Employment has risen by more and unemployment has risen less than expected, given the path of
output. Nevertheless, long-term and youth unemployment and involuntary part-time work are high. A
polarised labour market risks worsening income inequality, which is high by OECD standards, despite a
recent and likely temporary decline. The UK welfare system is an essential safety net, which needs to
promote employment, while protecting the most vulnerable. The reformed welfare system, Universal
Credit, and the employment programme for disadvantaged workers, Work Programme, will generally
improve work incentives and provide support for return to work, but need to be refined. Skill deficiencies
are holding back employment and fostering inequality, as low education achievements penalise children
from lower socio-economic backgrounds. Vocational training needs to be strengthened and cooperation
with employers reinforced. Transition from education to work can prove challenging, requiring more
attention to the integration of university graduates into the labour market.
