July 17, 2019

Rise in employment led by self-employed and older workers

As with the last few months, the latest UK employment figures look like a sea of tranquillity. The number of people in work is up ever so slightly (setting another record), unemployment down slightly again (ditto) and earnings continuing to grow. After a couple of months where there were hints that the labour market might be cooling down, today’s figures suggest that it is heating up once more. However beneath the surface, the numbers highlight some big changes in employment trends – with two things in particular standing out.

First, the recent growth in self-employment in the last three months has far oustripped the growth in employment overall – with self-employment up by 120 thousand to a new record level of 4.96 million. This has been rising strongly over the last two decades and particularly since the recession, but had been fairly flat (around 4.8 million) since 2016. The self-employed are a diverse group, and our analysis for the Centre for Research on Self-Employment highlights that self-employed workers overall are more satisfied and have higher levels of independence and security than employees doing similar jobs.

However this is also an incredibly diverse group (as our large-scale research on the gig economy for the Taylor Review found), and around one in five employed workers are insecure. So more work is needed to understand what is driving the recent increases, and how we support more self-employed workers to increase their incomes, security and independence.

Secondly, in a neat symmetry, employment has risen by 85 thousand among older people (over-50s) in the last three months while it’s fallen by the same amount among those aged 16-24. (The fall in the number of young people in work is mainly explained by a slight decline in the population (down 20k on the quarter) and a rise in those in full-time education (up 40k). However we’ve also seen a small rise in worklessness among those young people not in education – up 30k on the quarter – although it remains well below where it was a year ago. We’ll keep an eye on this in future months.)

The rise of the grey workforce

[perfectpullquote align=”right” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]It’s this ageing of our workforce, much more than the future risks of automation, that policy makers end employers should be focusing on[/perfectpullquote]

The growth in older people working has been driven in particular by those over 65, with employment up by nearly 50 thousand to 1.33 million. I talked last month about the opportunities of our older workforce but also about how our research is showing that the world of work needs to adapt better to reflect these changes. Today’s figures reiterate that it’s this ageing of our workforce, much more than the future risks of automation, that policy makers end employers should be focusing on.

Today’s figures also see a substantial rise in economic inactivity over the last three months (i.e. the number of people neither working nor looking for work). This is up by 83 thousand on the quarter, mainly explained by a recovery in the number of inactive students (up by around 60 thousand after falls of over 100 thousand on the previous year). However the number of people inactive due to long-term sickness has risen on the quarter by 40 thousand to 2.02 million, and is up on a year ago. It is clear that much more is needed to support those with health conditions to stay in and re-enter work – the government’s consultation yesterday on new measures to reduce job loss are a welcome start.

Finally, today sees the publication of the Department for Work and Pensions’ estimate of the ‘Alternative Claimant Count’. This quarterly data attempts to estimate the number of ‘claimant’ unemployed (that is, people claiming benefits who are out of work and required to look for work) if Universal Credit were fully rolled out. The reason why DWP needs to publish an ‘alternative’ version of the claimant count is because UC has led to changes in the groups of claimants that are required to seek work as part of their claim – meaning that the very large increases in the ‘official’ claimant count since UC rollout are being largely driven by changes definition rather than labour market or administrative reasons. So the ‘alternative’ measure tries to strip out the definitional changes so that we can see the true trends in the data.

Today’s ‘alternative’ count shows that claimant unemployment reached 1.22 million in May – virtually the same as the Labour Force Survey measure of unemployment, which stood at 1.29 million in March-May. The gap between these two figures has fallen from around 500 thousand when Universal Credit started its rollout, to just 75 thousand today. Given that many of those counted as unemployed in the Labour Force Survey are not eligible for Universal Credit (because of their household earnings or their age), and many of those unemployed don’t start a benefit claim for other reasons, this suggests that a potentially significant number of UC claimants are required to search for work but are not in fact doing so. This could be an early indication that the conditionality regime in Universal Credit is not working as intended, and more research and analysis is needed to understand what is driving this.