Choose your targets carefully, George, or you’ll end up with egg on your face

This pledge owes rather more to political than economic logic

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Lewis Carroll’s Humpty Dumpty had an irritating attitude to language. “When I use a word,” explained the accident-prone egg, “it means just what I choose it to mean, neither more nor less.” That’s something he has in common with George Osborne, who yesterday offered his own special meaning for the words “full employment”.

This is a conventional economic term used to refer to the minimum level of unemployment an economy can cope with before it begins to generate harmful levels of inflation. But yesterday the Chancellor informed us that full employment for the UK, in fact, means achieving an employment rate higher than the rest of the G7 nations. Clearly, time to rewrite the textbooks.

Of course, this pledge owes rather more to political than economic logic. The Chancellor is seeking to make hay from two stark trends of recent years: the sharp fall in the employment rate in the United States and the strength of the same rate in the UK. Britain has already surpassed America’s employment rate and, by some measures, is in touching distance of the G7 leader, Germany. The Chancellor feels he is pushing on an open door, while simultaneously raiding some traditional Labour territory.

But is this target well chosen? In some ways it’s laudable for the Chancellor to concentrate on job creation. Yet an exclusive focus on job quantities risks neglecting their quality. Many young graduates are in jobs below their skill levels. And behind the strong headline figures, many people still want to work more hours. The Chancellor’s focus also ignores productivity – output per hour worked. This is what allows national living standards to rise. Unless productivity picks up (and it has been flat so far under the Coalition) all the King’s horses and all the King’s men will not be able to put our economy back together again.

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