{"id":18103,"date":"2023-01-10T22:06:38","date_gmt":"2023-01-10T22:06:38","guid":{"rendered":"https:\/\/www.adzuna.co.uk\/blog\/?p=18103"},"modified":"2023-10-26T15:26:37","modified_gmt":"2023-10-26T15:26:37","slug":"the-current-state-of-the-uk-labour-market","status":"publish","type":"post","link":"https:\/\/www.adzuna.co.uk\/blog\/the-current-state-of-the-uk-labour-market\/","title":{"rendered":"The current state of the UK labour market"},"content":{"rendered":"<p><strong>Welcome to Labour Market Voices; our series of blogs and discussions with leading policy commentators.\u00a0<\/strong><\/p>\n<p><span style=\"font-weight: 400;\">In this first edition, James Neave, Head of Data Science at Adzuna, and Tony Wilson, Research Director, Institute for Employment Studies (IES), discuss the state of the UK labour market and how we compare to other developed economies. Part 2 will look at how our public employment services need to be reformed in order to improve the functioning of our labour market. <\/span><\/p>\n<p>&nbsp;<\/p>\n<blockquote>\n<p style=\"text-align: right;\"><b>James Neave:<\/b><\/p>\n<p style=\"text-align: right;\"><em><span style=\"font-weight: 400;\">Leading up to the Covid-19 pandemic, the UK\u2019s labour market appeared to have been in pretty good shape \u2013 we entered the pandemic with employment at its highest-ever rate and unemployment close to its lowest in fifty years. Was everything as good as it seemed on the surface?\u00a0<\/span><\/em><\/p>\n<p>&nbsp;<\/p><\/blockquote>\n<p><b>Tony Wilson:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Well, yes and no.\u00a0 Whilst the record high level of employment you mention was certainly positive, it actually masked a range of issues we were facing: :<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Certain groups still faced significant disadvantages in the labour market<\/b><span style=\"font-weight: 400;\">, including disabled people (who were 2.5x more likely to be out of work than non-disabled people), those with limited qualifications, ethnic minority groups, lone parents and older people;<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Disadvantaged areas were at risk of falling further behind.<\/b><span style=\"font-weight: 400;\"> These mostly ex-industrial and coastal areas with lower employment and vacancy levels, but also disadvantaged across a range of other indicators, saw virtually no employment growth over the last five years, and existing employment in these areas was more heavily concentrated in industries at risk of decline;<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Low investment in people (the number of people accessing training at work was falling, and much of said training merely constituted induction or health and safety) and capital was also contributing to <\/span><b>weak productivity growth<\/b><span style=\"font-weight: 400;\"> and a widening gap between the UK&#8217;s productivity rate and the productivity rates of other major economies;<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>One in six workers were in low pay<\/b><span style=\"font-weight: 400;\">, with as many as 25% of those in low pay having been stuck there for up to a decade and a further half had cycled in and out of low pay.\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These issues contributed to <\/span><b>record levels of poverty among working households<\/b><span style=\"font-weight: 400;\">, with nine million people in relative income poverty, including rising numbers for families where all adults worked, likely reflecting the effects of large cuts to social security for working families.\u00a0<\/span><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<blockquote>\n<p style=\"text-align: right;\"><strong>James:\u00a0<\/strong><\/p>\n<p style=\"text-align: right;\"><i><span style=\"font-weight: 400;\">So actually, the record employment figures belied the true health of the labour market, particularly the circumstances of certain groups? And then the pandemic hit \u2013 did this then bring these challenges to the forefront?<\/span><\/i><\/p>\n<p>&nbsp;<\/p><\/blockquote>\n<p><b>Tony:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Absolutely. Whilst we avoided the widely predicted unemployment crisis in the aftermath of the pandemic, we are instead now facing three linked crises that we had not prepared for and are struggling to meet.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2>\u00a0 \u00a0 \u00a01) Worklessness has increased significantly<\/h2>\n<p><span style=\"font-weight: 400;\">There are still <\/span><b>600,000 more people out of work than before the pandemic began<\/b><span style=\"font-weight: 400;\">. This is explained by higher \u2018economic inactivity\u2019 (people not looking and\/or not available to work), driven by more older people leaving work and more people out of work with long-term health conditions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Although many want to work and would come back for the right job with the right support, for instance with adequate flexibility so that individuals can maintain employment alongside the demands of their personal circumstances, be that managing a health condition or looking after children for instance.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What is concerning as well is that the growth in economic inactivity is being driven by those out of work the longest, with <\/span><b>200,000 more people that have been economically inactive for over five years<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><b><i>\u00a0 \u00a0 \u00a0 <\/i><\/b><\/p>\n<h2>\u00a0 \u00a0 \u00a0 2) We are facing serious labour and skills shortages<\/h2>\n<p><span style=\"font-weight: 400;\">The shrinking labour force is contributing to acute labour and skills shortages \u2013 with <\/span><b>more than a million unfilled vacancies, and fewer unemployed people than there are jobs available<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This is holding back growth and may be adding to pay pressures in the private sector (where nominal pay growth is above 6% a year) as well as recruitment and retention problems in public services (where pay growth is barely 2%).\u00a0<\/span><\/p>\n<p><b>The Adzuna Intelligence portal<\/b><span style=\"font-weight: 400;\">, which displays a wide range of key datapoints derived from their comprehensive vacancy data, shows that in the past month (21\/10-21\/11), there were over 2.3 million job postings on the Adzuna website, with the median salary listing up 6.9% year-on-year. This most in demand occupation over this period was social care workers, with approximately 56,000 listings and a year-on-year increase in median salary listing of 10.7%.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<h2>\u00a0 \u00a0 \u00a0 3) Living standards are falling sharply.<\/h2>\n<p><span style=\"font-weight: 400;\">Inflation overall is so high that pay cannot keep up \u2013 with pay in \u2018real\u2019 terms down by 3.3% since the turn of the year, the steepest fall in at least twenty years. And for those out of work, the hit to living standards has been greater still.\u00a0<\/span><\/p>\n<p>&nbsp;<\/p>\n<blockquote>\n<p style=\"text-align: right;\"><b>James:<\/b><\/p>\n<p style=\"text-align: right;\"><em><span style=\"font-weight: 400;\">But surely over time as the Covid-19 shock to the labour market passes through, these crises will naturally subside?<\/span><\/em><\/p>\n<p>&nbsp;<\/p><\/blockquote>\n<p><b>Tony:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">So while recent falls in labour force participation have been driven by the pandemic, they are likely to signal a <\/span><b>permanently smaller labour force<\/b><span style=\"font-weight: 400;\">: first as the \u2018Baby Boomer\u2019 generation continues to retire over the next decade; and secondly because of lower migration (in part due to Brexit).\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For more than three decades, the story of the UK labour market had been of higher labour demand being met with higher supply. The pandemic put that growth in labour supply into sharp reverse and it has not recovered since. At the same time, we are also facing significant changes in what we do and how we work, which will bring challenges as well as opportunities \u2013 driven by technology and automation; the transition to net zero; and a future with greater barriers to overseas trade and higher borrowing costs.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">So if we want to grow the economy and reduce inequalities we need to do far more and far better at helping people who are out of work to get back into work and helping employers to adapt, to grow and to make work more productive and rewarding.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-18115 size-full\" src=\"https:\/\/www.adzuna.co.uk\/blog\/wp-content\/uploads\/2023\/01\/ruthson-zimmerman-Ws4wd-vJ9M0-unsplash-2.jpg\" alt=\"\" width=\"900\" height=\"600\" srcset=\"https:\/\/www.adzuna.co.uk\/blog\/wp-content\/uploads\/2023\/01\/ruthson-zimmerman-Ws4wd-vJ9M0-unsplash-2.jpg 900w, https:\/\/www.adzuna.co.uk\/blog\/wp-content\/uploads\/2023\/01\/ruthson-zimmerman-Ws4wd-vJ9M0-unsplash-2-300x200.jpg 300w, https:\/\/www.adzuna.co.uk\/blog\/wp-content\/uploads\/2023\/01\/ruthson-zimmerman-Ws4wd-vJ9M0-unsplash-2-768x512.jpg 768w\" sizes=\"auto, (max-width: 900px) 100vw, 900px\" \/><\/p>\n<blockquote>\n<p style=\"text-align: right;\"><b>James:<\/b><\/p>\n<p style=\"text-align: right;\"><em><span style=\"font-weight: 400;\">How do we compare to our international counterparts? Are other developed economies facing similar challenges?<\/span><\/em><\/p>\n<p>&nbsp;<\/p><\/blockquote>\n<p><b>Tony:<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Other nations certainly struggled during the pandemic, but <\/span><b>the UK is almost unique in seeing employment fall over the last two and a half years<\/b><span style=\"font-weight: 400;\"> \u2013 with every major economy faring better than the UK, and employment up by on average more than two percentage points across the European Union.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Furthermore, employment rates are rising across most of the developed world even as they stagnate in the UK. <\/span><b>So it is plausible that by early next year, the UK will be the only developed economy in the world whose employment rate is lower than it was before the pandemic began<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The relatively high poverty and inequality rates that have become characteristic of the UK labour market compared to other developed economies are also not inevitable. T<\/span><b>he UK performs above average on employment and pay, but performs poorly on pay gaps and low pay, income inequality and poverty, and on employment \u2018gaps\u2019 for disadvantaged groups<\/b><span style=\"font-weight: 400;\"> (the gap between the employment rate of the disadvantaged group, for instance, the disabled, and the employment rate of the wider population).\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In part, this reflects low levels of social security benefits \u2013 among the lowest rates of \u2018income replacement\u2019 (the amount of in work income that an individual would receive in benefits were they to become unemployed) of any developed economy \u2013 but also structural factors including childcare, housing, employment protection, representation at work and access to employment and skills support.\u00a0<\/span><\/p>\n<p><b>Many other northern and western European countries have managed to combine relatively high employment with high pay and low(er) inequalities<\/b><span style=\"font-weight: 400;\">. The UK can &#8211; and must &#8211; do better, and would not even have to climb to the top of the table in order to see substantial economic and social improvements. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">I<\/span><b>f our employment gaps for disabled people and older people improved from being mid-table to just being at the bottom of the top quarter of developed economies then that would mean nearly a million more people in work than now and an employment rate of just over 80%<\/b><span style=\"font-weight: 400;\"> \u2013 with nearly 600,000 more disabled people and 350,000 more older people in work.<\/span><\/p>\n<p>&nbsp;<\/p>\n<blockquote>\n<p style=\"text-align: right;\"><b>James:<\/b><\/p>\n<p style=\"text-align: right;\"><i><span style=\"font-weight: 400;\">This would certainly help to quell the labour and skills shortages, with its knock-on effects on wage and price inflation, that we are currently facing. So how do we go about doing better?<\/span><\/i><\/p>\n<p>&nbsp;<\/p><\/blockquote>\n<p><b>Tony:<\/b><\/p>\n<p>High-quality employment support can help meet these challenges, and is a key supply-side policy for supporting economic growth, raising productivity and reducing inequalities<span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The UK\u2019s current employment support has its strengths, including the capabilities of work coaches, but it could be doing far more to provide wider support to groups other than those who are claiming benefits and are required to look for work, to support employers to fill their vacancies and fulfil their other needs, and to improve on partnership working with other local and national services.<\/span><\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p><strong><img decoding=\"async\" class=\"emoji\" draggable=\"false\" src=\"https:\/\/s.w.org\/images\/core\/emoji\/11\/svg\/1f4a1.svg\" alt=\"\" \/> Read more: <\/strong>Are you looking to make better decisions, faster? <a href=\"https:\/\/www.adzuna.co.uk\/hire\/labour-market-intelligence\/\">Speak to one of our team about Adzuna Intelligence<\/a>; your trusted source for labour market insights with granular location-level data across key facets such as industry, salary, occupations and more&#8230;&#8217;<\/p>\n<p>&nbsp;<\/p>\n<p><em><span style=\"font-weight: 400;\">In collaboration with Daniel Muir, a Research Economist (Fellow) at IES.<\/span><\/em><\/p>\n<p><em><span style=\"font-weight: 400;\">IES is an independent, apolitical, international centre of research and consultancy in public employment policy and HR management. It works closely with employers in all sectors, government departments, agencies, professional bodies and associations. IES is a focus of knowledge and practical experience in employment and training policy, the operation of labour markets, and HR planning and development. IES is a not-for-profit organisation.<\/span><\/em><\/p>\n<p><br style=\"font-weight: 400;\" \/><br style=\"font-weight: 400;\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Welcome to Labour Market Voices; our series of blogs and discussions with leading policy commentators.\u00a0 In this first edition, James Neave, Head of Data Science at Adzuna, and Tony Wilson, Research Director, Institute for Employment Studies (IES), discuss the state of the UK labour market and how we compare to other developed economies. Part 2<a class=\"moretag\" href=\"https:\/\/www.adzuna.co.uk\/blog\/the-current-state-of-the-uk-labour-market\/\"> Continued \u00bb<\/a><\/p>\n","protected":false},"author":51,"featured_media":18107,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"quote","meta":{"_acf_changed":false,"footnotes":""},"categories":[1168],"tags":[],"class_list":["post-18103","post","type-post","status-publish","format-quote","has-post-thumbnail","hentry","category-adzuna-intelligence","post_format-post-format-quote"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/posts\/18103","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/users\/51"}],"replies":[{"embeddable":true,"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=18103"}],"version-history":[{"count":2,"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/posts\/18103\/revisions"}],"predecessor-version":[{"id":20234,"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/posts\/18103\/revisions\/20234"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/media\/18107"}],"wp:attachment":[{"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=18103"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=18103"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.adzuna.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=18103"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}