UK faces a 'long and difficult' path back to full employment

The UK faces a "long and difficult" path back to full employment, with up to two million new jobs needed to be created to return to pre-recession levels, according to a new report today.

The IPPR think tank said the public sector had been filling in for insufficient private sector job creation over the last 20 years, a trend which will have to be reversed because of the government's spending cuts.

Forecasts of 1.5 million jobs being created over the next five years will not be enough to replace those lost in the public sector and bring down unemployment, said the report.

The report, published ahead of new unemployment figures today, warned that a slow recovery in the labour market increased the risk that people will become discouraged from work and permanently leave the workforce as their skills become redundant.

Regional disparities in employment growth over the last 20 years were found, with employment increasing by 27 per cent in London between 1993 and early 2008, but only by 10 per cent in the North East and the North West.

The study predicted that the vast majority of jobs created over the next decade will come in the private service sector.

Most jobs created in the UK over the next decade will be skilled, while traditional low-skilled jobs will continue to disappear, replaced by more work in areas such as social care and personal services, said IPPR.

The report also warned that some groups, in particular those with few or no skills, people with a disability, some ethnic minority groups and older people who previously worked in low value-added declining industries, will be particularly disadvantaged in the labour market in coming years.

Tony Dolphin of IPPR said: "Promoting a speedy return to full employment in the UK should be a priority for the government. There is little evidence to suggest the private sector will be able to meet the challenge over the next four years without help from government.

"Cutting corporate tax rates, deregulation and the creation of new Enterprise Zones are an inadequate response to the challenge.

The government should work with others, including skills providers and welfare-to-work providers, to do more to support growth in the short-term and to avoid the problem of discouraged workers leaving the labour market by doing more to encourage retraining, to improve job-matching and to get the long-term unemployed back into work.

"The longer someone is unemployed, the less likely they are ever to return to work. If we are going to provide decent services for our ageing population and clear the deficit, we need as many people in work as possible to maximise tax revenues. We cannot afford to let people permanently drift away from the jobs market."