8 - Employment policy and the labour market

Summary

In Let Us Face the Future in 1945 the Labour Party accepted that full employment was a slogan of all the political parties: ‘All parties pay lip service to the idea of jobs for all.’ However, the manifesto argued, what made Labour different was its willingness to pursue such a policy through whatever measures might be necessary. The clear expectation was that the new government would quickly be faced by ‘slumps in uncontrolled private industry’, requiring a major extension of state action. This extension would have four thrusts – a maintenance of demand, to correct previous under-consumption; redistribution of income to the lower income groups to maintain purchasing power; planned investment under the aegis of a National Investment Board; control of the banking system, including nationalisation of the Bank of England.

These manifesto statements make clear three things about Labour and the employment issue in 1945. First, full employment was central to their agenda. Second, the methods suggested for the attaining of this objective were eclectic – a mixture of ‘simple’ Keynesianism, redistribution and notions of planning. Third, the threat to full employment was seen as arising primarily on the demand side.

The importance accorded to full employment in the late 1940s was underpinned not only by the sharp collective memory of the miseries of 1930s mass unemployment, but also a clear recognition from wartime debates that Labour's welfare aims depended upon the tax revenues and limited claims on expenditure that full employment would bring.