Employment is at record levels – so what’s the problem?
The employment rate at 74.1 per cent is at record levels, and the unemployment rate at 5.1 per cent has returned to pre-recession levels. These are strong employment figures, yet while the numbers are healthy there are still concerns about the quality of employment.
Initially the argument in response to the growth in zero hour contracts, underemployment and precarious self-employment was that they would decline as the labour market tightened, which would be sign-posted by falling unemployment. The rate of unemployment started declining from the very end of 2011 and has gained pace since the beginning of 2014; however has this been accompanied by a fall in insecure work and under-employment?
In the early part of the labour market recovery, self-employment along with part-time employment played a significant role in cushioning the overall fall in employment. Our analysis in 2014 showed from mid-2010 until then the rise in self-employment accounted for 44 per cent of the net rise in employment, and 40 per cent of this growth was in part time self-employment. We have previously set out our concerns around the growth in self-employment, that while some people move into self-employment as a positive choice others may have been forced in to self-employment or bogus self-employment as they were unable to find suitable work. Previous TUC analysis of self-employment has also shown that self-employed workers often earn less, are more likely to be underemployed and have less job security than employees. More recent research by the Social Market Foundation found that low-paid self-employment is rising. They found that around half (49 per cent) of the UK’s self-employed are in low pay, measured on an hourly basis, compared with around a fifth of employees (22 per cent).
The graph below clearly illustrates the composition of the change in employment since 2008. It is evident that full-time employee posts only became a positive contributor to employment growth in the second half of 2014.
Net employment growth since 2008
Over the last year growth in employment has been from full time and employee jobs, of the 320,000 growth in employment 132,000 has been in full time employee jobs, however self-employment hasn’t stopped rising, it is just rising at a slower rate. There are now 4.6 million self-employed workers, this is an increase from 13 per cent to 15 per cent of the workforce since 2008.
Net employment growth over 2015
Despite the recent reversal in the composition of employment growth, the share of full time employees as a proportion of all in employment still remains below pre-recession levels. The share in Jan-March 2008 was 64.4 per cent, it is currently 62.4 per cent (Nov-Jan 2016). Achieving the equivalent share today would require an additional 629,000 full time employee jobs.
Share of full-time employee jobs 2008-15
Recent ONS statistics also continue to report the prevalence of zero hour contracts increasing; for October- December 2015 the number of workers on zero hour contracts had increased by 15 per cent over the previous year to reach 801,000. This represents 2.5 per cent of people in employment – 1 in 40 workers – a statistic which cannot be ignored. Zero hour contracts are insecure work where the balance of power is tilted decisively in favour of employers. Research published by the TUC also shows that average weekly earnings for zero-hours workers are just £188, compared to £479 for permanent workers. Two-fifths (39 per cent) of zero hour workers earn less than £111 a week (the qualifying threshold for statutory sick pay), compared to 1 in 12 (8 per cent) permanent employees.
Any improvements in employment numbers must also be viewed against large scale underemployment. While many choose to work part time out of choice a significant number are forced to do so as they cannot find full-time work. There are 1.2 million people working part-time involuntarily; while there have been some falls in these numbers the level is still around 70 per cent higher than in early 2008, when it stood at around 700,000.
Involuntary part-time workers 2008-15 (000s)
We have developed our own TUC definition of underemployment which is published regularly, and looks at how many workers across the economy want more hours in their existing hours as well as the regularly published measure of the number of workers in part-time jobs who want to work full-time. This shows there were 2.3m people underemployed at the end of 2007, this now stands at 3.2m, again while there have been small improvements this is around 900,000 more than before the recession.
In addition to involuntary part time work, involuntary temporary work remains high, it is over half a million (556,000). A third of temporary workers are working on a temporary basis as they were unable to find permanent work, in early 2008 there were 363,000 temporary workers unable to find permanent work, a quarter of those on temporary contracts. When adding involuntary part-time and involuntary temporary work numbers, this shows there are 1.76m people in this category. This constitutes an increase in numbers of around 700,000 compared to before the recession, and as a proportion of employment an increase from 3.6 per cent to 5.6 per cent.
Involuntary work index (part-time and temporary, 000s)
The growing shift in employment towards precarious self-employment and insecure work, with high levels of underemployment, takes the edge off the strong overall employment numbers. Insecure, precarious employment may represent a small proportion of overall employment, but the concern is that the share has grown and that the UK labour market is moving towards an economy characterised by higher levels of insecure work.