David Willetts is President of the Resolution Foundation. He was Minister for Universities and Science 2010-2014. His book A University Education is published by OUP.
The challenge to Boris Johnson’s leadership is of course the immediate political issue grabbing all the headlines. But behind the adrenalin rush of the day’s political crisis, there are still the long term issues which responsible parties of government have to think about and try to address. And behind today’s living standards crisis are still the deeper issues of how well the British labour market is doing and what it means for jobs and wages.
First, the good news. Britain is a high employment economy with a flexible labour market. We are still benefitting from Margaret Thatcher’s labour market reforms of the 1980s. Ironically, it was the threat to these from Jacques Delors in his notorious speech to the TUC which led to her Bruges speech starting the movement which led to Brexit.
But the EU did not actually impose substantially more regulations after that. Instead, the main interventions have been domestic – notably the minimum wage. And contrary to the fears that many of us had, including myself, it did not lead to a surge in unemployment.
There is however still the problem of the NEETS – people who are Not in Education, Employment or Training. It peaked in the 1990s at over a million young people aged 16-24. Now it is down to about 800,000.
Research we will shortly be publishing at Resolution Foundation suggests the fall is almost entirely amongst young women who are less likely to be having kids when they are young and, even if they do so, are more likely to carry on working. There has however been no real improvement among young men.
There has also been a shift in job satisfaction, especially amongst the low paid. In the past the low paid used to be more satisfied with their work than they are now. The minimum wage might have boosted their pay, but it also increased the pressures on them from managers and employers, especially if they are insecure contract workers.
Moreover there are still abuses of the labour protections which successive political parties have brought in – that is why the 2019 Conservative Manifesto promised a single effective body to enforce legal rights instead of the mish-mash of weak and under-resourced agencies we have at the moment. We should have a simpler, stronger system. It would be great if that pledge were now implemented.
Our employment rate for 16-64 year olds reached an all time peak of over 76 per cent before Covid struck. Although our employment rate is high, it is not yet back to its pre-Covid peak. The problem is that a swathe of older workers haven’t gone back to work. They appear to have opted for a quiet life and early retirement.
If they are still of working age and claiming unemployment benefits we should be expecting them to engage actively in job search, and they should be accessing the same range of back to work initiatives as younger unemployed people.
The biggest problem is that we are a low pay economy and that is above all because we are a low productivity economy. The living standards crisis has been building for years as our economy has underperformed. It is hard to boost living standards by tax cuts when Government borrowing is so high and productivity is so low. Instead, we boost living standards by a work force with more education and trainingm together with more business investment behind them.
We had a vivid example of this problem in the Chancellor’s package to help people with the rising cost of living. It was big and bold and widely welcomed. But it was all about transferring money to help people with these costs. There was nothing about actually investing in the home insulation and the innovative domestic heating systems which bring household costs down in the long run.
One reason for that omission is that the Treasury is scarred by the failure of successive green deals. The biggest single reason why they fail is that we are short of the trained workers to insulate the houses or install the new boilers. There is a lot of rhetoric about boosting vocational training, but we need to do more to deliver it in practice.
These jobs can’t all be created straightaway, but we need a plan of gradually increased funding to lower home heating costs by investment and innovation with a proportion of the budget going specifically on the vocational qualifications linked to those programmes. That would show we meant business about boosting living standards in the only way that makes those gains solid and sustainable.