Labour's guru gives warning on jobs market inequality

One of New Labour's most influential gurus is in London to spread the message that flexibility in the jobs market is not enough. Robert Reich, the former US Labor Secretary, tells Diane Coyle that governments also have to spend money and expand the economy to combat inequality and exclusion.

There are few people who manage to win respect for their intellectual abilities, political engagement and sheer likeability. Robert Reich, Secretary of Labor in the first Clinton administration is one of these rare creatures. Perhaps it is not so surprising, then, that he did not last all that long in the bear-pit of Washington and has returned to the academic world as a professor of economics.

Even so, his analysis of the world of work, set out in his 1991 book The Work of Nations, has had a lasting influence on economic policy in the US and now in New Labour Britain. Professor Reich is not entirely content about this, however. In the US at least, he reckons, his policy message has been watered down, with the Administration basking in the sheer success of the American economy in the past few years.

Speaking to The Independent yesterday, he said: "When the current expansion ends and the tide goes out again, the underlying structural problems will be revealed. We should be using this time of prosperity to tackle them."

The Reich analysis starts with the observation that demand for labour in developed economies has shifted hugely in favour of people with a high level of skills and education, leaving a surplus of those with too little education or those who happen to live in the places where there are no new jobs. The result is that inequality has widened and living standards for many have fallen behind.

"The Anglo-Saxon model is working exceedingly well for creating jobs," he says. "It is a far less successful story in terms of wages, insecurity and inequality."

Some parts of his prescription for tackling the insecurity and unfairness have become familiar and even uncontroversial. For example, he puts heavy emphasis on the importance of education and of reskilling the workforce, and on what have come to be known as "active" labour market policies, common-sense measures like having the employment service make sure the unemployed know when a job that might suit them is available.

Other parts of Professor Reich's solution are also New Labour orthodoxy. He emphasises that jobs must pay enough to ensure that anybody who is working is not living in poverty. This means introducing a minimum wage and top-up tax reliefs or benefit payments to boost the income of those on low pay. Britain should be in this position within a couple of years.

But his policy recommendations in their entirety are more radical than politicians either side of the Atlantic are prepared to accept in full. As he admits: "I'm not sure the argument has been won."

As Europe prepares for the Jobs Summit in Luxembourg next week, "The question is how do you gain the flexibility of American capitalism without the cruelties," says Professor Reich.

The answer he gives says there are three keys. One is flexibility of in the jobs market and markets for products, to allow business to operate efficiently and generate jobs. A second is agility or employability of the workforce, requiring much better education and also additional infrastructure - for example, adequate public transport to get people to where the jobs are. A third is expansionary fiscal and monetary policy.

Number one is gospel in political circles. Number two is widely accepted but not if it costs a lot of money. Number three is probably the most controversial. "It is far from clear that our economies are growing too fast," Professor Reich says. "Perhaps central bankers ought to wait until there are real signs of accelerating inflation."

He emphasises that he is not a believer in the so-called "new paradigm", the ultra-optimism about the US economy's potential growth as a result of advances in technology and productivity. But he insists that financial orthodoxy must not be allowed to prevent governments making the necessary investments in education and the structure of the economy.

It sounds suspiciously Old Labour. However, Professor Reich has nothing but enthusiasm for the new Government's policies. "The country seems almost reawakened," he says.

News
peoplePaper attempts to defend itself
Voices
voicesWe desperately need men to be feminists too
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
PROMOTED VIDEO
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum