ABSTRACT
The objective of reducing long-term structural unemployment has moved to the top of the international political agenda following the apparent establishment of a regime of low inflation in OECD countries. The extra employment can mean lower short-term unemployment with the long-term level unaffected, or it can also mean a higher non-inflationary level of full employment. Employment is expected to rise and unemployment to fall over the medium term for the UK economy. However, unemployment is expected to remain high at over 2 million into the next century, and there is considerable room for policies to reduce unemployment. To complement the employment equations, a set of hours-worked equations have also been estimated, which relate average weekly hours worked by industry to normal hours, and capacity utilization. As employment rises and unemployment falls, so expenditure by government on unemployment benefits and Social Security benefits falls more generally.
