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Monday, September 27, 1999 Published at 20:15 GMT 21:15 UK


Business: The Economy

How full is full employment?

Gordon Brown's barnstorming speech impresses the prime minister

By the BBC's Economics Correspondent, Ed Crooks

Gordon Brown's conference speech was as interesting for what it didn't say as what it did say.

Conference99
There was barely a mention of the burning issue of Europe - dispatched with a quick reference to his policy, which is the same today as it been since 1997 - and only the barest allusion to his much-discussed "war chest" of extra money for public spending.

There wasn't even a reference to his most favourite theme of all, prudence.

What really caught the eye was his setting himself the target of full employment. It wasn't the first time he'd used the words. He had committed the Labour Party to the pursuit of full employment in his conference speech two years ago.


[ image: Brown: Labour's policy both
Brown: Labour's policy both "credible and radical"
But he had been rather quiet on the subject ever since. And last year, when it seemed certain that unemployment was about to rise, there was a highly significant silence.

Full employment sounds like a wonderful thing, of course.

Labour party members who are not generally among Gordon Brown's biggest fans, such as union leaders, warmly welcomed that part of his speech at least.

The words evoke an image of the Fifties: The Goons, Cliff and the Shadows, and "you've never had it so good".

But when you try to pin down exactly what Gordon Brown wants, and what he has committed himself to, it all begins to get more than a little fuzzy.

As well as the plain-sounding target of "full employment", he also promised, so long as we all behave ourselves as employers and employees, "high and stable levels of employment" and "employment opportunity for all".

What that might mean, and what even "full employment" might mean, was never spelled out.

Definition difficulty

Economists don't really have a formal definition of full employment, although they know it when they see it. Post-War unemployment hit its low point in July 1955 at just 215,000 people - a mere 1%.

That is full employment by anyone's standards. There will always be some people who are unemployed for a little while as they move between jobs. But everyone who wants a job can have one.

We are still a very very long way away from that point, though. It has been falling for six years now, but unemployment as measured by the number of people actively looking for work - the internationally agreed definition - is now 1,728,000, a rate of 5.9%.

Even the more restrictive measure of people claiming benefits shows 1,211,000 people unemployed - a rate of 4.2%. Getting back to 1955 levels would take an enormous change in the economy and the jobs market.

But according to many economists, "full unemployment" translates into "a level of unemployment that puts no upward pressure on inflation".

In other words, an economy with full employment is an economy where employment is as high as it can be, without labour shortages appearing that lead to rising wages and hence prices.

"High and stable"

It is quite possible that we are very close to that level right now - although, to be fair, all the warnings that we had reached that level a year or even two years ago turned out to be wrong, and it is quite possible that employment can keep on rising without causing higher inflation even now.

But it is clear that level of unemployment could be very different from the level at which everyone who wants a job has got one.

By talking about "high and stable levels of employment", Gordon Brown seems to be implicitly endorsing that more technical definition of full employment. He still thinks unemployment can fall further, but what he hasn't done is promise that we can go back to the Fifties.

It is worth noting, too, that Gordon Brown has promised this full employment "within our generation" - which presumably means over the next 25 years or so.

Never mind Tony Blair's third term then - Gordon Brown is clearly planning objectives for his sixth or seventh term as Chancellor. And we'll have to wait until well into the 21st Century before we can tell whether he has succeeded.



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