A British academic who won a Nobel economics prize for his work on studying unemployment called on the Government to make more “gradual” spending cuts.
Professor Christopher Pissarides |of the London School of Economics said it is crucial to avoid jobless people becoming “entrenched” in claiming benefits.
He received the award jointly with Americans Peter Diamond and Dale Mortensen for their work on analysing labour markets.
Prof Pissarides specialises in the economics of unemployment and studies theories of labour markets and policies.
He said the current level of unemployment of 7.8% is “consistent” with the scale of the recession endured in the UK. But he said it is vital to get people back to work as soon as possible.
“The key idea really is they shouldn't allow unemployment to become entrenched,” he said.
“If you have been out of a job for more than a year, it's disastrous really — you don't have the incentive to get back to work.”
Prof Pissarides, a British and Cypriot citizen, said Government subsidises should be targeted at helping companies bring people back to work and benefits should come with conditions that encourage people to look for employment.
“It's not clear yet that the Government has a good, consistent policy with the incentives they are giving to get people back to work,” he said. “They are probably cutting the budget a little too fast. The advantage of gradualism is that you don't suddenly get lots of people out of work.
“If you spread it out, you give people more time to find work.”
Prof Pissarides said he was shocked by the award, announced yesterday.
“It still hasn't sunk in yet,” he said. “It's a great surprise. It's such fantastic news. It's the biggest honour I could be given.”
Prof Pissarides is the ninth Briton to win the award, the Royal Swedish Academy of Sciences said.
Announcing the honour, it said: “The laureates' models help us understand the ways in which unemployment, job vacancies and wages are affected by regulation and|economic policy.”
Prof Pissarides said his research investigated the “processes and decisions” that affect how long it takes people to get back to work.
He said: “One of the key things we found is that it is important to make sure that people do not stay unemployed too long so they don't lose their feel for the labour force.
“The ways of dealing with this need not be expensive training — it could be as simple as providing work experience.”