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NEF - Latest labour market stats: work’s still not paying
Blog posted by: Jacob Mohun Himmelweit (July 22, 2014)
We’re still working more, for less.
In last month’s blog we pointed out that despite positive employment growth there had yet to be any obvious impact on the average level of pay. The figures this month give the same conclusion, but now on a historic scale.
The employment rate, the proportion of 16 to 64 year olds in work, hit 73.1% between March and May 2014 – the joint-highest level since comparable records began in 1971. But regular pay growth, average pay excluding bonuses, was 0.7% for the same period compared to a year earlier – the lowest level since comparable records began, in 2001 for this data. With inflation still running higher, at around 1.5% over the year to May 2014, this translates into yet another real pay decrease.
These two extremes show the UK labour market continues down a rather peculiar route. Around a quarter of a million people entered employment in the last three months, yet they’re not earning the salaries and getting the opportunities the labour market might once have offered them.
Many economic commentators are pointing to short-term demand and supply dynamics to explain this. For them the issue is one of ‘slack’ in the labour market, where there is still more supply than demand for workers so little pressure on employers to increase wages. But there may also be a longer-run, harder to reverse and therefore more worrying cause here; gradual institutional change in the labour market itself.
As the output of the economy recovers to its pre-recession levels, continued attempts to make the labour market more flexible – a business-friendly weakening of workers’ rights and power – has created a quality vs. quantity trade-off. These new symptoms of high employment but low wages and productivity growth actually pre-date the recession. Prior to 2008 we were already seeing a declining wage share, a stagnating median wage and growing numbers on zero hour contracts. These trends have been propelled further and faster in the aftermath of the financial crash with governments placing even less pressure on employers to provide decent wages and employment conditions.
Our country’s leaders continue to claim they are on the side of hard-working people, however these latest statistics remind us again that the economic system is simply not working for the majority. An increasingly flexible labour market now exists where a significant number of people are underemployed, self-employed or in insecure and low paid forms of work. Employment is likely to be more desirable than unemployment for most, but as the quality of work declines so do the well-being impacts.
A recent report by NEF shows how addressing problems in the labour market would be essential to addressing inequality at its root and enabling all to benefit from a recovery. We call for a focus on good jobs rather than simply the employment rate, and suggest potential policy avenues which begin to do this. Part of this work builds on earlier NEF proposals for an industrial policy aimed at creating good jobs and the establishment of a British Business Bank to focus our efforts and create the institutional environment to facilitate a good jobs revival.
There are alternatives to the current approach of high but low quality employment. Instead of stretching our labour market beyond its limits, it’s time to consider them.
