Introduction

For most of the past three decades the UK has ranked among the countries with one of the worst labour market records in Western Europe. Unemployment rates hovered around the 12% mark for most of the 1980s. For a very long time, the prospect for a return to anything approximating full employment seemed very bleak indeed. Any improvements turned out to be temporary and the persistence of high levels of unemployment became an all but accepted characteristic of late 20th century Britain.

Then, in 1993, unemployment started to fall gradually but steadily. At the same time employment levels started to climb. This time the improvement was long-lasting and non-inflationary, so that at the start of the 21st century, the UK can be considered as one of the labour market ‘success’ countries in Europe next to Denmark, the Netherlands and Ireland (see Chapter Two of this volume). While other countries (Austria and Luxembourg in particular) have lower unemployment, it is these four countries which have witnessed significant reductions of unemployment during the last decade. What is more, among the large economies in Europe, the UK is the only one that can boast a sustained labour market improvement, while Italy, Germany and France are now faced with the highest unemployment rates in Western Europe.

On the face of it, the turnaround in the British labour market is remarkable indeed. By the end of the 1990s, the labour force participation rate of those aged 16-64 reached 76% – a higher figure than that for the mid 1970s. This was largely due to women entering the labour market to an extent which is now close to levels found in Scandinavia. By contrast, as in many other countries, the labour force participation among men dropped over the past three decades. However, this trend seems to have slowed down in the mid-1990s and the current rate of 84% is one of the highest in Europe and certainly higher than in any other large European economy.

Equally, unemployment levels dropped to the lowest levels since the early 1980s, with 1.47 million people out of work in spring 2001, which represented just below 5.0% of the workforce according to the ILO definition, which is now the government’s preferred measure.