Is low unemployment causing us more problems than we realise? The suggestion might seem absurd, offensive even. It’s reminiscent of the days of Mrs Thatcher’s supposedly ‘cruel’ monetarism, when we had three million unemployed. Some on the fringes liked to argue that unemployment was good for the economy because it made people work harder, being fearful for their jobs.

Mass redundancies would not, of course, help the economy now or at any other time. If a million people were to lose their jobs, as happened in the early 1980s, that would be a million households suffering a collapse in the spending power. As well as a human tragedy, it would be an economic one, too.

But then who mentioned anyone losing their jobs? We could have a far higher – not to mention healthier and more honest – unemployment figure without anyone losing a single job. How come? The working age population is divided not into two pots – employed and unemployed – but into three: employed, unemployed and the economically inactive. While the government likes to celebrate that the size of the unemployed pot is at a 50-year low of just 3.5 per cent, the economically inactive pot tends to get ignored. But as Michael Simmons recently explained here, it has been growing alarmingly. There are now nine million people of working age who are not in employment and who are not looking for work, either because they are recorded as long-term sick – 2.5 million – or because they consider themselves retired, are in education or because they are taking an extended career break.

The number of economically inactive has grown by 630,000 since the beginning of the pandemic. For whatever reason, this is a huge body of potential labour that is being lost to the economy. This matters because it is depriving the economy of the workers that it needs to grow. No matter what the levels of personal and business taxation – cuts which were Liz Truss and Kwasi Kwarteng’s chief tool for trying to promote growth – the economy is going to struggle to grow if large numbers of people are not seeking employment. There are 1.25 million vacancies in the jobs market – a number that has remained stubbornly high in recent months, even as the economy appears to be sliding into recession.

What we really need is to shift a large number of people from the ‘economically inactive’ column into the ‘unemployed’ one, where they are looking for work. But how? To a certain extent the current market turmoil is self-correcting. Sliding values of pension funds and other investments may convince some people that they have retired too early: that they ought to be heading back into the workforce for a few more years. On the other hand, rising interest rates are hiking annuity rates sharply – making it more appealing for the over-55s to convert their pension funds into an annuity and take early retirement. How many of the 2.5 million recorded as long-term sick are really too unwell to work? One of the whole points of Universal Credit was to prevent people being parked ‘on the sick’ for year after year. There has long been a tendency for people to put on sickness benefits and then left there, even if their health condition improves. This might be something that has to be revisited.

The other issue is people in education. As has become increasingly clear, the massive expansion in higher education has not been accompanied by an increase in quality of courses, or an improvement in the job prospects of those with degrees. Many graduates are not doing graduate-level jobs.

Whatever the answers, if we want growth, the employment market and out-of-work benefits is one of the main places we are going to have to look.