Wednesday, 9 January 2013

Moving on up: aspiration, living standards and growth

a Working Links Report by Stephen Evans

Executive Summary

There is a major debate about how to kickstart the UK economy with growth relatively low and living standards falling. However, these are manifestations of long-term challenges as well as the aftermath of the financial crisis.

In particular, the UK faces challenges of both ‘growth creation’ (how to boost long-term economic growth) and ‘growth sharing’ (as economic growth over the last decade has not led to improved living standards or opportunity).

The link between growth and living standards has been fractured by:
  • global economic changes, such as growth in emerging economies and technological change replacing intermediate jobs and ‘hollowing out’ the labour market; and
  • a decline in labour market institutions, such as trades unions, that can contribute to greater equality.
These have led to a polarisation of the labour market, with job growth concentrated at the top and bottom ends. This leaves little room for people to progress – the rungs of the career ladder are growing further apart – and a concentration of low pay and productivity, such that there are now more households in in-work poverty than out-of-work poverty.

This is of fundamental importance.
The purpose of economic growth and policy is to improve living standards, and this is not currently happening. Too many people feel they get a ‘nothing for something’ deal as a result. The risk is that these forces continue to drive greater polarisation, with significant economic and social costs.

However, this is not inevitable.
Living standards have generally risen over time in the UK with productivity rising strongly until 2008, though inequality also grew. Other countries have higher productivity and social mobility, and lower inequality.

To boost long-term economic growth in a way that creates better paid jobs and progression opportunities, this report makes a number of recommendations:
  • Full employment and rising living standards should be the central aims of economic policy and reported accordingly.
  • Welfare to work programmes should support people to progress at work, as well as to find and keep a job, and be funded in a cost-neutral way using Universal Credit savings.
  • A new Getting On service to help 500,000 low paid workers over the next five years, paid for through savings in Universal Credit bills and skills funding.
  • A new Growth and Opportunity Fund, rolling together existing funding streams to allow groups of Local Authorities to trial ways to boost productivity and living standards, measured by outcomes delivered.
  • Support for partnership approaches to growth, including employer compacts to promote progression and the Living Wage and licenses to practice.
Full text (PDF 60pp)

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