Full employment – not full flexibility.

August 14, 2026

How can some employers have it cosy while others struggle to attract the talent they need? Is insufficient labour mobility the cause or a symptom of something more fundamental? Is our debt culture really the ‘active ingredient’ in what’s changed? The other cliché about 50 years ago is the golden age of full employment.

Having very little labour supply slack, as a business, you naturally must either pay higher wages to attract talent (or avoid costly industrial unrest) and invest in either labour-saving ideas or better products you can sell for higher prices to obviate the risen costs. So from labour’s perspective, you’ve got much less worry about finding a new job if you quit or have to move.

Ian McAuley proposes supply-side solutions: Cut the red tape; get rid of perverse incentives; unemployment insurance securing against inflexibility of the real-world economy. What about the need for proactive government spending; wage rises and low interest rates? Astonishingly, I haven’t once heard mention of ‘business cycle’ in the productivity debate.

Across the Western World, harsh monetary policy achieved the ‘great moderation’ in inflation; but also a similar moderation of the business cycle and thus the chances for true full employment.