Many technocrats think the UK is at or around full employment. What they don't say is that this requires some radical thinking about economic policy.

The Bank's chief economist Huw Pill recently said that the labour market so tight that higher interest rates might be needed to cut aggregate demand and inflation. And Sir Keir Starmer says: "We're going to have to be fiscally disciplined." The only charitable reading of this is that it means he thinks he's going to inherit a reasonably tight labour market (albeit perhaps not as much so as now) and so a fiscal expansion would be inflationary.

Which raises a big problem. Any intelligent government will need many more workers in some sectors: in health and social care; in housebuilding; in insulating homes; or making and installing solar panels and windmills. But where will these workers come from? The answer used to be simple: migrants and the dole queues. If these are not sufficient to supply the extra staff, however, we need something else - to destroy some existing jobs. Rachel Reeves has promised to "create good jobs", but this might require the abolition of bad ones.

At full employment, doing the things we want - building houses, improving social care, greening the economy - means doing less of something else. Progress must be a matter of creative destruction.
Which jobs should be destroyed? It's here that we need radical thinking.

For a long time, many economists have thought that the labour market was micro efficient but macro inefficient. As Keynes said:

I see no reason to suppose that the existing system seriously misemploys the factors of production which are in use. There are, of course, errors of foresight; but these would not be avoided by centralising decisions. When 9,000,000 men are employed out of 10,000,000 willing and able to work, there is no evidence that the labour of these 9,000,000 men is misdirected. The complaint against the present system is not that these 9,000,000 men ought to be employed on different tasks, but that tasks should be available for the remaining 1,000,000 men. It is in determining the volume, not the direction, of actual employment that the existing system has broken down.

If this is the case, then the solution to our problem is simple: higher taxes would destroy private sector jobs generally, thus making room for job creation in priority sectors.

But it might not be the case. There are reasons to think the existing system does seriously misemploy factors of production.

I don't mean that simply that people spend too much on trinkets of frivolous utility, thus creating over-employment in nail bars, takeaway restaurants or in sports car manufacturing. Instead, I'm thinking of five other mechanisms.

Agency failure. The "bullshit jobs" described by David Graeber are a product of this: middle managers would rather expand their empire of underlings than maximize "shareholder value". So to is the guard labour documented by Samuel Bowles and Arjun Jayadev: security guards, supervisors and some of legal system are in employed to ensure that agents (workers) do what principals (capitalists) want. I'd add many fund managers to this category: savers don't know that active managers on average under-perform the market and so employ too many of them.

Wrong policy choices. One obvious example here are the Border Force agents and lawyers needed to enforce an illiberal immigration policy. I'd add the lawyers, accountants and DWP staff employed to cope with an excessively complicated tax and benefit system, and the police required to enforce anti-drugs laws.

Ideology. Skill is a social construct, a product of ideology. Fund managers are considered skilled even though "the vast majority" of them are "genuinely unskilled" measured by their ability to beat the market. Conversely, care workers are considered unskilled not because they lack technique because they are disproportionately women or ethnic minorities. The result is excessive demand for some workers (many financiers and managers) and insufficient for others.

Externalities. Where the social cost of pollution is unpriced or under-priced, some industries are larger than would be socially optimum and so have too many workers. Standard examples here are those which emit carbon and other air pollutants. But these aren't the only forms of pollution. There's also risk pollution. The costs of financial crises are borne by all of us rather than internalized with the financial system, and so there is excess employment in the sector. Similarly, when Bulb went bust, we all had to pay more, reminding us that privatized utilities might employ more people than necessary. But there's something else. A lot of "journalism" and poshcuntstalkshit programmes are intellectual pollution; they degrade the public sphere and contribute to bad government.

Peer pressure. Robert Frank has shown that some types of consumer spending (such as on big cars) are fuelled by a desire to keep up with the Joneses, leading to excessive employment in those sectors. He advocates a progressive consumption tax to - in effect - ratchet down this arms race.

Here, though, is a problem. Except perhaps in our last case, higher taxes in general will not on their own destroy the right jobs. We need other policies: tax simplification; deregulation in some sectors and more regulation in others; nationalization; carbon taxes and Pigou taxes; worker democracy; cultural change to valorise care work; better financial education; and so on. It's not clear to me, however, that Labour is thinking along these lines, or even is aware of the problem.

Maybe it is right to be. Perhaps the labour market isn't as tight as Pill believes: this is a purely empirical question the answer to which must not be coloured by one's ideology. (The level of unemployment is not a sufficient metric here: what also matters are mismatches between demand and supply). Or perhaps it will be loose by the time Labour takes office.

Herein lies a paradox. In some respects, inheriting a recession would make things easier for Labour. In such a world, it could create jobs in the care sector and green economy simply by fiscal expansion - assuming it has the will to reject moronic talk of fiscal responsibility. Intellectually, there is no challenge here.

If, however, the labour market is tight, decarbonizing the economy and fixing health and social care will require much more thought.

For decades, we've thought of full employment as an ideal. Which in many ways it is: joblessness is a big cause of unhappiness. In a sclerotic, low-productivity economy, however, it also brings with challenges - ones which are largely neglected.