Economic Change and Employment Policy

British society will need to accommodate a higher level of unemployment well into the 1980s. Forecasters now differ only by degrees of pessimism in their general pronouncements on the economy and employment in the medium term. Whilst there is much less agreement about prospects for the 1990s, the employment situation is likely to continue to deteriorate without significant changes in policy and in attitudes. The seeds of a strategy for coping with such changes must be sown in the next few years. During that period, however, the development of the economy could create an extremely hostile environment for the kind of social and economic experimentation which is now called for. Therefore it is all the more important to establish the likely pattern of economic change over the next five years or so, to discuss those policies required for the long-term benefit of the economy and to consider problems of implementation which are likely to arise on a shorter time-scale. The conflicts which exist between pursuing long-term objectives and the reality of the economic situation in the short term will always be with us. Medium-term policy should provide a means of controlled compromise between the two, through which the rhetoric associated with the former is confronted with the expediency engendered by the latter. In order to do this, however, the policy must be explicit.

Since all governments intervene in the economy to some extent, they require models which will enable them to assess the consequences of proposed action, suggest alternative possibilities and provide a basis for evaluating the options which emerge as worthy of serious consideration. The difficulties of constructing such models are well-recognised by those involved and a model used for forecasting is subject to a continuous process of development.

The United Kingdom could easily squander the benefits of North Sea oil and gas production. The opportunities provided by the discovery and exploitation of this resource will be wasted on temporary increases in private and government consumption if the pattern of economic change over the next five years or so continues to be dictated by short-term considerations, and if governments fail to appreciate that manipulating the conventional fiscal and monetary instruments of policy has not and will not reverse the long-term deterioration in Britain’s relative industrial performance.

This chapter reviews historical trends in industrial and occupational employment and provides a more detailed analysis of the projections to 1985 discussed in the previous chapter. Section 4.1 classifies manufacturing industries into broad groups depending on their respective trade and employment performance and examines the relative importance of trade and domestic demand in employment generation. Section 4.2 looks at the various factors underlying trade performance, particularly changes in price competitiveness. The section goes on to consider the mechanism whereby investment may directly influence trade performance and deals more thoroughly with the simulation of major structural change summarised in Chapter 3. Section 4.3 then completes the link between trade and employment by analysing the growth of productivity and employment, dealing with manufacturing industries, which provides the focus for sections 4.1 and 4.2, and other sectors of the economy. Section 4.4 is concerned with changes in occupational employment throughout the economy and considers employment prospects for different skills. Section 4.5 summarises the findings of the chapter and draws out some of the implications for economic policy.

The previous chapters have been concerned with medium-term economic prospects at the national level. Using the macroeconomic model, alternative economic outcomes have been projected under different policy assumptions. These projections embody demands for labour which have been analysed in terms of industrial and occupational structure. However, the analysis so far has been non-spatial. Thus, employment levels have been projected for each industry group and occupational category but nothing has been said about where within the UK these demands will occur. Similarly, the projections of the labour force have been made for the nation as a whole. There are several reasons why it is important to introduce a spatial dimension into the analysis. First, spatial mismatching of demands for and supplies of labour may be an important aspect of unemployment and may cause considerable wastage of labour resources. It is, therefore, important to know whether the projected demands for labour will occur at locations where the availability of labour enables them to be satisfied. Second, spatial disparities remain a contentious issue. One would, therefore, wish to make some comment on spatial differences in employment opportunities. Third, it is at the local level that much employment policy must be implemented. Demand-deficient unemployment can perhaps be tackled by broad national policies to stimulate the economy, but structural unemployment must be tackled locally by providing appropriate aid to retraining or relocation.

Over the past two decades female employment has expanded at a steady and relatively rapid rate. By 1978 women held over two-fifths of the employee jobs in the UK. This contrasts sharply with the slow growth and recent downward trend in male employment. This chapter examines these trends in detail and develops labour force and employment projections by sex.

Prospects for the two major sectors discussed in this chapter provide something of a contrast. Employment in engineering is expected to fall substantially over the medium-term whereas in construction it is likely to rise. Both industries frequently claim that government attempts to regulate the economy impinge too much upon their activities, undermining product demand, making planning almost impossible and generally dissipating business confidence. Whether this exacerbates the cyclical fluctuations to which investment industries are in any case prone or simply slows down their average rates of growth or leads to both problems, the uncertainties about future demand in engineering and construction are usually considerable. These uncertainties and the relatively long lead-times required in training people for skilled trades combine to produce the classic situation with which ‘active manpower policy’ is intended to cope. Periodic labour shortages apparently occur, allegedly widespread and severely restricting the potential for higher output and employment.

In this chapter we turn our attention to the labour market for scientists and technologists (including engineers). There are a number of reasons for choosing to focus on this particular group. There has been a heated debate about the possibility of shortages of such types of manpower in the UK and the detrimental effect this imbalance might have on the dynamic performance of the economy. This question is of great importance, given the long training period required to produce this type of manpower and the large sums of money involved, much of it from the public purse.

On present policies it is most unlikely that registered unemployment will be below 2 million in the early 1980s and the projections described in previous chapters suggest that substantially higher levels could be reached in the middle of the decade if the Government sticks to its manifesto. Accustomed as some may have become to the situation in recent years, for most people unemployment does constitute a major problem requiring government action and the prospect of an additional half to one million becoming unemployed should be taken very seriously.