LETTER : Jobs: Labour sets out strategy

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The Independent Online
Sir: John Philpott's analysis (9 April) of the policy options for reducing unemployment is balanced, but too unambitious. He claims that "even a controlled demand expansion would at best hit inflationary pressures at around 1.75m unemployed (6 per cent of the workforce)". But why do he and others believe that Nairu (the non-accelerating inflation rate of unemployment) now operates at this level? Recent experience suggests this is too pessimistic.

It is true that when unemployment in the last economic cycle fell to 1.8m, inflation began to mount in 1989-90. But this was almost entirely due to a huge credit boom spinning out of control following the deregulation of financial markets in the early 1980s, plus the Lawson giveaway budget of 1988, which threw further oil on the fire.

What is needed now is a return to balance to overcome the "pendulum effect" of past policies, from exclusive emphasis on demand management in the 1960-70s to an almost equally exclusive concentration on the supply side in the 1980-90s. We need a reconciliation of what should be mutually complementary policies. The supply side, especially training and labour mobility, is very important, but cannot by itself deliver the necessary number of job opportunities (when there are today about 700,000 vacancies, but probably around 3 million unemployed). Only some limited expansion of the demand side, in conjunction with appropriate supply-side measures, would be capable of having sufficient impact an the scale of unemployment today.

In carrying this through, I agree with Dr Philpott that our priority should be the 750,000 currently unemployed for more than a year. Whether extra jobs are created by higher investment or tax cuts, or where labour recruitment subsidies are provided for employers, the very high level of long-term unemployment is a disgrace we should no longer tolerate.

Michael Meacher MP

(Oldham W, Lab)

Shadow Employment Secretary

House of Commons

London SW1