Earlier this year, the Department of Trade and Industry published an analysis of employment trends based on official datasets. It showed improvements for most workers in the areas of pay, working time and job security.
In March 2006, the UK Department of Trade and Industry (DTI) published an analysis of the performance of the UK labour market over the past decade, focusing on employee experiences. The report, How have employees fared? Recent UK trends (322Kb PDF), is based on official data including the Annual Survey of Hours and Earnings (ASHE), the Labour Force Survey (LFS) and the Average Earnings Index (AEI). The ASHE surveys approximately 90,000 employers and 245,000 job positions to provide data on earnings and hours worked. The LFS is a quarterly survey of approximately 57,000 households and gathers a range of data from individuals. The AEI is obtained by dividing total sums paid by the total number of employees paid.
UK labour market
The labour market context has been one of rising employment. The UK employment rate increased from 71% of the population aged 15–64 years to 74.5% in 2005, according to the LFS, making it the highest rate within the Group of Seven (G7) countries (Canada, France, Germany, Italy, Japan, the UK and the US). Over the same period, the unemployment rate among the working age population declined from 9% to 5%.
Moreover, increases in the employment rates of disadvantaged groups such as disabled people, lone parents, ethnic minorities and older people have been greater than the overall average increase. This contributed to a decrease of around one million in the number of people without work drawing social benefits in the UK.
Earnings growth
The analysis of average earnings growth in the report was based on the AEI and the LFS, using a deflator from the Consumer Price Index to derive a real earnings series after inflation. Both measures show an increase of about a third in private sector real earnings from 1995 to 2005, equating to an average annualised growth of 2.75% in earnings. Public sector employees experienced a slightly lower average annual growth of between 2.25% and 2.5% in earnings.
However, according to ASHE data, the health and education sectors expanded from a 17.3% proportion of total employees in 1998 to a 24.8% share in 2005. Furthermore, hourly earnings increased in these sectors from being 5.1% over the UK mean to being 8.5% over the mean during the same period.
Analyses show that substantial real wage gains occurred across all major sectors, and that female employees have benefited to a greater extent than men. The average annualised real wage gain since 1995 was 2.3% for men and 3.2% for women. Unqualified and partly qualified employees have received real wage increases at least equal to the proportional increase received by more highly qualified employees. This reflects the introduction of the National Minimum Wage in 1999 (UK9904196F), which has served to reduce wage inequality at the bottom of the wage distribution.
Working time and employment security
The proportion of part-time jobs has remained stable in recent years at just over a quarter of all paid jobs. According to the LFS, in 2005 only 8% of part-time employees reported working such hours because they could not find a full-time job, down from nearly 14% in 1995. There has also been a reduction in the number of workers regularly working long hours. Since the introduction of the Working Time Regulations in 1998 (UK9810154F), the proportion of full-time employees working over 48 hours a week has fallen by a fifth.
The proportion of jobs classified as ending on an involuntary basis – which includes the termination of temporary work, according to the LFS data – fell from 38% of all jobs that ended in 1995 to around 28% in 2005. The number of redundancies per 1,000 employees peaked in 2001 at around 8.5 (10.5 for men and 6.4 for women), and fell to under six in 2005 (7.5 for men and less than four for women). The LFS also shows that the rate of temporary work declined from a peak of 7.5% of all work in 1997 to 5.5% in 2005. The proportion of temporary employees who said they could not find a permanent job fell from 44% of temporary workers in 1995 to 25% in 2005.
Commentary
The report commends the UK labour market’s robust performance, both compared with other countries and with its own history. Undoubtedly, improvements in pay, working time and job security for large numbers of workers have been recorded, as demonstrated by figures from the nationally representative datasets used in the report. However, as the report concedes, this ‘does not imply that no major wage inequities remain, nor that all employees have benefited’. Nevertheless, the report portrays a positive image of employment trends in the UK’s dynamic labour market.
James Arrowsmith, University of Warwick