Employment news today and on the surface the message is positive. There are now 30.6m people in work, which is 167,000 more than in the period January to March 2014. The number of people employed is 820,000 more than a year earlier, according to the Office for National Statistics (ONS). The employment rate is up, unemployment is down to a fraction over 2m and is still falling, to its lowest level since 2008, and the economic inactivity rate is also declining.
So, a frabjous day for all concerned? Well no. The upward thrust of job numbers is offset by the nasty little detail of what is happening to pay. Pay, including bonuses for employees in Great Britain was 0.2 per cent lower than a year earlier. This was due to some employers paying bonuses to staff last year instead of this. Discounting those people who receive bonuses, pay for everyone else rose by 0.6 per cent from this year to last, a fact that brings momentary optimism—but which is then immediately quashed in remembering that the rate of inflation to June this year was 1.9 per cent, meaning that a 0.6 per cent nominal increase in pay is turned by inflation into a 1.3 per cent pay cut. Today, in delivering the Bank of England’s Inflation Report, the Governor of the Bank of England Mark Carney said: “The MPC expects inflation to remain at, or slightly below, 2 per cent.”
So: employment is up, but pay will continue to be weak and what little rises there are will be rubbed out by inflation. Why?
A clue might well be found in the below chart:
It shows that of that total number of people entering the workforce in the last year, just over half were men entering full time work and over a quarter were women going full time. But the number of women taking part time work increased by 132,000 to just over 6m. The number of men working part time changed little and is just over 2m.
So there are 8.2m Britons who work part time, out of a total employed workforce of 30.6m—that means 26 per cent of anyone who works in the UK works part time. This, in part, answers the question of why pay levels are declining. People who work part time are paid less. But there is a definitional question at this point, as “part-time” can also include a section of the population that is self-employed, a cadre of workers whose job entails the pursuit of new contracts—this period of pursuit is unpaid.
The willingness on the part of the self-employed to conduct unpaid work and the large number of people who are employed part time are part—and only a part—of the reason for which national figures on pay remain so weak. The bigger question concerns productivity—the output per worker per hour. Productivity growth is weak in Britain. Without it, pay cannot rise. This problem was summed up neatly by Governor Carney in his comments today: “Whether tomorrow’s normal rates for growth in activity and real incomes match those of the past rests ultimately on the extent to which productivity growth picks up. This remains an open question.”
Today’s employment numbers are strong. But the current workforce exists in a constant state of pay-cut. As a YouGov poll released today shows, only 17 per cent of the electorate thinks that Britain it is “well on its way to full recovery.” Not only jobs, but also better pay will be needed before the public is convinced that Britain has fully recovered from the shocks of the last decade.
