E&Y Economy Doom Ups Stakes For Election Jobs Policies

Last Updated Apr 19, 2010 7:47 AM EDT

Forecasts from the Ernst & Young ITEM Club that the economy will only grow by 1 percent in 2010 will come as a disappointment to the campaigning parties in the May general election, all of whom have made statements about how they propose to guide the country back into economic growth.

Employment is probably the most important issue on voters' minds and the expected health of GDP is going to impact heavily on how credible each party's stance on job creation (or in the public sector at least, job reduction) seems to the electorate.

The CIPD has just published an assessment on the election manifestos of the three main political parties where they touch on the subject of employment.

The report noted the successful management of the unemployment rate under the Labour regime, although public sector management by Labour has undeniably gone awry. The government's record on youth unemployment thus far is also a black mark.

Also under criticism by the report is the over-reliance of migrant workers over the last decade, which has undermined the creation of domestic expertise. The report notes all the three main parties have some mechanism for limiting the scale of economic migrancy into the UK, but warns the emphasis should be put on improving the supply of home-grown talent, before cutting off the supply of overseas recruitment, which can only result in pay inflation.

Conservative proposals to immediately cut spending by £6bn could threaten economic recovery and increase the chances of higher unemployment.

The CIPD supports a reversal of Labours proposed National Insurance Contributions payments though, which it says is just as much a threat to employment recovery.

The report's author, CIPD chief economic advisor Dr john Philpot warns that it's probable the public sector will have to cut its workforce by half a million jobs in the next five years. This is way beyond anything suggested by the main parties. He suggests that the strategies of pay freezes and short-time working that helped the private sector avoid mass unemployment won't be far-reaching enough to ease public sector employment problems. What is needed is long-term structural change.

On the upside, Philpot seems to think the private sector will be able to take on the surplus workforce let go by government-funded employers, as long as the shoots of recovery in the wider economy continues. For this reason, promises to generate jobs in low-carbon, digital and creative sectors is on the right track, although it's unclear how unemployed public sector workers will be made suitable for these sectors.

The CIPD also supports moves to tackle youth unemployment, but warns manifesto promises could turn out to be short-term palliative relief. The report singles out the Liberal Democrat policy on extending minimum wage rules to training and work experience posts for 16 and overs, as just such an illustration of this short-termism on youth unemployment.

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