UK: Smith on Economics - Jobs summit faces an uphill task.

UK: Smith on Economics - Jobs summit faces an uphill task. - There's no universal solution to late 20th century unemployment, says David Smith. The UK's relatively good record has come about by a series of lucky accidents.

Last Updated: 31 Aug 2010

There's no universal solution to late 20th century unemployment, says David Smith. The UK's relatively good record has come about by a series of lucky accidents.

Later this month on 21-22 February, as finance minister of the host country of the Group of Seven/Eight (G7/8), Gordon Brown will welcome his counterparts from the other leading industrial countries, plus Russia, for a special jobs summit.

The two-day meeting, at the QEII Conference Centre in London, is but the latest in a series of such summits. It was arranged in the first flush of Labour victory last summer because the new government wanted to show that jobs and the elimination of unemployment headed its list of priorities.

To distinguish it from its predecessors this summit has a grand title - the summit on 'growth, employability and exclusion'. The summit is intended to mark a shift of emphasis from pure labour market flexibility, which is seen as benefiting employers more than workers, to 'flexibility with employability', which is of equal benefit to both parties. Does it have any chance of success?

First there were five

The G7 has its roots in the mid-'70s, when the leaders of the Group of Five - the US, UK, Germany, France and Japan - met to discuss the implications of the first OPEC oil crisis. The following year, by which time it had been agreed to make such summits annual events, and also to deal with some bruised egos, Italy and Canada were invited along, making the G7.

After the drawing back of the Iron Curtain in 1989, the decision was taken to invite Russia along, initially as an observer but with the promise, later kept, of near enough full participation if the country maintained its drive towards capitalism.

Russia remains, however, a cuckoo in the nest. Its economic problems in general and its employment problems in particular have little in common with the G7 industrial countries. It's a bit like the poorest Sunday morning hacker joining seven of golf's elite professionals for the world matchplay championship. Employment in Russia has fallen by between 10% and 15% during the '90s, the unofficial economy is booming, and the regional disparities in wealth and job opportunities are vast. Set against Russia's economic problems, and whether it can develop a modern economy, the difficulties of the leading industrialised countries look minor.

Even among those western countries, however, the challenges are very diverse. In the US, unemployment is down to levels not seen since before the oil crisis which brought the G7 into existence. 'Help wanted' is now the most popular sign on America's main streets and serious questions are being asked about whether there is any available labour supply left to tap into. This may seem too gloomy a view as more than 60 million Americans of working age are not currently employed. The problem is how to persuade people to join, or rejoin, the workforce at a time when many of the new jobs being created are of a low-wage, low-skill nature.

Continental Europe's problem is very different. There are plenty of people who wish to work - about an eighth of the population is officially unemployed and disguised unemployment is higher still. But Europe simply doesn't have the employment growth to mop up these people. And few believe that economic growth will strengthen at a sufficient pace to reduce unemployment significantly.

Inflexible Europe

Europe's problem is well known - a lack of competitiveness and flexibility.

Flexibility remains a dirty word among many European politicians who prefer artificial, and expensive, solutions to their unemployment problem - like France's naive 'work-sharing' scheme which cuts the official working week from 39 to 35 hours in the hope of creating 10% more jobs.

Japan, a country whose modern economic development was based on the paternalistic principle of lifetime employment, has also had to adjust to the new realities, made worse by the crisis affecting the Asian region. Replacing paternalism with true flexibility will, however, prove far from easy.

Good aim, wrong target

So where does this leave Britain? Few would quarrel with the Government's aim of creating a more skilled and educated workforce, and of targeting disadvantaged groups in its welfare to work programme. All politicians tend to fight yesterday's battles, however.

In the '80s, when demographic factors helped produce a sharp rise in youth unemployment, a welfare-to-work programme for the under-25s would have been sensible. But time has moved on. Under-25s unemployment has fallen sharply. If anything, the greater need is for help to be directed at the other end of the age scale - redundant older workers who face serious discrimination in the job market.

There are other problems too. The introduction of a minimum wage sits uneasily alongside the aim of ensuring that there are plenty of 'entry-level' jobs for the unemployed. With the Social Chapter, the Government is in danger of importing restrictive labour market practices from the rest Europe

So will the latest jobs summit do any good? Almost certainly not. While countries can pay lip service to notions of employability and flexibility, there is no universal solution to late 20th century unemployment. The UK's relatively good jobs record in the '90s came as a result of a series of happy accidents. And when you get lucky, the wise thing is not to ride that luck.

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