This chapter assesses employment policy since the crisis. Evidence presented shows that employment rates were remarkably resilient over the recession, largely driven by falling wages and increasing self-employment. For many, employment became more precarious through growth in zero-hours contracts and insecure self-employment. The young were hit hardest, with the recession having differential generational consequences. The Coalition Government reformed active labour market programmes (ALMPs) but despite employment reaching record levels, their performance did not meet expectations and for some time, and some claimant groups, delivered results below those achieved by previous programmes. A greater emphasis on private providers paid according to results, with higher rewards available for groups requiring additional help has not improved relative outcomes. The fiasco around work capability assessments and the fact that ALMPs are still failing to meet the needs of those deemed capable of work in a limited capacity suggests a major review is now required.
Labour’s strong focus on employment is rooted firmly at the historical heart of the party. Full employment is still clearly an aspiration. However, New Labour’s approach to employment policy represents a departure from previous Labour governments: both the approach to achieving full employment and arguably the motivation have changed. After the high levels of unemployment in the 1980s and early 1990s recessions, Labour was cautious about pledging a commitment to full employment. However, shortly after Labour came to power, a new definition was put forward. In a speech launching his first pre-budget report in November 1997, Chancellor Gordon Brown stated that:
We need a new approach – Employment Opportunity for All – to face the challenges of today’s dynamic labour market, creating a modern definition of full employment for the 21st century. (HM Treasury, 1997)
The emphasis, therefore, shifted from employment for all to employment opportunity for all.
Brown identified five vital elements needed to meet the new challenge:
a framework for macroeconomic stability;
a flexible and adaptable labour market, underpinned by minimum standards;
skilled and adaptable people;
policies which encourage people to move from welfare to work; and
a tax and benefit system that makes work pay.
One of the main departures is the greater emphasis on supply-side policies; for example, helping people become more employable, search for work, equip themselves with marketable skills, provision of financial incentives to seek and remain in work and more conditions placed on many out-of-work benefits with greater coercion to find work. In the past, Labour placed more emphasis on demand-side policies, viewing unemployment as a problem of lack of demand which could be stimulated through a variety of policies.
This chapter considers the impact of New Labour policies on inequalities in the labour market, focusing in particular on the experiences of previously disadvantaged groups: younger and older workers, the long-term unemployed, lone parents, disabled persons, and women. While New Labour did not set out to reduce inequality in the labour market as a main policy objective, it has tackled inequality in employment rates as the result of a number of major policy objectives and through setting a range of targets. The three main targets are: to achieve ‘full employment’ through the Employment Opportunity for All agenda; to eradicate child poverty by 2020; and to reach a 70% employment rate among lone parents by 2010. While policies designed to meet these targets have had an impact on the unequal distribution of work across individuals and households, they have not addressed labour-market inequality in terms of earnings inequality.
The capacity for individuals to make choices that, individually and collectively, affect their lives is one of the essential characteristics of a liberal democratic society. Its relative absence for some groups defines their social exclusion. As Sen (1999, pp xi-xii) says, ‘the freedom of agency is inescapably qualified and constrained by the social, political and economic opportunities that are available to us’. Not the least of these constraints is the availability of credit or the possession of capital. Perhaps the single most distinguishing feature of the socially excluded in a society that has some kind of income safety net is their lack of assets and hence credit worthiness. This precludes risk taking, any feasible way of beginning a business, trading off between present and future income, investment in skills apart from those subsidised by the state, the capacity to overcome even minor disasters without becoming indebted to the state or local loan sharks. People are trapped in a narrow range of choice sets that make their lives different in significant ways from the lives of even working-class families with a steady, reasonably paid job. The capacity to change life’s pattern of opportunities is highly constrained.
Much of the discussion about giving children assets at birth has emphasised the behavioural advantages of educating families into the ways of saving (Nissan and Le Grand, 2000; Regan, 2001; Regan and Paxton, 2001). For us, however, the starting point is the intrinsic importance of extending individuals’ agency, especially that of the poor. The growth of owner occupation has given most people a significant asset that gives them an enhanced chance of borrowing, financing their old age, moving jobs and living arrangements, giving opportunities to their children to move into owner occupation and much else.
Labour signalled that education was a policy priority well before the 1997 General Election. In his now famous Labour Party Conference speech in 1996, Tony Blair announced that the three highest priorities in government would be ‘Education, education, education’. In December 1996, Blair outlined Labour Party thinking on education policy; themes, which, as we shall see, have continued to be important since 1997:
I believe there is the chance to forge a new consensus on education policy. It will be practical not ideological. And it will put behind us the political and ideological debates that have dominated the last thirty years. The foundations of the consensus are clear. Early support for children under the age of five. Primary schools delivering high standards of literacy and numeracy. Rigorous assessment of pupil and school performance, and action based upon it. Improved training and qualifications for teachers, especially Heads. Early intervention when things go wrong. Support from all sections of the community to ensure that all our children are given the best possible start. And we must never forget that education is not a one-off event for the under 18s. The new consensus must be based on wide access to higher education and continual opportunities for all adults to learn throughout life. (Tony Blair MP, Speech given at Ruskin College, Oxford, 16 December 1996)
Education also featured in both the 1997 and 2001 election pledges. In 1997, as one of the five ‘early pledges’, Labour promised to cut class sizes to 30 or under for five-, six- and seven-year-olds by using money from phasing out the assisted places scheme.