According to figures from the Office for National Statistics, the level of employment in the UK is currently at a record high. Despite the impending doom that many have forecast as a consequence of Brexit from the figures it would appear that, in terms of jobs at least, the economy is thriving. However, some have questioned the current boom in job creation as a false positive in terms of whether or not it’s an indicator of economic health – so, what’s really happening in the UK jobs market?
Job vacancies are increasing
The most recent numbers show that unemployment has hit record low levels of 4%. In the three months running up to January 2019, the number of unfilled vacancies increased by 16,000 to 870,000. This comes in the context of a slowdown in growth, both in terms of the UK’s economic growth and growth on a global level. For example, in 2018, the UK economy grew by just 1.4%, which is the weakest level of growth that the economy has seen in six years. The increasing number of vacancies is putting pressure on employers, especially in industries such as IT, health and food services, which are some of the sectors that have been the most affected. Many are finding it difficult to hire the volume of workers currently required to fill available positions. As a result of this new market – a candidate’s market – total average weekly wages rose by 3.4% in the year to December 2018.
The UK jobs market – under the surface
Although the figures seem to indicate that everyone is profitably employed, all is not quite as it seems:
Up to 844,000 people in the UK are employed on zero-hours contracts as their main job – these are arrangements that provide no job security and pay wages that often make it difficult to live off.
While pay growth has increased slightly, it is still significantly below the previous peak of 6.6% recorded in February 2007. It’s also worth noting that real wages fell by 10% between 2008 and 2015. This was the biggest cut in wages anywhere in Europe, other than in Greece.
A lack of economic growth in certain sectors has also led to some significant job losses. For example, the manufacturing sector shrank severely with substantial job losses in vehicle manufacturing – and several big retailers, such as House of Fraser, went into administration in 2018 taking large numbers of jobs with them.
More older people joined the UK workforce – the over 50s made up one in five of the UK workforce in the 1990s but now account for around a third. This is attributed predominantly to increases in pension age and the fact that many Britons simply don’t have enough set aside for retirement to stop work.
Many of the “jobs” that count as employment are not what we would traditionally view as employed roles. According to the Resolution Foundation, two thirds of the increase in jobs has come from a rise in atypical work, such as self-employment, zero-hours contracts and agency work.
Use of food banks has significantly increased. Around six million jobs in the UK now pay below the living wage, which has left many households trapped in a state of “in-work poverty” where, although they are employed, they cannot afford to live.
The hidden impact of Brexit
Another cause of the sharp increase in employment is being attributed to one of the less obvious consequences of Brexit. Bank of England rate-setter Gertjan Vlieghe suggested that, as a result of the uncertainty over Brexit, many companies are not investing in plant, machinery and efficiency driving technology, as they normally might in order to meet the needs of customers. Instead, businesses are hiring people to enable them to keep up with customer demand. Although this might seem like a positive step, the reasoning behind it is that people are much easier to hire and fire. Corporate spending has continued to fall over the past year and British workers are relatively easy to get rid of. If a Brexit shaped recession starts to bite, many businesses would find it difficult to reverse investment decisions in technology, plant or machinery but could reduce a workforce without too much effort. So, rather than being a sign of a thriving economy, according to Vlieghe, the increase in employment could actually be a sign of economic stagnancy.
It’s often difficult to determine what’s really going on with the UK jobs market purely from employment figures alone. As a result of all the different factors involved, from growth rates to the changes in types of employment we have seen in recent years, it’s clear that positive predictions need to be taken with a pinch of salt.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read more about Alex Hartley