The UK’s low pay recovery
New TUC analysis shows that seventy-seven percent of net job creation since June 2010 has taken place in industries where the average wage is less than £7.95 an hour. Just over one in five net new employee jobs created since June 2010 have been in the highly paid computer programming, consultancy and related services industries, where the average hourly wage is £18.40. In the middle paid industries, which account for nearly three quarters of the UK workforce and where the average is between £7.95 and £17.40 per hour, there has been no net job creation since June 2010.
While there has been much recent discussion on the extent to which demand deficiencies in the labour market are leading to high under-employment and increasing rates of atypical and insecure work, there has been less focus on how jobs growth has varied across different industries. Our analysis focuses on these changes, and shows that the vast majority of jobs growth that we have seen has been in low-paid industries.
The shift towards a labour market which is characterised by increasing levels of low wage jobs is worrying, and risks damaging our economic prospects in the long run. While job creation may be better than unemployment this still leaves households struggling with little money to spend in order to aid the recovery.
The report also looks at change over the longer-term in industries we have defined as low paid, middle paid and high paid since 2005.
Employee jobs in low paid industries Dec 2005 – Dec 2012
Low-paid industries experienced the sharpest jobs decline during the recession. There was a reduction in the net number of low paid industry employee jobs particularly during December 2008 to March 2009; but there was then a jobs recovery with a real sharp increase in employee jobs towards the end of 2011 which has continued to beyond pre-recession levels.
Employee jobs in middle paid industries December 2005 – December 2012
The net number of jobs in middle paid industries fell dramatically from December 2008 to 2009, and has stagnated at around that level ever since. Jobs in middle paid industries have never recovered from the recession and a significant jobs gap of 599,000 remains.
Employee jobs in high paid industries December 2005 – December 2012
In contrast jobs in higher paid industries never really felt the impact of the recession. There was a very small fall in net numbers from December 2008 but employee jobs levels in higher pay industries then continued to grow to above pre- recession levels.
This suggests that a ‘hollowing out’ of the labour market may be happening. While it remains too early to determine the extent to which this shift represents a structural change, without strong economic growth it is likely to characterise our jobs market for at least several years to come.
The trends also demonstrate the importance of securing strong jobs growth in middle paid industries if household incomes are to see a significant rise over the medium term. While it is important that policy debate focuses on mechanisms which will increase rates of pay for workers across low and middle paid industries this analysis demonstrates why it is equally important to focus on measures which will seek to reduce the share of low paid jobs across the UK economy. In the current context it is also clear that tax credits and other benefits will need to continue to play an important role in boosting the household incomes of those who can only find work in low paid sectors.