Labour market: Britain’s jobs success is vulnerable to further austerity

Real earnings are increasing but are too dependent on low inflation


The monthly employment figures from the Office for National Statistics show that employment is still rising and unemployment still falling. There are some signs that the stronger jobs market is finally feeding through to pay. On the other hand, underemployment and youth unemployment are still major problems and renewed austerity could cut off the recovery.

But let’s start with the unambiguously good news. The employment level of nearly 31.1 million and the employment rate of 73.5 per cent are both records – records that are due to women’s employment. For the ten years before the recession, men’s employment rate was higher than its current level of 78.4 per cent but women’s 68.6 per cent rate is significantly higher than the typical pre-recession rate of about 67 per cent.

Unemployment, at 1, 827,000 is still 200,000 higher than pre-recession, but it has come down 386,000 in the past year – by this time next year it might fall to the level of about 1.4 million that was achieved in 2004/5. My favourite indicator of labour market health, the ratio of unemployed people to job vacancies, is now back to its pre-recession level of two and a half to one:

Unemp vac ratio v1

Against the background of inflation at 0.9 per cent, using the most recent figures for the Retail Price Index (usually used for pay negotiations, the government’s preferred CPI measure gave us an inflation figure of 0.0 per cent) there was significant movement in earnings. The three month average for increases in weekly regular pay showed earnings 2.2 per cent higher than a year before and the increase for total pay (including bonuses) was 1.9 per cent.

However they are measured, real earnings are definitely increasing, but this increase is too dependent on low inflation and a jump in prices – caused by an increase in interest rates, for instance – could bring wages back down to earth rapidly. Ultimately, only an increase in productivity will bring us sustained overall wage increases, and low productivity has been one of the characteristics of the labour market recovery.

There are other reasons to worry, especially persistent youth unemployment. Like other age groups, the number of unemployed under-25s started falling a couple of years ago, but that process stopped last summer and has essentially flat-lined since:

Yth unemp v1

Although full-time employee employment has been rising in the last 12 months, that doesn’t mean we can stop worrying about underemployment. In the latest figures, the number of temporary workers who would have preferred permanent jobs and part-time workers who would have rather got full-time jobs increased from the previous quarter. And although the number of people in all types of employment is now higher than before the recession, it remains the case that full-time and employee jobs account for a smaller proportion of overall employment than before the recession:

Full-time and part-time jobs, employees and self-employed, 2008 – 2015 (000s and %)

Mar-May 2008 Jan-Mar 2015 Change
Employees 25,657 26,370 713
86.2% 84.8% -1.4%
Self employed 3,856 4,504 648
13.0% 14.5% 1.5%
Total people working full-time 22,227 22,735 509
74.7% 73.1% -1.6%
Total people working part-time 7,522 8,362 840
25.3% 26.9% 1.6%
Employees working full-time 19,216 19,472 256
64.6% 62.6% -2.0%


This is a picture of labour market success that is vulnerable to austerity. Significantly higher interest rates or cuts in benefits and public sector jobs on the scale suggested by the Conservative manifesto plans could easily undermine the employment and unemployment results that were one of the keys to Mr Cameron’s success in persuading the voters to give him another five years.

Richard Exell is senior policy officer at the TUC. Follow him on Twitter

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3 Responses to “Labour market: Britain’s jobs success is vulnerable to further austerity”

  1. stevep

    Average earnings should be calculated should be shown for the different sectors, this would paint a truer picture. Too often higher earners in the professions have been lumped in with lower paid part-time and temporary workers and this artificially boosts the apparent average.
    As for a labour market recovery, it isn`t going to happen in the term of this government because they are quite happy for the private sector to continue pay basic wages and offer insecure jobs whist simultaneously reducing the public sector in a misplaced ideological crusade,. Back in 2004-5 workers enjoyed greater job and financial security.
    The new conservative government will laugh off any suggestion of changing the current employment scenario, they want a downtrodden, subservient low-paid workforce fighting for the table scraps. It is history repeating itself.

  2. Cyril Fitzgerald

    Actually, the Office for National Statistics does publish average earnings for the different sectors.

  3. stevep

    The only newspapers that I`ve seen that publish the Office for National Statistics figures for different sectors have been trades unions publications. It`s rarely up for discussion on TV news or debates.

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