The latest ONS analysis looks at how unemployment rates and real wage growth were affected by the economic downturn in the G7 and BRIC countries. Unemployment in the G7 countries increased notably after the economic downturn, and real wage growth fell. It is clear that the downturn affected G7 countries in different ways, with the UK labour market adjusting more on the wages side, and the US labour market adjusting more on the employment side.
Unemployment rates increased across the G7 countries after the economic downturn
Before the economic downturn (Q1 2000 to Q1 2008) the UK unemployment rate averaged 5.1%, which was broadly similar to the US rate. However, after the economic downturn the UK’s unemployment rate increased, along with that of all G7 nations. Between Q1 2008 and its peak in Q4 2011, the UK’s unemployment rate increased by more than all other G7 economies, excluding the US which reached 9.9% in Q4 2009. Unemployment rates in France and Italy increased to 10.4% and 12.7% respectively by Q1 2014. Japanese unemployment peaked at the relatively low rate of 5.4% in Q3 2009 and has fallen since to 3.6% in Q1 2014. German unemployment peaked at 11.4% in early 2005 and has been on a broad downward trend since then.
Figure 1: Harmonised unemployment rates in the G7 nations from Q1 2000 to Q1 2014
- Source: OECD
High variation in unemployment rates within BRIC countries
There was high variation of unemployment rates within the BRIC (Brazil, Russian, India and China) countries too. In 2005 unemployment ranged from 4.1% in China to 9.3% in Brazil, similar to the G7 range of 4.4% in Japan and 11.1% in Germany. However, during the economic downturn unemployment in Russia increased, while India, China, and Brazil saw little change. By 2011, the unemployment rate in all BRIC economies returned to rates seen in 2005, indicating that the economic downturn had a smaller impact on most of the BRIC economies than the G7, and a less sustained impact.
Table 1: Unemployment rates, modelled International Labour Organisation (ILO) estimates, in the UK and the BRIC nations from 1990 to 2012
- Source: World Bank
UK experienced the highest real wage growth of any G7 countries from 2000-2007
Labour market adjustments in response to the recent downturn took place through lower real wage growth as well as higher unemployment. Between 2000 and 2007, the UK experienced the highest real wage1 growth of any G7 country (14%), and has since experienced the biggest fall (5.1%). There were also notable real wage growths between 2000 and 2007 in Canada (11%), the United States (9%), and France (8%), with Japan (-2.1%), Germany (1.2%), and Italy (2%) experiencing smaller increases. While real wage growth was negative in the UK following 2007, real wage growth was mainly positive for Canada (6%), France (4%) and Germany (4%). Japan and the US experienced low real wage growth over this period (of 1.7% and 0.7%, respectively), and Italy is the only other country, apart from the UK, in which real wages were lower in 2012 than in 2007. Overall it’s clear that labour market adjustment following the downturn took place more on the wages side for the UK, and on the employment side for the US.
Figure 2a: Real wage growth in the G7 nations, from 2000 to 2007
- Source: OECD
Figure 2b: Real wage growth in the G7 nations, from 2008 to 2012
- Source: OECD
Where can I find out more about labour markets in the G7?
These statistics were analysed by the OCEA team at ONS. The analysis was based on data from the OCED. If you would like to find out more about labour markets in the G7, you can read ‘An international perspective on the UK – Labour Market Performance’. If you have any comments or suggestions, we would like to hear them. Please email us at: email@example.com
Measures of real wages take account of the effect of price inflation. If a worker’s earnings are unchanged, rising prices mean that real wages are falling and the same income will therefore buy a smaller quantity of goods and services than before. Figures 2A and 2B use consumer prices inflation to calculate real wage growth across the G7; 2A focuses on the pre-crisis period and 2B focuses on the economic downturn and post-crisis phase. Comparable data is not available for the BRIC economies.