In the three months to June 2019, employment increased by 115,000 to reach a record high of 32.81 million and unemployment increased by 31,000 to 1.33 million.
The employment rate for women increased to reach a record high of 72.1% in the three months to June 2019.
The number of non-UK workers increased, driven by the number of workers with European nationalities.
Total average weekly pay grew by 3.7% in the year to June to reach £538, and regular average weekly pay grew by 3.9% to reach £505 over the same period.
The union density rate has been falling as have trade union wage premiums in the private and public sectors.
The UK labour market shows a mixed picture of employment and wage growth (which point towards greater tightening of the labour market), and falling vacancies and rising unemployment (which point towards loosening). The UK economy contracted by 0.2% in the three months to June 2019 driven by contractions in production and construction sectors. This was the first such contraction since 2012. Growing uncertainty associated with the UK leaving the European Union is influencing economic agents’ perceptions of the economy. For example, the Bank of England’s Inflation Report for August 2019 reported that recruitment surveys (by the British Chambers of Commerce and KPMG/REC) showed that hiring new staff was getting increasingly challenging, with labour shortages across a broad range of sectors and skill levels.
The latest British Chambers of Commerce (BCC) Quarterly Recruitment Outlook for the second quarter (April to June) of 2019 reported that 64% of firms struggled to recruit the right people. This was a drop from 71% of firms reporting the same in the first quarter (January to March) of 2019. Recruitment challenges remained very high for firms in hotel and catering activities (74%), in transport and distribution (67%) and in wholesaling and retailing (58%). These sectors are generally characterised by low wages. Geographically, firms in Northern Ireland (76%), and Wales and the South of England (both 71%) reported the highest levels of difficulty recruiting new staff.
The KPMG/REC survey on jobs identified the main cause of recruitment challenges as political and economic uncertainty. In addition, firms reported getting few candidates for vacancies, reflecting the tightness of the labour market. A tight labour market puts pressure on wages to increase. These issues are examined below using the latest estimates from the Labour Force Survey covering the period April to June 2019.Back to table of contents
The UK labour market has been resilient over several quarters, resulting in high employment and low unemployment and falling economic inactivity. Employment has been on an upward trend since 2011.
In the three months to June 2019, employment increased by 115,000 to reach a record high of 32.81 million. The employment rate remained unchanged at 76.1% over the same period.
The increase in employment was driven by women whose employment increased by 127,000 to a record high of 15.55 million. The employment rate for women increased by 0.3 percentage points to reach a record high of 72.1%.
The number of men in employment in the UK reduced by 12,000 to 17.26 million in the three months to June 2019. The employment rate reduced by 0.2 percentage points to 80.1%.
The Organisation for Economic Co-operation and Development (OECD) calculates the employment rates of the age group 15 to 64 years in member countries. The most current and complete employment rates are for the period January to March 2019. The employment rates for men and women for selected countries are shown in Figure 1.
Figure 1 is ordered by the employment rate for women. It shows that in this group of countries, Germany had the highest employment rate for women, while France’s was lower. The UK had the third-highest rate after Germany and Canada. The employment rate for men was highest in Japan, followed by Germany and the UK respectively. France had a lower employment rate for men.
Considering the full range of OECD countries, Germany’s female employment rate ranked seventh behind Iceland (83.8%), Sweden (76.3%), Switzerland (75.8%), the Netherlands (73.8%), New Zealand (73.5%) and Norway (72.8%). The UK ranked 14th behind the countries listed above and Denmark (72.3%), Lithuania (72.2%), Canada (71.6%), Finland (71.4%), Estonia (71.2%) and Japan (71%).
In the group of countries shown in Figure 1, Japan had the highest aggregate employment rate for men (77.5%), followed by Germany (76.4%) and the UK (75.1%). France had a lower rate (65.5%) behind the US (71.1%). The UK employment rate for men was above the OECD average.
Among all OECD countries, Germany's employment rate for men ranked seventh behind Iceland (85.6%), Switzerland (80.3%), the Netherlands (78%), Sweden (77.8%) and New Zealand and Japan (both 77.6%). The UK ranked 10th behind those countries, and Denmark (75.5%) and the Czech Republic (75.3%).
The increase in the number of employees was driven by women
There has been a strong increase in the number of women in the labour market. The increase was strong among employees, in full-time and part-time employment, and in those with second jobs. In the three months to June 2019, the increase in the number of people in work was driven by employees (who increased by 76,000 on the quarter to 27.67 million) compared with the self-employed (who increased by 29,000 to 4.96 million).
Disaggregating employees by sex shows that the increase in employees was driven by women who increased by 74,000 on the quarter to 13.79 million, compared with men who increased by 2,000 on the quarter to 13.88 million.
Although more men (3.29 million) were self-employed, their number fell by 23,000 on the quarter and that of women increased by 51,000 to reach 1.67 million.
More women joined part-time employment than full-time employment
The number of women working on a full-time basis increased by 62,000 on the quarter to reach 9.15 million in the three months to June 2019. The number of women who worked on a part-time basis increased by 64,000 on the quarter to reach 6.4 million. In fact, the number of women working part-time more than doubled between 1992 and the three months to June 2019. Figure 2 shows the index of employment for women working on a part-time basis as employees or as self-employed workers.
Figure 2 shows that the number of self-employed women who worked on a part-time basis has increased significantly over time. This is because self-employment and part-time working allow women the flexibility of arranging working hours around other responsibilities. The increase in the number of female employees working part-time is associated with changes in conditions that allow women to take up employment, such as improvements in childcare services and the greater prevalence of flexible working arrangements.
The number of men who worked full-time reduced by 65,000 to 14.96 million in the three months to June 2019. Those working part-time increased by 53,000 to reach 2.30 million over the same period. Figure 3 shows the index of employment for male part-time workers. It shows that since 2006, there has been a faster increase in the number of self-employed men working part-time than of male part-time employees.
Since the beginning of 2010, the number of self-employed men has grown more rapidly than that of employees. Between 2006 and the three months to June 2019, part-time self-employment increased by 77.6% and the number of employees increased by 29.8%.
Although self-employment in general has grown significantly over time, it constituted only 15.1% of total employment in the three months to June 2019. Our labour market economic commentary for May 2019 examined the structure of self-employment in detail. It also discussed the reasons behind the growth of self-employment in the economy.
There were more women than men with second jobs
The number of women with second jobs increased by 23,000 on the quarter to 671,000, while that of men increased by 3,000 to 466,000. One of the reasons for people to have more than one job is to boost income. The second job market is dominated by women, which may be partly due to women earning less than men.
In the year to June 2019, the changes in employment, unemployment and economic inactivity were driven by women
On a longer-term basis, employment increased by 425,000 in the year to June 2019. The increase was driven by women whose employment increased by 322,000, while men's only went up by 103,000 over the same period.
The latest figures show that in the year to June 2019, unemployment fell by 33,000 and economic inactivity by 176,000. The number of unemployed men increased by 17,000 on the year while the number of unemployed women fell by 51,000 on the year. For every man who became unemployed, three women left unemployment. The numbers of economically inactive men and women fell by 13,000 and 164,000 on the year, respectively. The decrease in economic inactivity among women was nearly 13 times that of men.
The number of non-UK workers increased, driven by the number of workers with European nationalities
In the UK labour market, 11% of the people in employment have non-UK nationalities. In the year to June 2019, the number of UK workers increased by 298,000 on the year to 29.08 million. The number of workers with non-UK nationality increased by 133,000 on the year to 3.66 million. There were increases in the number of workers from Europe (118,000) and Africa (28,000). There were also increases in workers from Pakistan and Bangladesh (20,000). There were decreases in the number of workers from India (23,000), the USA (14,000), Romania and Bulgaria (12,000), and from New Zealand and Australia (9,000). The decrease in the number of workers from these countries may be linked to improvements in their economic performances.
Of the non-UK workers, 2.49 million were from Europe and 1.17 million were from elsewhere in the world. Disaggregating the number of non-European workers shows that there were 567,000 workers (48%) from Asia, 314,000 workers (27%) from the Americas and Oceania, and 289,000 workers (25%) from Africa.
Analysis of non-UK employment rates by nationality show that workers from Europe had the highest rate (82.5%) and those from Asia had the lowest (54.3%). Figure 4 shows the employment rates of the four groups of non-UK workers compared with UK workers.
The aggregate employment rates mask differences in the employment rates of different nationalities. For instance, among workers from Europe, workers from Romania and Bulgaria had the highest employment rate (85.9%), followed by those from the EU8 countries (Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slovak Republic and Slovenia) (85%), and those from Cyprus, Malta and Croatia (83.7%). The estimates show that except for the employment rate for non-EU European workers (69.5%), the employment rates for European workers were higher than the rate for UK workers.
Overall, South African workers had the highest employment rate (90.2%). Workers from New Zealand and Australia also had a high employment rate (86.3%) exceeding the UK average rate. Workers from Bangladesh and Pakistan had the lowest employment rate (53.8%). As discussed in our labour market economic commentary for July 2019, there are several reasons why workers from Bangladesh and Pakistan have lower labour market outcomes, such as high unemployment and low earnings. The reasons include discrimination by employers and restricted access to opportunities.
The number of unemployed people increased in the three months to June 2019
The number of unemployed people increased by 31,000 on the quarter to 1.33 million. The unemployment rate increased by 0.1 percentage points on the quarter to 3.9%.
The increase in the level of unemployment was driven by unemployed men who increased by 40,000 to 740,000, and the unemployment rate for men increased by 0.2 percentage points to 4.1%.
The number of unemployed women reduced by 9,000 on the quarter to 589,000. The unemployment rate for women reduced by 0.1 percentage points to 3.6%.
Figure 5 shows the unemployment rates for men and women since 2015. It shows that the unemployment rate for women was generally lower than that for men, and that the gap between the rates narrowed over time. In the periods December 2017 to March 2018 and April to July 2018, the unemployment rates were equal. From July 2018 onwards, the rates diverged with more men than women being unemployed. The growing gap was driven by strong performance of the female labour market as more women than men left unemployment.
There are several reasons for the rising employment and falling unemployment rates for women, including falling fertility rates, increase in the number of young women in employment, delayed child-bearing, equalisation of the state pension age, improved childcare provision, and flexible working patterns.
Unemployment in the UK and in the OECD
Comparing the UK with selected OECD countries in the second quarter of 2019 shows that the UK had a lower unemployment rate (estimated to be 3.8%) than Australia (5.2%), Canada (5.5%) and France (8.6%). The UK had a higher rate than Germany (3.1%), the US (3.6%) and Japan (2.4%).
The OECD produces harmonised unemployment rates that make it possible to compare countries. The harmonised unemployment rate is derived by applying an internationally comparable definition of unemployment.
The number of economically inactive women fell by 46,000
The latest Labour Force Survey estimates show that the number of economically inactive people fell by 47,000 to 8.56 million in the three months to June 2019. The economic inactivity rate reduced by 0.1 percentage points on the quarter to a joint record low of 20.7%.
The number of economically inactive women decreased by 46,000 to 5.21 million. The number of economically inactive men fell by 1,000 to 3.35 million. The economic inactivity rate for women fell by 0.2 percentage points to a record low of 25.1%, while the rate for men remained unchanged at 16.3%.Back to table of contents
The latest estimates from the Vacancy Survey show that vacancy levels in the UK economy decreased by 22,000 to 824,000 in the second quarter (April to June) of 2019. Vacancies have been on a downward trend since the three months to January 2019.
Most of the vacancies in the UK economy (733,000) were in the services sector, reflecting the dominance of services in the economy. A disaggregated analysis of the services sector shows that the highest number of vacancies were in the wholesale and retail sector (133,000) and in the human health and social work activities sector (137,000) as shown in Figure 6.
Figure 6 is based on five selected sectors with more than 50,000 vacancies. It shows that vacancies increased strongly from 2012 onwards. Vacancies have always been higher in the wholesale and retail and human health and social work activities sectors than in other sectors. An analysis of vacancy trends in the public sector that was published recently showed that the vacancy rates in the NHS and adult social care were high relative to other public services.Back to table of contents
In the year to June 2019, average weekly earnings experienced substantial growth. Average weekly earnings can either be total average weekly pay (which includes bonuses) or regular average weekly pay (which excludes bonuses). The latest earnings data show that total average weekly pay for the whole economy grew by 3.7% in the year to June to reach £538. This was the highest growth rate recorded since June 2008.
Disaggregating total average weekly pay into private and public sectors shows that total average weekly pay in the private sector grew by 3.9% in the year to June to reach £536. Total average weekly pay in the public sector also grew by 3.9% in the year to £542.
The highest total average weekly pay growth was recorded in the construction sector where pay grew by 5.9% in the year to June to £646. The lowest total average weekly pay growth was recorded in the manufacturing and the wholesale, retail, hotel and restaurants sectors where pay grew by 2.4% to reach £612 and £362 respectively.
Regular average weekly earnings in the economy grew by 3.9% in the year to June to reach £505. This was the highest growth rate since June 2008. In the private sector, regular weekly average pay grew by 3.9% in the year to June to reach £498, and in the public sector it grew by 3.8% in the year to reach £539.
Comparing total and regular pay in the private and public sectors shows the importance of bonuses in the private sector. The gap between regular pay in the public and private sectors was £41 in June 2019. However, taking bonuses into account (that is, using total pay), the gap reduced to £6.
Both total and regular pay can be expressed in real terms by deflating them by the consumer price index including owner occupiers’ housing costs (2015=100). Real total pay increased by 1.8% in the year to June to reach £499. This was the highest growth recorded since June 2016.
Real regular pay increased by 1.9% to reach £469 over the same period. The last time the growth rate was higher was in September 2015. Figure 7 shows the trend of real regular pay since 2000.
Figure 7 shows the strong growth in real pay since April 2018. Despite the growth, real pay in June 2019 was still lower than the level reached in the period February to April 2008. As of June, there was a gap of £4. Real total pay was £26 less than the level reached in February 2008.
The strong pay growth may be linked to the tightening labour market that is characterised by high and increasing employment, high numbers of vacancies, more people leaving economic inactivity, and historically low unemployment. Firms are faced with a small and shrinking pool of labour. This puts upward pressure on wages as firms try to attract and retain new workers. The uncertainty about the UK leaving the European Union, by causing reduced capital investment, may be indirectly contributing to wage growth because firms are opting to employ more workers (despite the shrinking pool of labour) than to invest in new capital equipment.Back to table of contents
The analysis of employment, unemployment and economic inactivity statistics indicates that the labour market may be softening. This is because the employment rate remains largely unchanged and economic inactivity and unemployment are decreasing at slower rates. In fact, unemployment increased in the most recent quarter. Overall, the labour market is still at a high level but there are several labour market outcomes that are not discernible from the headline numbers. In this section, we examine two of these outcomes, namely union density and the extent of over- and under-employment in the economy.
The extent of unionisation in the economy
Trade unions are an important institution in the economy. Their functions include protecting workers’ employment rights, bargaining for fair compensation and working conditions, and regulating relations between workers and employers. In some countries, trade unions are part of a tripartite arrangement (including government and employers’ representatives) that formulates and manages the implementation of economic and social policies.
In the UK, the activities of trade unions are governed by the Trade Union and Labour Relations (Consolidation) Act of 1992 and the Trade Union Act of 2015. The existence of the governing laws indicates the importance of trade unions in the economy.
In the UK, trade union membership peaked in 1979 at 13.2 million. Since then, trade union membership has declined persistently. The economic policies of the 1980s and the recession of that period both contributed to the decline in membership. Trade unions were powerful in the period up to the 1980s and they were accused of causing industrial unrest in the economy. In consequence, laws were introduced to restrict trade unions’ right to strike. There also was the promotion of industrial disputes resolution through employment tribunals rather than through collective workers’ actions. The fall in union membership in the UK is illustrated by the declining trend of union density in Figure 8.
Figure 8 shows the downward trend of union density from 32.4% in 1995 to 23.4% in 2018. The union density for men decreased faster than that for women. Between 2017 and 2018, the union density for women increased while that for men decreased.
The fall in trade union membership differs by age and by sector. If we analyse the periods 2007 to 2012 and 2013 to 2018, we observe that the general trend has been a fall in union membership except for the age group 65 years and older. In the period 2013 to 2018, there was growth in youth trade union membership as shown in Figure 9.
Although youth trade union membership increased in the period between 2013 and 2018, the overall outcome between 2007 and 2018 was a decline. The age group 50 to 59 years experienced the largest decrease in trade union membership in 2018.
Another way of examining union membership is to focus on the sectoral changes over time. We focus on sectors that had union density that exceeded 30% in 1995. There were 10 such sectors as shown in Figure 10.
In all the 10 sectors, union density declined between 1995 and 2006. There was further decline in union density between 2006 and 2018. Only 5 out of the 10 sectors that had union density exceeding 30% in 1995 still had such high union density in 2018.
One of the effects of falling trade union membership is reduced trade union power and influence. Declining union power is reflected by the fall in the trade union wage premium as shown in Figure 11. The trade union wage premium is the premium that union members earn over non-union members. It is the difference between union and non-union members’ earnings as a percentage of non-union members’ earnings.
Figure 11 shows that the trade union premium was higher in the public sector than in the private sector. The premium fell most in the public sector, from 30.3% in 1995 to 11.6% in 2018. In the private sector the wage premium fell from 15.3% in 1995 to 2.6% in 2018. The gap between public and private sector trade union wage premiums has declined over time.
The fall in the trade union wage premium has reverse causality effect on trade union density. The fall in the premium acts as a disincentive to joining trade unions. In turn, the fall in membership undermines trade union bargaining power, and this reduces the wage premium. Further, the introduction of the minimum wage and the national living wage may have reduced trade union influence in some sectors.
Other factors that may contribute to falling union membership include apathy among workers, employer opposition, and the structural change of the economy, particularly the decline in the manufacturing sector from the 1980s onwards. Between 1995 and 2018, union density in the manufacturing sector fell from 32.8% to 17.1%. In the electricity, gas and air-conditioning supply sector, union density fell from 71.9% to 35.2% over the same period.
In the total services sector, union density declined significantly in the finance and insurance services and information and communication sectors. In the former, union density declined from 37.9% to 12.7% between 1995 and 2018. In the latter, it fell from 25.5% in 1995 to 7.9% in 2018.
Over-employment and under-employment
The Office for National Statistics (ONS) publishes statistics on under-employment and over-employment. Workers who responded positively to wanting more hours and/or a new job are classified as under-employed if they work below 48 hours a week (or below 40 hours a week for people aged under 18 years). Those who wanted to reduce their existing working hours (with less pay) in their current or different jobs because they felt they were being over-worked are classified as over-employed. Alternatively, over-worked workers feel that they work excessive hours for not enough pay.
In the current period of high employment and falling unemployment and economic inactivity, the levels of under-employment and over-employment have been changing. The latest data for the second calendar quarter (April to June) of 2019 show that there were 2.48 million workers who were under-employed. Over the same period, there were 3.34 million workers who were over-employed. Figure 12 shows the trends of under-employment and over-employment.
Figure 12 shows that the number of under-employed workers increased between 2004 and July to September 2012 when it reached a maximum of 3.18 million. It has been declining since then, but it is still above pre-downturn levels. The number of over-employed workers decreased during the downturn period, but it increased between 2013 and January to March 2018 to reach a high of 3.34 million. Since then, it has been relatively flat.
The current levels of under-employment and over-employment are consistent with a tightening labour market. Falling under-employment benefits the economy through improved resource utilisation. Over-employment may be a result of high recruitment costs causing employers to increase the usage of existing labour. It may also be cheaper to increase the utilisation of existing labour than to employ additional workers (since the cost of overtime may be lower than employment costs of an additional worker). However, over-employment may induce stress in workers. It negatively impacts on relationships and well-being, on productivity and on health and safety in the workplace.Back to table of contents
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