Full employment could be the silver bullet for Labour

Reading the reaction to yesterday’s news that Labour plans to revive the contributory principle in welfare, you’d think this was a bolt from the blue – rather than something the Labour Party has been talking about for the best part of a year.

Last July Liam Byrne was writing for LabourList as the 70th anniversary of the Beveridge Report rolled around, fleshing out the shape of what a contributory welfare system might look like. In August Kate Green asked “What might a revived contributory principle look like?”.

Green’s piece in particular is worthy of further examination, as it tackles head on some of the legitimate concerns about the re-introduction of the contributory principle – particularly the impact such a system would have on the young, the disabled and women, as I noted back in February.

In short – the problem with a contributory system is that it potentially disadvantages those who have never had the opportunity to work (the young), those who are unable to work (the disabled) and those who are likely to work fewer years over their careers (women). Any system which is seen to discriminate against these groups would face significant challenges.

Yet the system outlined by Green – including Full Employment – could actually see, in her words, “more generous benefits”, both for those who have paid into the system and those who have been unable to. The more people who are in work, the greater the amount available to be spent on those who are unable to work. The pie is made larger, and the number of slices needed becomes smaller, meaning that those who need it get a bigger piece.

Yet amidst the furore around the potential pitfalls of the contributory aspect of Labour’s plans that the arguably more radical aspect has been overlooked.

Full Employment – or to put it more clearly, the abolition of long term “cyclical” unemployment – was once the ambition of government’s of all stripes. Yet it was abolished as a policy goal by the Thatcher government, and never reintroduced. Instead politicians began to talk about “employability” – shifting the blame for the widespread destruction of British industry from themselves to the workers who lacked the “skills” for the modern workplace (the fact that many had the skills for workplaces that had been forcibly closed as a result of government action was often overlooked). Thatcherite economic theory dictated that a “flexible” workforce – continually bouncing in and out of employment – was best as it kept costs down and “increased competition” by pitting poor against poor in a battle for a low paid job.

And whilst Blair and Brown sought to reduce unemployment, they didn’t really demure from the Thatcherite economics that underpinned the whole system.

So a return to the principle of Full Employment is hugely significant. If Miliband and Byrne are as keen on returning to Beveridge’s original principles on Full Employment as they are on contribution, that would mean unemployment falling from the current rate of nearly 8% to below 3% (where Beveridge thought it should be to be considered true full employment). And any policy agenda that aims to more than half unemployment deserves a fair hearing.

As with all proclamations on work and welfare, the proof of the pudding will be in the eating. For this to be a genuine commitment to full employment, these need to be real jobs, with real training and real pay (preferably at living wage level or higher). This can’t be an excuse for workfare via the back door, or more profiteering from the likes of Poundland or Homebase.

But putting a system in place that provides real jobs, real wages, real hope for communities riven by high levels of unemployment – which in turn helps to fund more generous benefits for those who can’t find work – that to me seems like something worth fighting for.

If done right, full employment could be the silver bullet, not just for the welfare debate that Labour has manifestly failed to win, but for a better kind of economy.