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Ian Brinkley
Economic Advisor
Ian Brinkley

Labour Day 2014

Authors: Ian Brinkley

01 May 2014

Labour Day 2014 is a chance to do a quick stock-take on how well labour is faring – and what the prospects are for the future. As ever, it is a mixed picture neatly captured in the release of new statistics on the economy and the labour market.

Firstly, we have had yet another set of good figures on the growth in total employment and unemployment. The economy continues to generate large numbers of jobs and unemployment is falling. The Chancellor has set a full employment goal, albeit with a somewhat unconventional definition. As an old fashioned sort of cove, I would translate that as aiming at a national UK unemployment rate between 4 and 5 per cent. This is achievable, but it will mean paying even more attention to skill shortages and other potential bottlenecks in the UK labour market.

Secondly, we have the fall in real wages and the consequent squeeze on some household incomes. The milestone of average earnings growth just surpassing the annual increase in the consumer price index was of greater political symbolic value than altering the reality on the ground. In fact , for some, real wage growth resumed some months ago, while for others wages are still falling in real terms or are barely keeping pace. Either way, it will be sometime before many people start to feel much better off, let alone make up the ground lost over the past few years. At the same time, recognition that the cost to the taxpayer of offsetting low pay through the tax and benefit system is no longer sustainable is gaining ground. The issue of low pay and associated poverty and the  solutions will continue to be a hot topic – and the focus of a major new Work Foundation research programme.

Thirdly, we have the latest instalment in the upward revisions of the number of zero hours contracts in the economy – with 1.4 million such contracts in existence, according to the ONS, with further upwards revisions likely. The new figures tell us more about levels rather than trends, and ONS analysis strongly suggests that the revisions are mainly because we are getting better at measuring the iceberg rather than because all the new jobs created in recent years are zero hours. Even so, it is clear that the conventional parameters of dividing jobs between temporary or permanent or employee or self employed are increasingly inadequate when it comes to mapping the modern contingent workforce.

Lastly, where you live matters a great deal. Job growth has been pretty spectacular in London and some parts of Southern England and very mixed elsewhere. Some regions have seen very little new job growth and within all regions we have contrasting stories of areas of zero job creation and declining labour markets, and others where prosperity is returning with new jobs becoming increasingly abundant. We have the curious position of a high flexible labour market and a highly inflexible housing market, so even those who want to move to areas where the new jobs are find it hard to do so. The challenge of more balanced economic and jobs growth across and within the regions and countries of the UK remains.

Some of these challenges can be met by changes in government policy and others by more effective implementation, but much will also depend on what goes on in workplaces between labour and capital – whether through formal collective bargaining machinery, through individual representation of union members, or engagement between non-unionised workforces and their employers. How the public sector adapts to the strains and stresses of continued austerity and the operation of pay policy is an obvious area for contention. But across both the private and public sectors, the challenge remains in many sectors to make high performance workplaces the norm rather than the exception.