Roads to full employment

The Review is pleased to give hospitality to CLARE group articles, but is not necessarily in agreement with the views expressed; responsibility for these rests with the authors. Members of the CLARE Group are M.J. Artis, A.J.C. Britton, W.A. Brown, W.J. Carlin, J.S. Flemming, C.A.E. Goodhart, J.A. Kay, R.C.O. Matthews, D. Miles, M.H. Miller, P.M. Oppenheimer, M.V. Posner, W.B. Reddaway, J.R. Sargent, M.FG. Scott, Z.A. Silberston, J.H.B. Tew, S. Wadhwani and M. Weale. Can unemployment be cured by flexible labour markets? This current nostrum had little to do with the maintenance of full employment, with little inflation, throughout the 1950s and 1960s. The secret of that success can be traced to the high level of investment, which stimulated both supply and demand in the economy, and enhanced the employability of labour. Downward pressures exerted on the cost of labour appear to have had some effect on unemployment in the 1980s, but are likely to run out of steam before it is reduced to a tolerable level. Attention now needs to be concentrated on enhancing the employability of labour. But whether this is attempted through tax incentives to investment or other means, its purpose will be liable to be thwarted unless accompanied by general restraint in the upward adjustment of real wages.