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The report argues that the public sector has been filling in for insufficient private sector job creation over the last two decades, a trend which will have to be reversed as the government cuts to public sector employment will put the onus on the private sector to create hundreds of thousands of jobs over the next five years. The Office for Budget Responsibility (OBR) forecasts that the private sector will create 1.5 million jobs over the next five years, but this will not be sufficient to replace jobs lost in the public sector, bring down unemployment and mop up new entrants to the labour market.

The report shows that mainstream economic forecasters, including the OBR, believe the UK will still be some way short of full employment by the beginning of 2016, eight years after the recession began. The report argues that this slow recovery in the labour market increases the risk that people will become discouraged from work and permanently leave the workforce as their skills become redundant.

The report highlights substantial regional disparities in employment growth over the last 20 years. Between 1993 and early 2008, employment increased by 27 per cent in London, but by only 10 per cent in the North East and the North West. It argues that there will have to be a massive turnaround in private sector employment growth in the North East, Yorkshire and Humberside, the West Midlands and Scotland.

IPPR's analysis shows that technological change and globalisation will continue to cause the nature of jobs to change. In the last economic cycle, while 4.8 million net new jobs were created, 1.3 million jobs were lost in manufacturing. The vast majority of jobs created over the next decade will come in the private service sector. The report argues that if the government is to achieve its aim of rebalancing the economy, a greater proportion of those jobs will have to be in tradable sectors than in the past (over the last 14 years the number of jobs in the tradable sector fell by 0.8 million, while the number in the non-tradable sector increased by 3.3 million). Key industries will include professional, business and scientific services and the information, communication and creative industries.

The report also argues that most jobs created in the UK over the next decade will be skilled jobs, while 'traditional' low-skilled jobs will continue to disappear, to be replaced by more work in areas such as social care and personal services.

IPPR analysis also shows that some groups - in particular those with few or no skills, people with a disability, some ethnic minority groups and older people who previously worked in low value-added declining industries - will be particularly disadvantaged in the labour market in coming years and will need extra support to help them into work.

In the long-term, the report argues the UK's employment rate needs to be increased significantly: from less than 71 per cent to around 80 per cent. This would increase tax and national insurance revenues by up to £20 billion, making it easier for the government to provide first-rate universal services such as education and health.

Among the reports recommendations are:

The Government should introduce a job guarantee scheme for those who have been out of work for twelve months
Work Programme providers should be given a clear role to play in the promotion of apprenticeships
The Government should encourage the better provision of local labour market information
Encouragement should be given to workers newly made redundant to retrain, and to employers to undertake some of this training
The Government should respond to the poor short-term economic outlook by increasing its capital spending
The provision of universal childcare should be a medium-term priority to support a higher employment rate

Tony Dolphin, IPPR Associate Director for Economic Policy, said:

"Promoting a speedy return to full employment in the UK should be a priority for the government. There is little evidence to suggest the private sector will be able to meet the challenge over the next four years without help from government.

"Cutting corporate tax rates, deregulation and the creation of new Enterprise Zones are an inadequate response to the challenge, The government should work with others, including skills providers and welfare-to-work providers, to do more to support growth in the short-term and to avoid the problem of discouraged workers leaving the labour market by doing more to encourage retraining, to improve job-matching and to get the long-term unemployed back into work

"The longer someone is unemployed, the less likely they are ever to return to work. If we are going to provide decent services for our ageing population and clear the deficit, we need as many people in work as possible to maximise tax revenues. We cannot afford to let people permanently drift away from the jobs market."

Notes to Editors

IPPR's new report - Jobs for the Future: The path back to full employment in the UK - will be available at www.ippr.org

The recommendations in IPPR's report include:

The Government should provide a guaranteed job, paid at the minimum wage or above, to anyone who has been unemployed and claiming JSA for more than 12 consecutive months. The guarantee should be matched by an obligation to take up the offer or to find an alternative that does not involve claiming JSA. The job should be for no more than 30 hours a week to allow a reasonable amount of time each week for job search and should last a maximum of six months. Jobs could be provided by the third sector or local government.
To strengthen routes into apprenticeships for long-term unemployed young people and to improve uptake among employers, clearer guidance should be given to Work Programme providers on the role they can play and the barriers to their participation should be removed.
The Government should make the provision of better local labour market information a priority. Initially, the focus should be on JobCentre Plus, which, as part of its role, should provide job seekers with information about current and possible future trends in employment demand in their locality and surrounding areas. Eventually, this information should be made more widely available through government websites.
A UK-wide scheme should to introduced, along the lines of the Welsh ReACT scheme, to encourage people who are made redundant to retrain for work in other sectors and to encourage employers to recruit and train them. This scheme should last throughout the period of large-scale job cuts in the public sector, when redundancies in the whole economy are likely to be abnormally high, but should be available to workers formerly employed in the public and private sectors.
The Government should announce a £5 billion increase in capital spending to improve the country's infrastructure and boost employment in the beleaguered construction industry.
The Government should reconsider its decisions to reduce the amount of childcare support that can be claimed through the tax credit system and to integrate the childcare element of the tax credit into the Universal Credit. It should plan to introduce a single, integrated funding system for childcare that merges tax credit provision and the tax relief provided for childcare vouchers. This system should support all parents, but offer the greatest amount of support for those on low incomes.

Contact

Tim Finch, 07595 920899, t.finch@ippr.org