The jobless who will never fit in our brave new world

The Government had the pleasure yesterday of figures showing another big drop in the number of people on unemployment benefit. Despite the downward path in unemployment over the past 11 months, though, there are about 900,000 unfilled vacancies in the UK at present. This is not enough to absorb all of the 2,200,000 or so who are unemployed (on the standard international definition), but is certainly enough to make a sizeable dent in the total.

Steering the economy towards creating more jobs is one task for the next government. But why can't the unemployed take the jobs that already exist? Removing the structural barriers that prevent this is a separate policy challenge.

There will always be some level of unemployment. William Beveridge, father of the welfare state, thought the jobless rate could not fall below 3 per cent. The reason is "friction" in the labour market. Some people will be in between jobs. Some will be living in different areas from those where there are jobs.

In addition, once the level of unemployment has been high for a while, it tends to be slow to fall: a phenomenon economists have named "hysteresis" sets in. So, for example, people out of work for a long time lose the confidence and habits that enable them successfully to apply for jobs and hold on to them. They might be out of the workplace when a crucial new technology is introduced in their field, whether it is a new computer software programme or a new type of machine tool, and therefore lack the relevant experience.

Governments can only do a limited amount to offset this - training might help, but in the end there is no substitute for experience. However, politicians are very interested in tackling a third type of structural unemployment, that arising from people out of work not having the skills needed to fill the jobs that are being created. Improving education and training - this is the motherhood and apple pie pledge of this election campaign. We're all in favour of it.

There are good reasons for this. A recent publication from the OECD, Employment and Growth in the Knowledge-Based Economy, collects the evidence showing that the part of the advanced economies where jobs growth is fastest is the "knowledge" sector. Statistics on this sector are scanty. One OECD study in 1981 put the size of the information sector at between 14.8 per cent and 24.8 per cent of GDP, with the US and France ahead of the rest. An update in 1986 found that the sector had been growing rapidly.

The report says: "There is a clear trend in the OECD countries towards an economy where the share of the labour force handling tangible goods is becoming much smaller than the share engaged in the production, distribution and use of information." The demands this places on education and the national knowledge-base are clear.

However, equipping the workforce as a whole to meet the requirements of the information economy is one matter. Educating the people who are unemployed now to make them fit for jobs in this brave new world is another. It is an unpleasant fact that there are large numbers of people whom employers consider to be unemployable - any businessman will say so, privately. Some of the unemployed are so unproductive - the young people who have no qualifications and have never worked, or the fifty-something men shed from declining industries - that companies will not take them on at any acceptable wage.

It is pure political myth to pretend that all of these long-term unemployed can be retrained for skilled and high-value jobs. Equally, they are very unlikely to want to accept low-paid jobs that require only low productivity. People's aspirations for what they earn are set according to what they see most other people around them bringing home, and so the dead-end jobs hold no appeal. Low-productivity workers aspire to average-productivity wages. This mismatch is one that will get worse as the average standard of living increases, leaving the chronically unemployed further behind.

The Labour solution, to be set out once again in shadow chancellor Gordon Brown's speech today, is to subsidise the "re-entry" jobs the long-term unemployed might take. The employer will pay a wage that corresponds to the worker's low level of productivity - or perhaps more if the minimum wage is set higher - and the public purse will top it up with in-work benefits. This is fair enough, but it is a social policy as much as an economic one.

The economic solution to the labour market mismatches would be to complement the need to raise the educational and skill standards of the existing labour force as the economy becomes more knowledge-based with finding a new source of labour to fill the dead-end jobs. After all, no matter how fast the high-performance industries grow, there will always be a demand for janitors and hamburger-flippers at low wages. In fact, this is precisely what happens, but it is also obscured by political myth and rhetoric. Whatever they claim, all the advanced industrial economies import immigrants to fill grotty jobs, although by making it illegal or difficult they guarantee that these immigrants are all the more thoroughly exploited.

Sometimes this use of top-up labour has been explicit - for example when the NHS imported Caribbean medical staff in the late 1950s and early 1960s, or when Germany allowed in its Gastarbeiter. But with the scourge of high unemployment, politicians in the European countries have come to pretend that foreign workers are unwelcome even though they are the only people available to fill jobs that few of the native-born unemployed will consider.

It is deeply unfashionable to suggest, on the one hand that immigration might be a good thing, and on the other that it is to everybody's benefit if immigrants accept the bad jobs that nobody else wants. They are not "stealing" jobs because the work does not pay enough to attract the unemployed. Their employers can pay a low wage for low-productivity work. And the immigrants get their feet on the first rung of the economic ladder in the classic manner. The public policy problem - figuring out how to provide an acceptable standard of living for native-born, long-term unemployed workers whose productivity is low - is no better, but no worse than it would be anyway.