How to create new jobs

  • Following the Covid-19 lockdown, the UK labour market faces much higher unemployment and reductions in labour force participation as some groups withdraw from the labour market.

  • Measures such as the Coronavirus Job Retention Scheme and the Self-employment Income Support Scheme served a useful purpose, but governments cannot keep businesses on life support indefinitely. Job protection measures risk substantial harm if they hinder the adjustment of the labour market to changing conditions.

  • Direct government interventions to ‘create jobs’ can be costly and are rarely successful in generating multiplier effects.

  • The current crisis risks becoming an excuse for the permanent expansion of the state, accompanied by increased taxation, which could damage the recovery and become a long-term constraint on future growth.

  • Before the pandemic hit, the UK had been doing well in generating new private sector jobs. Allowing markets for goods and services to operate freely could help to restore and enhance the conditions under which job creation can be maximised.

  • Some deregulation of land-use planning has been announced, but the government could also consider liberalising employment law.

  • Employment regulation is in effect a tax on jobs, the burden falling largely on workers in terms of reduced pay and employment opportunities rather than on company profits. It often serves sectional interests at the expense of the wider workforce and may be a poorly-targeted way of assisting disadvantaged groups.

  • Key elements in boosting economic recovery might include the scrapping of much occupational licensing, the reform of minimum wages, ending the apprenticeship levy and unpicking many other types of employment regulation.

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Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.