Tackle economic failures at root to ease pressure on Universal Credit

The government has set a bold ambition to reach an 80% employment rate among 16-64 year-olds, a move that could fundamentally reshape the nation’s social security landscape. If achieved, this shift toward what is often called “full employment” could significantly reduce the reliance on Universal Credit (UC) and boost the national treasury.

The Financial Stakes of Full Employment

Hitting the 80% target could lead to a material impact on public spending. Projections suggest that UC expenditure could drop by approximately £10 billion, or 12%, by 2029/30.

This scenario may see half a million fewer families receiving the benefit. Simultaneously, the tax take could potentially increase by £64 billion.

Did You Know? The NEET rate—representing young people not in employment, education, or training—for adults aged 22–24 has risen from 14.3% in 2019 to 16.5%.

Addressing the Labour Market Gap

To reach these goals, policymakers may need to prioritize marginalized groups. Currently, only 52.8% of disabled people are in paid work, with an unemployment rate of 9.2%—more than twice that of non-disabled people.

Expert Insight

Other critical areas for intervention include the over 50s, where only 71.8% are currently working, and young people, whose employment rate stands at 60.2%.

Targeting Recovery in Local Hubs

The success of this trajectory may depend on where jobs are created. Targeting coastal and ex-industrial towns in England is seen as a sensible approach to reducing the need for social security.

By creating decent jobs in weaker local labour markets, the state could better match the supply of workers with increased demand, as 83% of working-age adults are currently in work or wanting to work.

Expert Insight: Samantha Carter notes that the “productivity puzzle” remains a critical risk; increasing the volume of employment without improving job quality or productivity could lead to stagnant living standards and a rise in in-work poverty.

The Productivity Risk

History suggests that increasing employment does not always guarantee prosperity. Following the great financial crash, employment rose from 72.9% in 2007 to 76.4% in 2019, but productivity growth slowed from an average of 2.1% to just 0.6%.

If productivity assumptions are downgraded, the projected tax gains could be severely impacted. A lower productivity scenario could potentially wipe out around £30 billion of the expected tax increase.

Looking Ahead: The Path to 2030

The trajectory toward an 80% employment rate may involve a balance between expanding the labour force and managing inflation. A possible next step involves implementing an improved industrial strategy to combat job disruption caused by technological change.

A Last-Minute Rewrite CHANGED Samantha Carter Forever (Dial the Gate)

the Mayfield review is focusing on improving work experiences for those with disabilities. More ambitious policies in this area could further shift the employment dial in deprived regions.

Frequently Asked Questions

What is the government’s target employment rate for 16-64 year-olds? The stated ambition is to reach an 80% employment rate. How would an 80% employment rate affect Universal Credit caseloads? It is expected that caseloads would reduce, with half a million fewer families receiving the benefit. What is the “productivity puzzle” mentioned in the analysis? It refers to a persistent hindrance where total factor productivity—how workers utilize capital—stagnated despite the workforce becoming better skilled and educated.

Do you believe focusing on local industrial strategies is the most effective way to reach full employment?