In his article for this site on Monday morning, Rishi Sunak noted how important it will be to grow the economy and issued the following call to arms:
“We must get people back to work. It is to me as a Conservative unconscionable that at a time when businesses are crying out for workers, a quarter of our labour force is inactive.”
This echoes concerns raised by commentators such as Fraser Nelson last summer, when the Spectator crunched data from the Department for Work and Pensions (DWP) and found that 5.3 million Brits are on some form of out-of-work benefit – a much higher number than that suggested by the historically-low unemployment rate.
Other outlets, from the Times to Master Investor, took up the hue and cry, of the United Kingdom’s missing workers. But already, a sort of mutation seemed to be taking place. Whereas the Spectator analysis focused on those claiming benefits, the Times identified a broader problem:
“The economically inactive comprise those who are not in work and not looking for work. In the first quarter there were almost nine million people of working age who met this description. The “inactivity rate”, at 21.4 per cent, was many times greater than the unemployment rate.”
It’s understandable that such a figure might vex policymakers, especially in the context of a tight labour market and over a million vacancies.
But there is, or ought to be, an important distinction to draw between people claiming out-of-work benefits or some similar form of welfare who can be coaxed back into work, and people who are merely economically inactive per se.
The latter category, after all, includes all sorts of people whose circumstances a Conservative government ought not to consider inherently problematic. A stay-at-home parent, for example, is neither in work nor seeking work. Nor is a comfortable retiree. Nor is someone who cares full-time for somebody who would otherwise require state assistance.
A bloodless Treasury official might quibble with all of these people on cost-benefit grounds. It may well be more efficient – or at least, better for the Exchequer – if a parent works and pays for childcare, for example. Both the parent and the nursery thus pay taxes, and nurseries care for children at a more efficient ratio (albeit, a too-low one) than a family unit.
Likewise, it might be true that it would be better for the revenue (sorry, the economy) if adults with caring responsibilities worked and thrust those responsibilities on the state, although this proposition seems more dubious.
But to focus exclusively on the economics misses a deeper point: that sometimes people simply do not wish to order their lives in a way that maximises their potential for HMRC. If you have earned enough to retire early and want to spend your twilight decades filing planning objections from a golf course somewhere, it is a strangely Stakhanovite instantiation of a small-government Conservative that refuses to let you.
This doesn’t mean there isn’t a problem: Nelson rightly points out how many of the features of Universal Credit designed to chivvy people toward employment were unwound during the pandemic, and have not yet been properly reintroduced.
Likewise, a share of the problem we have filling vacancies with British workers is the fault of decades of bad policy, such as when Margaret Thatcher caved to the nursing unions and knocked the legs out from beneath the NHS’s on-the-job training model, or the way benefits creep has (as Nelson again points out) led to a huge share of households receiving means-tested benefits, despite a high minimum wage and lots of vacancies.
But important as policy reform is, ministers should be careful not to let the measure become the target. It is perfectly possible to conceive of a welfare system which would make payments to the economically inactive.
Perhaps the most obvious example is reforming subsidised childcare so that parents could use the cash to subsidise spending more time at home with their own children. Such a policy would upset all sorts of charts, from economic activity to tax revenue and perhaps female workforce participation too, and it would mean giving welfare to people who weren’t looking for work, the horror.
But if it allowed people to better pursue their own preferences, there would be a perfectly respectable case (both small-state and conservative) for implementing it.
There is plenty that ministers can and should do to get people into work, from overhauling Universal Credit and paring back welfare creep to reforming (or to an extent de-reforming) NHS recruitment, and likely much else besides. There is definitely a problem here, and it needs fixing.
But a popular anti-Tory jibe is that they know the price of everything and the value of nothing. It would be deeply unfortunate were the Government to validate this charge by embarking on a policy shift in which everyone is treated principally as an economic cog which is either spinning or not – or in the Prime Minister’s words, is viewed as part of “our labour force”, to the exclusion of all else.