment.

And one of the problems for the government is that tax revenue from self-employment is less reliable than from full-time staff who work for companies and pay tax on a PAYE basis.

‘Half an answer’

There is concern that some people are finding work, but are either not earning enough to pay tax or are having to have their incomes supplemented by the taxpayer through tax credits to maintain an acceptable standard of living.

Despite the fact the British economy is growing steadily, tax revenues are not rising accordingly, which makes it more difficult to cut the deficit.

When we talk about the desirability of full employment, there are caveats. Is work always the answer?

“It’s half an answer,” said Ian Brinkley. “Work is better than unemployment, but you also have to take account of the quality of employment. If there are low wages and poor progress, it’s only half a solution to a problem, with people becoming dependent on in-work benefits.”

But Mr Brinkley is confident that the position of the self-employed will be seen to have improved when up-to-date statisitcs are published.

“Their earnings fell rapidly during the recession, you pay less tax if you’re self -employed and it’s more difficult to collect tax. My guess now is self-employment has gone back to normal, towards pre-recession levels of income.”