IES VIEWPOINT
Nigel Meager, IES Director 
This is a probable election year in the UK. Whoever wins, labour market concerns (even if no longer dominating the headlines) will still feature prominently in the in-baskets of the relevant incoming Secretaries of State.
At Work and Pensions, with unemployment at a thirty-year low, the focus continues to shift to the ‘economically inactive’. Some success can be claimed in moving lone parents into work (further progress will depend on the effectiveness of new childcare policies), but claimants of incapacityrelated benefits still hover close to the three million mark, and debates continue about the extent to which at least part of this group reflects ‘hidden unemployment’. Finding strategies that will both reduce the inflow of new incapacity benefit claimants (including growing numbers of women, younger people and people with mental health conditions), and reintegrate into the labour market existing claimants who wish to work, remains the holy grail of labour market policy.
Early evaluation evidence on the ‘pathways’ pilots and changes to ‘permitted work rules’ has shown promising results, but the newly announced reforms (to replace Incapacity Benefits with a two-tier system, incorporating a greater work focus) represent a radical and untested departure to the existing regime. One development is already clear, however; there will be a growing emphasis on preventive strategies to retain people in work and reduce the numbers moving from shortterm sickness absence into long-term incapacity.
At Education and Skills, major questions remain over the overall thrust of national skills strategy – much of the recent public policy emphasis is targeted at lower (level 2) skills, whereas arguably the UK’s bigger deficit remains at the intermediate skills level (level 3 and above); and it is at this level that skills development could perhaps make the biggest contribution to reducing the productivity gap between the UK and its main competitors. At higher skill levels, by contrast, the UK seems well-placed in international terms. Questions here focus on the appropriateness of the 50 per cent target for higher education participation, in the face of growing under-employment of new graduates.
At Trade and Industry, the regulation debate continues to simmer, with concerns raised about further increases in the National Minimum Wage, possible loss of the UK ‘opt-out’ from the Working Time Regulations, and extensions to parental rights at work. However, the evidence is more complex than the public discussion suggests and many myths persist in a UK debate that is depressingly insular. Despite recent developments, the UK remains one of the least-regulated labour markets in the developed world, and there is no simple relationship between the level of regulation and labour market performance. Another major policy challenge involves the creation of an effective single equality body, incorporating the existing strands of gender, disability and race, and adding the new strands of age, sexuality and belief. Even in the areas where equality legislation is long-standing, research continues to document the distance still to go and the extent to which some parts of the minority ethnic communities are still excluded from the labour market.
Finally, we must highlight the policy challenges thrown up by an ageing workforce, which will straddle all the main government departments. Recent developments continue to raise questions about the consistency of policy thinking (eg attempting to combat age discrimination and encourage later retirement while allowing employers to retain mandatory retirement ages). Future challenges will include the need to reform pensions and the management of the retirement process, tackling age discrimination throughout the stages of working life and making a reality of the rhetoric of ‘lifelong learning’, to equip older people for longer, more flexible careers.
In all these areas, rigorous research and evaluation will be required, with a willingness to learn from alternative models. We look forward to reporting IES’s contribution in Employment Studies.
This is just a small sample of our work; look in our current research pages for more of what we are doing, and in our publications pages for what we have done. The IES Annual Review is available from our press office on request.
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