Despite the continuing good news on unemployment, many people are still feeling the squeeze.
Despite the continuing good news on unemployment, many people are still feeling the squeeze
The latest labour market statistics show that the improvements in the labour market that began a year and half ago are continuing. The unemployment rate is at 6.8 per cent and the unemployment level fell by 133,000 to 2.21 million. This is the lowest since January 2009.
Employment grew by another 283,000 and the employment rate is also recovering. It currently stands at 72.7 per cent, close to the pre-recession level of 73 per cent. Vacancies are also just below pre-recession levels – there are 628,000 job vacancies compared to 696,000 in 2008. Long-term and youth unemployment have also fallen in the latest data.
But while this is all good news, many issues of concern remain.
Underemployment continues to remain very high, despite a small fall of 7,000 in the number in involuntary part time work, the total still stands at 1.42m. This is an increase of a 100 per cent beyond the pre-recession level of 701,000.
The rise in employment also continued to be driven by self-employment, which is extraordinary as self-employment is a relatively small part of UK jobs market. But although just one in seven workers are self-employed, over half of all jobs growth over the year has been in this type of employment.
Change in self-employment 2008-2014
While the number of employees has only just reached pre-recession levels, the story for self-employment has been very different. At the beginning of the downturn the number of self-employed workers increased while employees declined, with self-employment cushioning overall employment falls. From 2011 the number of employees began to rise faster than the self-employed.
But the latest twist is that over the last year, while the number of employees increased by 351,000 (1 per cent), the number of self-employed has increased far more sharply by 375,000 (a 9 per cent rise).
When being self employed allows those who have always wanted to be their own boss to start their own business, or when it means that workers with a great business idea are able to realise it (and take on the risks associated with it), then self-employment can be a fantastic opportunity. But the TUC’s concern is that some people have been forced in to self-employment as they have no alternative.
Previous TUC’s analysis suggests that rising self-employment is part of a wider shift towards insecure employment, rather than as a result of a growing number of people starting up new companies as ministers like to claim. Our analysis also shows that self-employed workers are often earning less, underemployed, and have less job security than employees.
Some self-employment is of course a good thing, but debate and discussion around the nature of the current rise in self-employment looks set to continue for some time to come.
Pay is another area of substantial concern. Is the wage squeeze really over, as the government might like us to believe? Not if we measure inflation by the Retail Prices Index, which is far more commonly used than CPI in pay bargaining; by this measure real pay is still falling.
While CPI inflation (which excludes housing costs) has dropped to 1.6 per cent, RPI inflation is currently at 2.5 per cent. Although mortgage rates may be low, house prices are rising sharply and in many areas rents are rising too, with particularly substantial rises in London.
Particularly in this context it is questionable whether a measure which excludes the cost of housing can really be considered an accurate means to assess living standards.
But even using the CPI measure of 1.6 per cent (the government’s preferred measure), wage growth has only returned when using the ‘total pay’ measure of 1.7 per cent (which includes bonuses). If ‘regular pay’ is used (a more appropriate series given most people do not receive bonuses) earnings are only rising by 1.3 per cent, with a real wage squeeze still very much in place.
In addition, public sector workers are largely subject to a 1 per cent pay cap, most social security benefits (including tax credits for working families) are capped at 1 per cent, and the growing number of self-employed (whose earnings are likely to be lower than average) are not even included in these wages figures.
Real pay is at best stagnating and still falling for many. It will be years before living standards even return to where they were in 2008. The Office for Budget Responsibility (OBR) has estimated that real incomes will not return to their 2009-10 levels until 2018 at the earliest.
The labour market recovery continues. But with insecure low paid work in the ascendency and a huge living standards gap still to make up, many will still be wondering why they are not sharing in the gains of economic growth.
Anjum Klair works in the TUC’s Economics and Social Affairs Department
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