Stephen Crabb is Member of Parliament for Preseli Pembrokeshire.
An essential feature of the British economy in recent decades is its remarkable capacity to create jobs, and lots of them.
Last week’s unemployment figures demonstrate the underlying strength and dynamism of our labour market: headline unemployment down, overall employment back to pre-pandemic levels and a new record number of job vacancies.
The winding down of the furlough scheme has not seen an unemployment crisis, as many had predicted, but an acute shortage of workers instead. Since lockdown ended there has been a growing chorus of concern from employers across many different sectors about recruitment difficulties.
Ministers have framed this challenge as part of a macro shift towards a higher wage, higher productivity economy less reliant on foreign workers.
Leaving aside the argument over whether immigration does hold down wages (the evidence is mixed), the clear injunction to bosses is to get better at finding and holding on to British staff. Coming at the same time as the row over Universal Credit rates, there is also a simple message for the unemployed: the jobs are there, go out and get one.
All of this has the firm smack of common sense about it. The problem is that a ready and willing surplus labour force, simply requiring a prod and the prospect of a decent wage, is not that easy to find.
If Ministers are serious about the new approach, then it will require one thing that Britain has tried to do without for decades: a clear and effective employment strategy focused squarely on boosting domestic labour market participation.
Immigration, a relentless push towards a 50 per cent university target and the exiting of long-term unemployed onto sickness benefits have all helped to cover over the weaknesses in UK employment policy.
Finding those additional British workers to fill the soaring vacancies will be a major challenge. For a start, the number of unemployed actively seeking work is low by historic standards. With well over a million job vacancies currently, there is approximately 1.3 unemployed per vacancy – the lowest rate in 50 years.
We are fast returning to the pre-pandemic situation where large swathes of the country were experiencing almost full employment. Therefore, relying on falling unemployment to increase the stock of workers won’t get us very far.
We need to look instead at improving our overall economic activity rate – the number of people who could potentially make themselves available for work.
There are around eight million economically inactive people in the UK comprising mainly students, long-term sick, those looking after family members and retired older people.
This may sound like a vast potential army, but the truth is that the UK has a relatively low rate of economic inactivity and many of those who are inactive do not work for very good reasons. Nevertheless, this is where our efforts need to focus to find Britain’s missing workers.
The first challenge is to encourage those who have recently downsized their employment commitments to return to work. While overall employment is back to pre-pandemic levels, this masks a drop in the trend rate. There are an estimated 900,000 fewer workers in the labour market compared to the pre-pandemic trend.
Perhaps more than half of these are older workers. Compared to the noise around claims of migrant workers exiting the economy, there has been too little focus on the quiet disappearance of older workers who have chosen to retire earlier.
This is a reversal of a very positive trend in the UK labour market and those sectors with an older workforce, like road haulage and social care, have really felt the impact.
Ministers, to their credit, have made available a dedicated support package to help the over 50s stay in and return to work. But turning this around while Covid is still endemic in the population may prove incredibly difficult.
The second large group where new thinking is required is the long-term sick: people who fall out of the workplace, often with mental stress or musculoskeletal problems.
Out of reach of DWP work coaches and with little prospect of swift NHS treatment, many never find their way back to employment even when some work may be therapeutic. The sheer waste of talent and potential is enormous and represents a failure of both welfare and health policy.
Similarly, there is a missing workforce of disabled people who have the capacity to find rewarding employment. Only 52 per cent of disabled people are in work compared with around 82 per cent of non-disabled people. Although the number of disabled people in work is rising, disability and long-term health problems continue to be associated with greater poverty and reduced access to work.
There have been plenty of schemes and trials over the years but the results have been poor, and delivery has often coincided with clumsy attempts to re-assess benefit entitlement. DWP officials openly admit a lack of knowledge of what works in helping these groups back to work.
Recent ministers have thrown themselves at the challenge with determination. But, as the National Audit Office states, the evidence base for effective employment interventions when it comes to the disabled and long-term sick just isn’t there.
As my colleague Rob Halfon argued here last week, skills shortages cost Britain billions every year. Rob makes a powerful case for a realignment of skills and education policy to better equip young people for the changing world of work.
In the meantime, where else can we look for the workers we so badly need? Should we allow more asylum seekers to work, for example?
Currently they can apply for permission to work in jobs on the Shortage Occupation List if they have been waiting more than 12 months to have a claim processed. Relaxing this rule has the merit of reducing the burden on the taxpayer, helps integration, reduces the prevalence of illegal work and meets a pressing economic need.
A number of senior Conservatives support this change but, in the current climate, worry about public reaction. Blurring the distinction between those who flee persecution and those who seek better economic opportunities would do nothing to reduce the ‘pull’ factor for illegal migrants.
Any significant expansion of the UK labour force will require the age-old ingredients of strategy, hard choices, effective interventions and investment.
The Chancellor’s Plan for Jobs has made a very good start in smoothing the path back to work for many following the lifting of Covid restrictions. But even policies like Kickstart tend to have a bias towards the low-hanging fruit. The harder-to-reach groups are precisely that.
Covid and Brexit have ushered in profound changes to our employment landscape. The good news is that, if smooth growth can be maintained, we now have the best chance in more than a generation to reduce economic inactivity and even end the scourge of long-term unemployment.