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Labour Market Realities: February 2017

 
Government employment figures announced today show that unemployment is at a near record low, and that more people than ever are in work. These headline statistics feed claims that the Conservative economic strategy is working - that the Conservatives are steering the economy out of recession, and are navigating the choppy waters of Brexit. However, these figures are meaningless for millions of workers, with the Joseph Rowntree Foundation also announcing today that almost a third of the population of Britain have been living on an inadequate income in recent years. Beyond the headline figures, the picture is not quite so rosy.  
 
The government finds it easy to make bold claims about employment figures because on the surface, they are positive. The current employment rate is 74.6%, the highest ever recorded, and the unemployment rate is 4.8%, the lowest since 2005. Employment levels since the financial crash have been so strong that even experts have been surprised. 
 

The problem, however, is the quality rather than the quantity of work. The number of people in insecure work has rapidly increased by more than 660,000 (27%) over the past five years. The TUC estimates that over three million workers are now in insecure work, amounting to one in ten workers. Equally as concerning is bogus self-employment, which is thought to apply to as many as 460,000 workers. These workers lose an average of over £1,200 a year in holiday pay alone, as well as having almost no job security, sick leave, or employer contributions to pensions.

Wage growth is another indicator of problems behind the headline figures. After inflation, wages are still 7% below their pre-recession peak. No wonder then that so many people have yet to feel the impact of economic growth. The picture is even bleaker for public sector workers, who have suffered a long and difficult pay freeze. 

The strong headline employment figures have hidden the true nature of the state pf the labour market. The combination of insecure work and poor wage growth has meant that more than seven million people from working families are now in poverty (55% of all people from working families).

There are a number of often interrelated factors behind these labour market changes:

  • Low productivity growth – measured by the amount each worker produces - has meant wages haven’t grown as employers choose low skilled employment models over investing in their workforce;
  • Declining wage share of workers with growing profit share for shareholders and executives;
  • Declining influence of trade unions and reduced collective bargaining coverage meaning workers no longer have power to negotiate for good pay and contracts;
  • Globalisation and de-industrialisation destroying many well paid manufacturing jobs.

The growth in poor quality employment is contributing to underlying weakness in the economy. In other words, insecure work is bad news for everybody, and not just carers and Uber drivers. We would all benefit from strong, sustained and equitable economic growth, just as we all lose out from a low wage economy.

Since the end of the recession, headline economic figures, particularly employment figures, have been relatively positive.  When you look beneath these figures, you find these changes are almost all cosmetic, as the quality of the employment growth has not been strong enough to lift people out of poverty. Instead the nature of poverty has shifted as in work poverty has become more prevalent.

With the most recent employment, inflation and GDP figures, there is mounting evidence that the low economic and wage growth of the past two years is now stagnating. Given that this period of growth brought insecurity and poverty, we should be very concerned about a more subdued economy. There is a huge disconnect between the rosy picture the government is painting of the state of the economy and the often grim reality of the lives of millions of working people across the UK, and nowhere has this disconnect been made more clear than in the result of the Brexit vote. CLASS hopes to bridge this gap with our Labour Market Realities series.      

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