Quality of employment, not quantity, is what matters

Job vacancyDavid Cameron has outlined his plans for the UK to become a nation of ‘full employment’. However, ‘full employment’ was also the aspiration, although never a formal target, of the previous Labour Government.

In a series of policy reviews in 2006 and 2007, including the Leitch Review of Skills, ‘full employment’ was defined as an 80% employment rate – which the then Secretary of State for Work and Pensions, Peter Hain, described as achievable “within a generation.”  At the time, the UK employment was around 73% – it is now back up to this rate, according to the latest Labour Force Survey for October to December 2014.

As in 2006-2007, many analysts in the UK would now agree that the most challenging issue for the labour market is one of the quality rather than the quantity of employment.  Our own analysis at Nottingham Business School suggests this has been exacerbated during the recession that started in 2008 and subsequent period of recovery in the labour market that started in 2011-2012.

These issues of ‘quality of work’ include:

  • An increased proportion of people working part-time: for several quarters from late 2011, the increase in part-time employment significantly exceeded the increase in full-time work – full-time work actually contracted in several quarters even whilst total employment increased – with the overall share of the labour force in part-time work higher than pre-recession. We have seen record-breaking proportions of people working part-time who say they are doing so because they cannot find full-time work, so it is not a choice.
  • A strong increase in temporary employment. Between the period October to December 2014 and the same period a year earlier, the number of employees on temporary contracts increased by 5%. This is more than double the rate of increase in total employment over the same period. Along with the number of people on zero-hours contracts (which increased by 100,000 over the last year), this presents a picture of increasing uncertainty in the labour market, with a growing proportion of individuals lacking the security of a permanent contract and unpredictable hours of work.
  • Very strong increase in self-employment – particularly amongst older males; with a large proportion of the newly self-employed working in low pay, low skill, low hours activities.  The TUC describe this phenomena as the “rise of the odd-jobbers”.
  • Stagnant wage growth.  Through much of the period from 2011, whilst overall employment rates were recovering, albeit bolstered by part-time and self-employment, earnings growth rates were below the rate of general price inflation – indicating a fall in earnings in real terms between 2007 and 2013.  Only in the most recent monthly statistics has the rate of earnings growth exceeded inflation and this is more due to low inflation (current at the record low level of 0.3% in the 12 months to January) rather than a recovery in earnings growth.
  • Sectoral and occupational change with low skill/low pay occupations, particularly in the service sector, such as ‘Elementary’ and ‘Process, Plant and Machine Operatives’ accounting for a larger share of employment compared to pre-recession, leaving more individuals in a comparatively vulnerable situation in the face of any future economic shock.  Conversely, the proportion of jobs in the middle of the skills hierarchy, such as the skilled trades, have contracted significantly.
  • A widening of the north-south divide, especially in earnings. Northern and Midlands cities like Nottingham, Birmingham, Manchester and Liverpool experienced far greater falls in employment and earnings than areas in the Greater South East, and have recovered less strongly.  Some cities, such as Leicester, have not yet started to show signs of recovery in employment and unemployment rates.  Nottingham for example now has one of the lowest earnings levels in the UK, which was not the case pre-recession.

The Prime Minister has expressed the aspiration for full employment in comparative terms: for the UK to have the highest employment, as a proportion of the working-age population, of any developed nation. This would mean overtaking Germany and the Netherlands, which currently both have an employment rate of 74%, and Sweden, which has an employment rate of 77%.

However, the working age population in the UK has grown at a significantly faster rate than employment. This has meant that, in several successive quarters since the labour market began to recover in 2011, the rate of employment has remained flat even though the number employed has increased. The UK population is forecast to continue to grow more strongly than elsewhere in Europe for the foreseeable future.  Given weak population growth in Germany – an ageing population with low levels of natural change – this will make the aspiration of overtaking Germany particularly challenging.

David Cameron has avoided a specific target or definition but he has linked the aspiration to the Government’s Start-Up Loans Scheme for potential entrepreneurs.  Based on the kind of self-employment we have seen post-recession, with higher levels of ‘necessity’ self-employment compared to the entrepreneurial ‘opportunity’ self-employment, without other interventions and support schemes, this may further exacerbate the problem of quality of employment and individuals trapped in vulnerable, low pay self-employment.

Any aspiration for full-employment therefore needs to recognise that this is not sufficient to raise or maintain living standards: pay, level of skill, hours of work, and nature of work are all equally important, and should be part of a wider national economic development or industrial strategy.

Chris Lawton
Senior Research Fellow
Nottingham Business School
Nottingham Trent University

Chris is a member of Nottingham Business School’s Economic Strategy Research Bureau.

A version of this article was originally published on The Conversation

One thought on “Quality of employment, not quantity, is what matters

  1. Pingback: A ‘Jobs Led Recovery’? Assessing the facts behind the Conservatives and Labour Manifestos | NTU Election Experts 2015

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