The labour market isn't working

'Unemployment is the big political issue of 2009' according to Larry Elliott in today's Guardian. In a superb analysis of labour markets in the UK and around the world he shows how the position has become much bleaker during the past year and highlights the limits to what policymakers can do. (See link to article on £2500 new job subsidy). However, he believes that active labour market policies are still worth the effort, using the lessons of the 1980s when so many skills were lost, so many people became demotivated and there were lasting personal and social consequences. There is particular concern for the under 24 age group, because 'there is evidence that a spell on the dole when you are young leaves the deepest scars'. Drops in world industrial output don't augur well for a swift recovery and investment flows are threatened by the large amount of government debt associated with rises in injections of public spending that needs to be sold, leading to the classic 'crowding out' effect. (i.e. private investment funds fall as governments compete for a bigger share to fund their increased expenditure). A compulsory read!

Link to article

Link to 'Firms to get £2,500 for each jobless new recruit'