full employment launch slides july 2015
TRANSCRIPT
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Full employment and what it will take us to
get us therePaul Gregg & Laura Gardiner
Resolution Foundation
July 2015
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Full employment and current labour market performance
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The journey towards full employment is about both the quantity and quality of jobs
• Partly because a tight labour market increases competition among firms – shifting pay and conditions upwards
• But also because full employment involves inducing increased labour force participation (for ‘low-activity’ groups), for which both job availability and attractive employment terms are necessary
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In terms of job quantity, the recent UK experience has been outstanding…
UK employment
growth stands in contrast to
the experience in the US, and the UK is now
has the 3rd highest
employment rate among G7
economies (behind
Germany and Japan)
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…but in terms of job quality, the UK’s wage (and productivity) performance has been dismal…
Real pay is now rising again, but it is still
only back at its 2004 level
More normal pay and
productivity patterns
should be restored soon,
though a question over
productivity and therefore
longer-run wage growth
remains
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…other aspects of job quality have received somewhat less attention than wages in recent debates
• A need to focus on the security and stability of employment, as well as the sheer number of jobs and the state of the wage bargain…
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The UK’s record on labour market security and stability in this century
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A received narrative that insecurity and precariousness are a growing problem
• Recent trends such as growth in zero hours contract working seen as emblematic of rising insecurity
• An idea that took root long before the recession: – Will Hutton’s 30:30:40 society (The State
We’re In)– The decline of the ‘job for life’ (e.g. Gregg
& Wadsworth)– Guy Standing’s ‘precariat’ class
• We map insecurity (30:30:40) and instability (job flows and tenure) since 2000: isolating trends from cyclical swings, and looking across genders and the generations
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On Hutton’s broad definition, there is limited evidence for rising insecurity overall…
The rise in employment through the
1990s reduced the share of
disadvantaged, but the growth
is exclusively among the
insecure
However, in the early 2000s
the insecure group plateaus
and the privileged grow
steadily
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…but for men and young people, trends are less positive…
1994 2000 2007 2010 2014
"Privileged" 42% 42% 44% 45% 45%
"Insecure" 30% 34% 33% 30% 32%
"Disadvantaged" 28% 24% 23% 25% 23%
"Privileged" 54% 52% 53% 53% 53%
"Insecure" 23% 29% 29% 26% 29%
"Disadvantaged" 23% 19% 18% 21% 18%
"Privileged" 31% 32% 36% 38% 38%
"Insecure" 36% 39% 36% 34% 35%
"Disadvantaged" 33% 30% 28% 28% 27%
"Privileged" 32% 28% 27% 28% 26%
"Insecure" 40% 50% 50% 45% 50%
"Disadvantaged" 28% 22% 23% 27% 24%
"Privileged" 49% 49% 51% 52% 53%
"Insecure" 29% 32% 31% 28% 30%
"Disadvantaged" 22% 19% 18% 20% 17%
"Privileged" 42% 43% 48% 49% 48%
"Insecure" 20% 23% 23% 21% 23%
"Disadvantaged" 38% 34% 30% 30% 29%
The 30:30:40 labour market by age and gender, UK (16-state pension age excluding full-time students)
30-49 year olds
50+ year olds
All
Men
Women
18-29 year olds
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…atypical or undesirable employment may signal new forms of precariousness for a minority
Involuntary temps and
part-timers, the insecurely self-employed,
zero hours contract
working and other atypical
forms have grown
If the breadth of insecurity
hasn’t changed much, the
depth may have for
pockets of workers
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The long-term trend is towards rising employment tenure…
Removing cyclical effects,
tenure has been rising by
roughly one-third of a
month per year
This is entirely driven by women –
tenure for prime-age men
has been in secular decline
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…driven by stable job entry…
While job entry has recovered
quickly overall, it
lags behind the pre-
downturn norm for men
and particularly
young people
By gender By age
Employment entry (16-state pension age)
Employment entry: proportion of the unemployed or inactive moving into employment each quarter
All
Male
Female
6%
7%
8%
9%
10%
11%
12%
13%
14%
1994 1998 2002 2006 2010 2014
All
18-29
30-49
50+2%
4%
6%
8%
10%
12%
14%
16%
18%
1994 1998 2002 2006 2010 2014
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…a long-term decline in job exit…
The employment exit rate for
young people currently
stands around 15
per cent below its
1994 level, whereas for those aged
30 and over it is 30 per cent below
By gender By age
Employment exit (16-state pension age)
Employment exit: proportion of those in employment moving to unemployment or inactivity each quarter
All
Male
Female
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
1994 1998 2002 2006 2010 2014
All
18-29
30-49
50+
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
1994 1998 2002 2006 2010 2014
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…and falling job to job moves, potentially a more worrying development
Job-to-job moves are
the primary mechanism
for pay progression and career
advancement, and
therefore are likely to have
implications for pay and
also productivity
growth across the economy
By gender By age
J ob-to-job moves (16-state pension age)
J ob-to-job moves: proportion of those in employment moving to another job each quarter
AllMale
Female
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
1994 1998 2002 2006 2010 2014
All
18-29
30-49
50+
0%
1%
2%
3%
4%
5%
6%
7%
1994 1998 2002 2006 2010 2014
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Secure and stable? Concluding remarks
• The true picture on security and stability is more complex than the public narrative gives credit for, with limited evidence for a substantial increase in insecurity and particularly instability
• The overall direction of travel masks big differences between the genders and generations, with particular concerns around young people’s long-term prospects
• These concepts are important to the dual labour market goals of full employment and sustained productivity growth
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The concept of full employment and the policy response
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Full employment has no standard definition – some possible approaches:
• Unemployment-vacancies ratio• Target rates for employment or
unemployment:– Historical– International– The ‘low-activity’ workforce
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Full employment = a one-to-one match between potential workers and job openings?
Driving this ratio down so
there is a one-to-one match
between vacancies and unemploymen
t would require a 1.1
million swing in the mix of unemployme
nt vs vacancies
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Full employment = surpassing the UK’s past employment or unemployment record?
An unemploymen
t rate of around 4 per
cent would imply
reducing unemploymen
t by around 550,000
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Full employment = matching international competitors?
An employment rate of 79 per cent would be equivalent to
raising employment by
around 2.3 million
An unemployment rate of around
3 per cent would require a reduction in the
number of unemployed by
900,000
15-64 year-old employment rates are presented here in the main because this is the measure more commonly used in international comparison and on which international data is more readily available
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Full employment = maximising the labour market participation of ‘low-activity’ groups?
Raising the activity rates
among groups with typically
lower levels of labour market
participation towards those
in the best performing
areas would add around
900,000 extra people to the
workforce
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Full employment: a framework for development
Population growth
‘Nearslack’
‘Low-activity’
workforce participation
Unemployed550,000 to 900,000?Hours increases? (emp. equiv)
c.1.1 million by 2020?
Regional gaps 900,000?
Further trend improvements? by 2020
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The policy challenge: planned research
• Policy to be assessed or simulated include:– Higher minimum wages– Youth (RPA and rising HE participation,
apprenticeships/traineeships)– Mothers and single parents (shift to JSA, Work
Programme, UC work incentives, childcare)– Ill-health and disability (Work Programme,
sickness absence and connections to previous employer)
– Adult low skilled (apprenticeships/traineeships)– Ethnic minorities (work incentives, qualification
penalties)– Older (over-SPA) workers (removal of DRA,
differential NI treatment)
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Full employment and what it will take us to
get us therePaul Gregg & Laura Gardiner
Resolution Foundation
July 2015