Monday, 20 October 2014

No wonder free movement of EU labour is a hot topic for UK

I would not describe myself as a Eurosceptic and also think immigration is generally positive for the British economy. However, a decade ago when a group of central and eastern European countries joined the EU I questioned the wisdom of immediately allowing citizens of those countries to enter the UK labour market.

My concern was that free movement of labour within the EU, though correct in principle, had the potential to cause practical difficulties given the very substantial income disparity between existing member states and these former communist bloc newcomers. The sensible course, in my opinion, would have been for the UK to follow the example of most other existing member states at the time and take advantage of scope for transitional restrictions on migration from the new member states while the latter integrated into the EU economy. Instead, the UK adopted an open door policy, resulting in a flow of eastern Europeans across our borders that has proved so large as to alter the complexion of many local communities and, in the process, not only propelled immigration to the top of the political agenda but also placed the issue of the free movement of labour at the centre of debate over the UK’s membership of the EU.

Politics aside, most economists contend that my concern has proved misplaced. My worry was that in an economy oversupplied with less skilled labour, an inflow of labour from low income countries would reduce the employment of less skilled British born people and/or lower their pay levels. As things turned out I was wrong about the employment effect of immigration, mainly because a decade ago I hadn’t quite appreciated how ultra-flexible the UK’s uber deregulated labour market has become. Nowadays it seems as though you can pump as much labour supply into the market as you like and still create lots of low productivity jobs because pay takes the strain and prices people into work, albeit the impact of migration on pay is generally found to be small, in part because the national minimum wage provides a floor to pay at the bottom of the market.

The national minimum wage has proved a policy Godsend in this respect since, despite protestations to the contrary, it’s pretty clear that UK employers have been hiring EU migrants primarily to cut wage costs. This is apparent from a recent study by the Chartered Institute of Personnel and Development (CIPD).  Oddly, while the CIPD is at pains to stress that ‘what the vast majority of employers are not doing is hiring migrants to lower the wage bill’ its key headline is that employers have been turning to EU migrants to fill entry level job vacancies, particularly for lower skilled jobs, because they are more skilled and ‘a bit older and have more work experience’. If hiring migrants with skills and experience into low skilled entry level jobs at low pay isn’t about cutting the wage bill for a given value of output I’d sure as hell like to know what it is.

It’s obvious that bosses, along with migrants themselves, benefit most from immigration. British born people benefit as consumers too, assuming the lower cost of employing migrants feeds through to product and service prices rather than adds to profit. But for British born workers the blessing is mixed, with immigration one of several supply side factors now keeping the lid on growth in pay with millions of people, British born and migrants alike, employed in jobs that pay less than a living wage. No wonder that immigration is a hot political topic. No wonder that free movement of labour within the EU is a matter of debate.  

Wednesday, 15 October 2014

Rise in number of economically inactive people enables unemployment to fall below 2 million despite slower pace of job creation as self-employment records sharp quarterly fall

The Office for National Statistics (ONS) has this morning released the latest set of UK labour market data, mostly covering the three months June to August 2014.

The fall in unemployment to below 2 million (1.97 million or 6% of the workforce, the lowest rate since late 2008) will grab the headlines but the latest figures suggest an underlying change in the pattern of the labour market recovery. The pace of net employment creation (up just 46,000 in the latest quarter to a total of 30.76 million, with a working age employment rate of 73%) has slowed markedly compared with earlier in the year, due in large part to a sharp quarterly net fall of 76,000 in self-employment. As for employees, continued growth of 107,000 in the quarter was split roughly between full-timers and part-timers (causing another slight fall, to 1.35 million, in the number of people working part-time because unable to find a full-time job). However, unemployment has nonetheless continued to fall sharply because slower employment growth was dwarfed by a big quarterly rise of 113,000 in the number of economically inactive people, almost half of which is accounted for by a rise in the student population. The fact that the latest fall in unemployment has been driven by rising inactivity rather than employment creation also helps explain why the associated fall of 18,600 between August and September in the number of people unemployed and claiming job seekers allowance (JSA) is also much lower than in recent months.


There is slightly better news on the rate of growth in average weekly earnings (unchanged at 0.7% including bonuses and up to 0.9% when bonuses are excluded) though this is still much lower than the accompanying rate of price inflation and there is little sign of an imminent pay surge to end the real wage squeeze.   

Monday, 13 October 2014

Is Mr Farage the answer to our political purgatory?

The BBC, ITV, Channel 4 and Sky News this morning outlined plans for a series of three televised debates between the political party leaders during next year’s General Election campaign. As I write, it’s unclear whether the suggested formats will be acceptable to those invited, and those excluded (the Greens and the Nationalists) from the plans are bound to be unhappy. Much of the difficulty in determining the format stems from the ever rising profile of UKIP and its leader Nigel Farage, who the broadcasters know is the only mainstream politician other than London Mayor Boris Johnson likely nowadays to draw a really big TV audience for such programming.

Mr Farage is popular because he is a populist and conveys an image of having lived a bit that many people clearly relate to. There was a time when more politicians came across this way. Last week marked the 40th anniversary of the October 1974 General Election and the BBC Parliament Channel re-broadcast the accompanying results programme.  I was a couple of months short of my 17th birthday at the time but remember watching the journalists quizzing varied pollsters, pundits and politicians as they pondered on what it all meant for the parties.

Looking back, most of those involved 40 years ago are now sadly departed, whether to heaven, hell or (God forbid) some kind of endless purgatory for politicos nobody knows. What struck me most, however, was the contrast between politician and pundit. All of the former (at least in the hour or so I watched the re-broadcast) were of an age to have lived through the Second World War, in most cases as adults. Not only were they wrapped in the aura of experience, their manner and accents reflected the class mix of the vox pop which also punctuated the programme. The pundits, generally somewhat younger, appeared trendier, more sophisticated and socially a bit removed from the general populous, often aided by the occasional drag on a cigarette, the latter anathema by today’s values but then a cool counterpoint to the common person style of Prime Minister Harold Wilson with his pipe and slight northern drawl.

Well over a generation on, and the distinction between politician and pundit has all but disappeared. Most look and sound the same and tend to have had similar education and experience. They are not so much a political establishment as a political class that transcends the ideological views and party labels they display.  Moreover, in the era of multiple think tanks, unelected quangos and digital commentators the members of the political class are increasingly interchangeable, today’s pundit or quangocrat becoming tomorrow’s politician and vice versa.  Rightly or wrongly, to the everyday Janet or John outside this class all that appears to matter at any particular time is whose in and whose out rather than the underlying state of the nation.  The prospect of continued coalition government further exacerbates this feeling, offering the nauseating sight of parties condemning each other’s policies while happy to get into bed together so as to grab a slice of ministerial power.


Continuation of this situation could itself be said to amount to a form of political purgatory for the living, with endless hand wringing about ‘connecting with the people’ combined with perpetual frustration that nothing will ever change. The only means of escape is to replace the political career as we have come to know it with an ethos of political service: opportunity to participate in democratic politics extended through increased devolution to a wider citizenry, combined with greater ongoing influence over the activities of all those – political bodies, public agencies and corporations – who affect our lives.        


I don’t yet know enough about Mr Farage to determine whether he is a genuine outsider seeking to break the prevailing mould or a canny insider who thinks his best chance of rising within the ranks of the political class and advancing his own ideological beliefs is to exploit disenchantment with the economic and social consequences of its stultifying grip on power.  Whatever the configuration of public debate ahead of the General Election this is the fundamental question he and his party need to answer. As for the other parties, they must demonstrate that political change means more than simply rearranging the Whitehall furniture.  

Thursday, 25 September 2014

Labour's 'togetherness' agenda: genuinely social democratic but hardly radical

This time last week all eyes were on Scotland for the referendum on independence. Not since the dim distant days when Andy Stewart hosted the annual TV Hogmanay show have so many English people tuned in after midnight to watch events unfold north of the border. As might have been expected it didn’t take long for southern Unionists to drop the saltire and refocus on what the majority No vote meant for England, though the post-referendum hangover was strong enough to turn the Labour Party Conference, which has just finished in Manchester, into an overall rather flat affair.

Ironically, while the efforts of Labour politicians ultimately proved crucial in breaking the momentum of the Yes campaign, Labour finds itself engaged in a struggle to prevent a new constitutional settlement for the UK as a whole from limiting its ability to determine key areas of domestic policy. Labour could find itself unable to form a majority in either the Scottish Assembly or some form of de facto ‘English Parliament’, restricting the executive power of a future Labour government to purely UK matters, notably defence and foreign affairs plus whatever authority remained over fiscal policy within a more devolved Union. This raises the odd possibility of a Labour Government able to decide whether to take Britain to war but unable to fundamentally re-shape the economic and social face of the realm.

Judging by some of the overblown reaction to domestic policy announcements made in Manchester this week there are those who would greet such a prospect with alacrity, though perhaps with a caveat over whether Mr Miliband, whose keynote speech was overshadowed by geo-political events and widespread unfavourable comment on his performance, should be responsible for anything at all. Yet while the detail and possible effects of Labour’s proposals deserve close scrutiny between now and the General Election, it’s hard to see much in what was said this week that could be described as radical in any sensible definition of the word.

Is it radical to propose an £8 per hour National Minimum Wage by 2020? Hardly, I suspect it will be close to that level whoever is in power at the time. Is it radical to propose a Mansion Tax? Surely, the neo-liberal Orange Book Lib Dems support this. Is it radical to propose raising the top rate of income tax to 50p? Only very recently such a rate was considered low and perfectly reasonable.

The truth is that Labour isn’t proposing anything particularly radical at the moment and will fight the General Election on a manifesto which boils down to saying a Miliband Government would pay down the fiscal deficit in a somewhat fairer way than either the current coalition or a majority Conservative government, while prioritising spending on a firmly non-privatised NHS. Labour’s opponents might criticise this 'togetherness' agenda for being wrong or naïve, and will undoubtedly question whether the current Labour leadership is fit to govern. Labour's supporters will present it as a clear and genuine social democratic alternative to the current centre-right offering. But please don’t call it radical.   


Wednesday, 17 September 2014

pace of jobs recovery slows as real pay squeeze eases

The Office for National Statistics (ONS) has this morning released the latest set of UK labour market data, mostly covering the three months May to July 2014.

Although the UK labour market continues to improve, there are tentative signs in the latest figures that the balance between job creation and pay growth may have started to shift. The increase of 74,000 in the number of people in work (which now totals 30.6 million) is less than half that recorded in the previous quarter and the lowest quarterly increase for a year. Moreover, in contrast with recent quarters almost all the net new jobs (92%) were part-time. Pay meanwhile ticked-up a bit with growth in regular pay (excluding bonuses) rising from 0.6% to 0.7%, the gap between regular pay growth and CPI inflation (the real pay squeeze) narrowing from -1.3% to -0.9%.

Despite the slower pace of job creation, unemployment fell faster than in the previous quarter, in large part because of a sharp, and welcome, fall of 106,000 in youth unemployment. The number of unemployed 16-24 year olds (excluding those in full-time education) is now below half a million (489,000), though the unemployment rate for this group (14.2%) is still more than twice the overall average rate (6.2%, now at a six year low). It therefore appears that the jobless, and especially the young jobless, are doing better in accessing the jobs being created.


The latest labour market data thus add to the quandary facing the Bank of England over when to start to raise interest rates. The unemployment and pay data point to tighter conditions but the jobs data suggest an easing in the pace of the jobs recovery, which might suggest improved prospects for labour productivity. Overall, therefore, these data do not suggest any immediate need for an interest rate rise.    

Wednesday, 10 September 2014

Is the UK becoming a graduate economy or are we a nation of menial workers?

A report published earlier this week by the Organisation for Economic Cooperation and Development concludes that the UK is becoming a ‘graduate economy’, with more people now likely to have a degree than to have only reached school-level qualifications. Yet the TUC, at its annual gathering, this year held in Liverpool, warned that the UK is becoming an increasingly low productivity, low wage economy. Can both these differing perspectives be reconciled? The answer is yes, as a look at our Byzantine occupational structure demonstrates.  

Although up to around half of all people employed in the UK today might be described as so-called ‘knowledge workers’ with professional or managerial skills, according to the Office for National Statistics the top 5 largest single occupational groupings at present (Q2 2014) include 1.1 million sales and retail assistants (a figure which excludes a further 223,000 people in the separate occupational category of retail cashiers and check-out operators), 600,000 cleaners and domestics, and 450,000 kitchen and catering assistants (which excludes a similar number split between the separate categories of waiters and waitresses and bar staff). The top 5 also includes 792,000 adult care workers, providing general rather than specialist or medical care services to the elderly, and 590,000 nurses (the latter the only occupation in the top 5 list for which formal entry level qualifications are necessarily required).

Moreover, while many of the occupations which have registered the most net expansion during the recent jobs recovery - such as taxation experts (up 88% between Q2 2011 and Q2 2014, to a total of 34,000), advertising accounts managers (up 75% to 33,000), psychologists (up 52% to 39,000) and town planning officers (up 55% to 24,000) - require professional or technical qualifications, high on the list also come window cleaners(up 73%, to 47,000), often unskilled odd jobbers, around 1 in 8 of whom are self-employed. Similarly, the 10 occupations which have contracted most in the past few years encompass skilled professionals – insurance underwriters (down 45% to 20,000 since 2011) and social scientists (down 42% to 10,000) – and skilled manual occupations – television engineers (down 46% to 6%), tillers (down 39% to 25,000) and sheet metal workers (down 33% to 13,000) – but do not include any unskilled jobs.


No wonder therefore that our complex and fluid occupational structure gives rise to so many conflicting views on how the British way of work is changing. From one perspective it’s clear that so-called ‘knowledge work’ is firmly on the rise, requiring a high level of professional and technical skill and offering decent pay prospects. Yet equally apparent is a substantial bedrock of low skill, low wage service work which accounts for the UK’s relatively high incidence of low pay, with around 1 in 5 (5 million) employees earning less than the commonly used low pay threshold for developed economies. While with considerable justification we like to portray ourselves as a nation of increasingly skilled professionals, we could also reasonably be described as a nation of shop assistants, cleaners and restaurant or café washer-uppers.

Monday, 8 September 2014

Women taking an even tighter grip on expanding UK HR profession

Last month the Office for National Statistics (ONS) published its annual snapshot of the UK’s occupational profile, as obtained from the Labour Force Survey (LFS) in the second quarter (April-June) this year. I’ve been comparing the numbers employed in each occupational category back to 2011 (reliable comparison with earlier data is not possible because of changes to way in which occupations are classified), including those performing HR management and development roles.

According to the LFS as of Q2 2014 there were in the UK 124,000 people employed as HR managers and directors, 150,000 as HR officers, 154,000 as vocational and industrial trainers or instructors and 46,000 as HR administrators. The total HR workforce of 474,000 is 18,000 higher than in Q2 2013 (a year on year increase of 3.9%) and 30,000 (6.9%) higher than in Q2 2011. The HR workforce has therefore been expanding at a faster rate than total employment in the UK, which registered a net increase of around 5% between Q2 2011 and Q2 2014.  

However, people in HR management or admin roles have overall fared better than those in HR development roles. Net employment growth in the profession since 2011 has been confined to HR managers and directors (up 11,000, 9.3%), HR officers (up 21,000, +16.1%) and HR administrators (up 14,000, 42.2%).  By contrast HR development has taken a hit – down 5,000, -2.8% - though most of the decline occurred between 2011 and 2013, employment in training related roles having rebounded in the past year, growing by 8,000 (5.7%) between 2013 and 2014. The past few years have also been quite topsy-turvy for HR managers and directors. Their numbers increased relatively quickly between 2011 and 2012, stabilised in 2013 and then fell back sharply (by 14,000 or -9.7%) between 2013 and 2014. As a result the share of HR managers and directors in the total HR and development workforce, which rose above 30% in 2012, has returned to the figure of just over 26% recorded in 2011.    

HR remains a strongly feminised sector, and in general appears to be becoming increasingly feminised. More than 6 in 10 people working in HRD are women. The proportion of women is highest amongst HR administrators (80%) followed by HR officers (68%) and HR managers and directors (62%). The gender balance is more even in training and development where just over half (52%) of people employed are women.


While there are signs of a shift in the gender balance amongst HR administrators (where the proportion of women has fallen from 87% to 80% in the past three years) this is not evident in other parts of the HR workforce. The gender balance amongst HR officers has remained stable since 2011, moved slightly in favour of women in training and development roles, and moved substantially in favour of women in HR manager and director roles where the proportion of women has increased from 57% to 62%. As a result the share of women in the HR and development profession as a whole has increased from 60% to close to 63%. If as is often said more is being done to attract men into HR there is little sign of this having yet had any significant impact.