Dr John Philpott, Chief Economic Adviser at the Chartered Institute of Personnel and Development (CIPD), comments on the recently published UK employment forecast for 2015-16. The Office for Budget Responsibility (OBR) published the forecast for general government employment and total UK employment on 30 June 2010.
Dr Philpott feels that this is, finally, a somewhat realistic official assessment of the probable impact on public sector jobs by deficit reduction measures. “The OBR forecast for public sector employment to 2015-2016 is close to that made by the CIPD both before and after the General Election. By contrast, however, the OBR forecasts for growth in total employment look optimistic.”
He continues to explain that, during the General Election, the CIPD anticipated a dynamic economy, with almost 30 million people in employment, is capable of making up for 0.5 million lost jobs. This is due to annual improvements in labour productivity. Such an economy should then be able to cope with a phased period of downsizing the public sector on a large scale, without resulting in higher unemployment. “But a favourable outcome depends on a return to health of the wider economy and increased demand for labour from the private sector.” Dr Philpott feels that “the conditions necessary for such a favourable outcome are at present far from self-evident and highly unlikely to emerge simply as a consequence of swifter and tougher action to reduce the deficit.”
However, historical precedent would suggest that applying strong financial discipline to an economy in such a weak state would slow both the rate of economic growth and the pace of job creation. “Consequently, the employment outlook is likely to be far weaker than the OBR forecasts and the coalition government hopes, with a rise in unemployment toward 3 million in the next two years a distinct possibility.”