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 cafĂ© 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. 

Wednesday, 13 August 2014

‘Paymageddon’ shows it’s not yet time for higher interest rates

The Office for National Statistics (ONS) this morning released the latest set of UK labour market data, mostly covering the three months April to June 2014, while the Bank of England has also published its latest quarterly Inflation Report.

The ONS figures reinforce the conclusion that the ongoing labour market recovery will serve to re-write the economic textbook: a record number of people in work (up 167,000 in the latest quarter, mostly due to more full-time employees, to a total of 30.56 million) unemployment falling at an even faster pace of decline (down 132,000 to just over 2 million, a rate of 6.4%), yet all this combined with ever lower pay pressure (average weekly earnings including bonuses shrinking by 0.2% in the year to June). In other words the jobs data indicate a boom but a fall in the cash value of total average weekly earnings signal ‘Paymageddon’.  

What’s good news for the jobless is thus being offset by ever slimmer pickings for those already in work, giving the UK labour market a distinctly bitter-sweet flavour. No wonder then that Bank of England Governor Mark Carney, in his remarks at the Inflation Report press conference, commented at length on the consequences of what he and other members of the Monetary Policy Committee conclude has been a ‘labour supply shock’ to the UK economy.

Carney’s comments, which broadly reflect my own analytical perspective, is that a structural increase in the supply of people active in the labour market has dampened underlying wage pressure. This will in turn eventually enable the economy to sustain a higher rate of employment and lower rate of unemployment than was attainable prior to the recession but in the interim an abundance of relatively cheap labour has caused the UK to become a more labour intensive, low productivity economy. However, while this is currently very painful to people in work, at some point the large amount of slack currently still available in the labour market will be absorbed, putting upward pressure on pay and pushing businesses to raise productivity in order to counter rising unit wage costs.

What nobody knows, the Bank included, is precisely how long this process will take and thus also at which point stronger pay pressure might warrant a rise in interest rates since this will also be affected by what happens to productivity. The Bank’s position is that it bases its judgement on interest rate decisions on an assessment of the trend in all the available data, which obviously keeps us guessing. But judging by the latest ONS data the UK labour market doesn’t look as though it needs an interest rate rise to cool things down but, on the contrary, further strong sustained expansion to help workers desperate for a pay rise.


Wednesday, 16 July 2014

Latest UK jobs market data: employment rate equals record high, cash pay rises at record low, real wage squeeze bites harder

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

The state of Britain’s jobs market gets more puzzling by the month. The number of people in work has increased by a further 254,000 to 30.64 million and the employment rate – the proportion of the working age population in work – has reached a record equalling 73.1%, higher than the pre-recession peak, while the unemployment rate has fallen to 6.5% (2.12 million) even though more people are entering the market to look for work. Full-time employees account for the bulk of the latest increase. Underemployment (i.e. part-timers who want a full-time job), though still very high, fell by 61,000 to 1.360 million. As well as the overall fall in unemployment, the number of jobless 16-24 year olds has fallen by 64,000, long-term unemployment is down 33,000, and the count of jobless people in receipt of Jobseeker’s Allowance fell by just over 36,000 in May. Meanwhile the level of job vacancies continues to rise and is now only 48,000 lower than the pre-recession high.

However, whereas one would normally expect all this good news on jobs to be reflected in bigger pay increases as the labour market tightens, the annual rate of growth of total pay for employees in cash terms is still running at only 0.3%, while regular pay (stripping out the effect of bonus payments) is rising by just 0.7% per year, the slowest annual rate of growth since comparable records began in 2001, resulting in an even tougher bite on real earnings and living standards (the CPI inflation rate was 1.5% at the time the latest pay data were compiled in May, though the rate increased to 1.9% in June).

The British jobs market is therefore at present something of an oddity: a record equalling employment rate, yet with cash pay rises at a record low and a real wage squeeze that is still biting hard. We should be celebrating an economy clearly on the fast track back to full employment. But full employment without stronger growth in pay and productivity is not the kind of full employment to hang out the bunting for.


Thursday, 26 June 2014

Extended flexible work law could prove costly to UK workplace relations

Next Monday (30 June) Liberal Democrat MP Jo Swinson returns to her job as minister for employment relations in the Department for Business, Innovation and Skills (BIS) following a period of maternity leave. The timing is either fortuitous or an example of neat political calculation because Ms Swinson will be back on the very day one of the Lib Dem policy cause celebres, extension of the right of employees to request flexible working, which employers have a duty to consider in a ‘reasonable manner’, comes into effect .

From next week the right covers all employees after 26 weeks in their job, rather than only those with children under the age of 17 (18 if the child is disabled) and certain carers, albeit a qualifying employee cannot make more than one request in a year.  The right to request regulation as limited to employees with young children was initially introduced in 2003 by the then Labour Government and is generally considered to have been a success because employers have in most cases responded positively to requests. The extension to more employees is thus seen as fair and likely to further encourage employers to operate flexible work practices, which the government believes has the positive effect of both improving workplace well-being and business performance. 

Supporters of this kind of soft ‘nudge’ legislation reckon that employers who wouldn’t otherwise offer flexible work options to the majority of staff will see the light and decide to do so if requests cause them to review their ways of working.  It’s thus assumed that although requests, once reasonably considered, can be refused on one or more of eight business grounds (including additional cost and any detrimental impact on the quality or performance of the business) they will in most cases be accepted.  However, especially with regard to the extended right, this may prove to be a mistaken assumption.

Other than a plethora of individual case studies of how individual organisations have benefited from their own use of flexible working detailed research evidence is far more equivocal about the business case for flexible working than advocates of such working arrangements generally suggest. The most comprehensive published review concludes that available evidence ‘fails to demonstrate a business case for flexible working’ (de Menezes and Kelliher 2011). Similarly, analysis of the 2011 Workplace Industrial Relations Survey (WERS) finds that after allowing for the effect of organisational size and sector the number of flexible working arrangements available in an organisation is not significantly related to either better or worse than average financial performance. In other words there isn’t a business case for, or for that matter against, flexible working (Chanfreau, 2013).

The reason for this is that the benefits from flexible working accrue mainly to employees in the form of improved work life balance, job satisfaction, increased commitment and reduced absenteeism but there is no guarantee that this ultimately improves the business bottom line. The key factor appears to be the specific organisational situations in which flexible working practices operate and the fact that ‘flexible working’ is a catch-all term for a variety of practices - encompassing part-time working (the most common form), flexi-time, temporary reduced hours, regular working from home, compressed working week, annualised hours, job sharing and term-time working etc. – not all of which will be suitable for every business.

This explains why most employers’ bodies, while in general lauding flexible working as a means of helping organisations to recruit and retain staff and to increase staff satisfaction, believe that the decision to offer employees flexible work, and precisely which contractual arrangements to use, should be determined solely by organisations themselves without any regulatory push or nudge.  The reluctance of some employers to voluntarily introduce flexible working, especially among small and medium sized enterprises, revolves around organisational difficulties, inability to cover for or substitute some employee skills, and managerial complexity. Given this the business lobby argues that the right to request could prove costly in terms of time and money if employees challenge refusals, and might also disrupt otherwise harmonious workplace relations if some requests are accepted while others are refused.  

Advocates of flexible working nonetheless argue that success of the right to request law in the past decade – the introduction and gradual extension of which raised similar fears – suggests that most employers will respond positively, and next Monday will doubtless see many high profile bosses sitting alongside Miss Swinson to support the change. As someone who generally supports any move to improve the quality of working life I hope they are proved correct in this expectation. But we need to recognise that a right that was targeted at a particular segment of the workforce may not operate in the same way when applied more widely. The initial policy of giving parents and carers the right to request flexible working proved successful because it was pushing on an open door, with ever more employers seeking to attract mothers in particular into flexible work roles in fast expanding service sectors. There is no guarantee that the same business imperative will apply to employees across the board, raising the prospect that the extended law could indeed prove costly to business and disrupt workplace relations. The wisdom of this particular cause celebre is about to be put to the test.

De Menezes, L and Kelliher, C (2011) Flexible working and performance: a systematic review of the evidence for a business case, International Journal of Management Relations. Vol 13, issue 4, December 2011.

Chanfreau, J (2013) Is there a business case for flexible working? National Centre for Social Research (NatCen), July

         

Wednesday, 11 June 2014

A jobs recovery like never before

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

Britain’s jobs market is booming everywhere apart from in most people’s pay packets. The number of people in work increased by 345,000 (1.1%) to 30.54 million in the latest quarter on the household Labour Force Survey measure, with full-time employees accounting for almost two-thirds of the increase, altering the recent trend which has seen self-employment as the main driver of rising employment. Employment increased in every nation and region of the UK except Wales, which registered a fall of 17,000. The ONS’s alternative quarterly Workforce Jobs measure – based mainly on a survey of employers and covering the period January to March – shows a similar pattern, with the total number of jobs increasing by 380,000 (1.2%) to just over 33 million in the quarter.

Adjusting for changes to statistical classification, private sector employment increased by 355,000 (1.4%) in the quarter, dwarfing a relatively modest fall of 11,000 (-0.2%) in public sector employment. The latter fall suggests a slower pace of public sector employment downsizing compared to recent years, in part accounted for by a quarterly rise of 10,000 (0.2%) in NHS employment. Within the private sector there was a notable quarterly increase in employment of 43,000 (4.7%) in ‘arts, entertainment and recreation’.     

Total unemployment on the LFS measure is also down sharply (by 161,000 to a rate of 6.6%), while long-term unemployment has fallen below 800,000 and youth unemployment (down 59,000 to 853,000) is now clearly on a sharp downward path.  Total unemployment in the quarter fell in every region and nation of the UK except the North East which registered an increase of 6,000. The count of people unemployed on Jobseeker’s Allowance meanwhile fell by 27,000 in May. Underemployment as measured by the number of part-timers unable to find a full-time job has fallen by 39,000 though remains high at 1.4 million.

Yet despite all this very good news the rate of growth of average earnings has slowed, and not just because of the statistical effect arising from the unusual pattern of last year’s spring bonus payments. Although growth in total pay has fallen from 1.7% to 0.7% between April and May, growth in regular pay excluding bonuses has fallen too, down from 1.3% to 0.9%, which means the underlying squeeze in average real earnings has resumed (the comparable CPI rate of price inflation is 1.8%). This is therefore a jobs recovery like never before, loads more work but no greater reward, an economy that looks much healthier but feels little better in the workplace.