Our new research report, published today, looks at the state of the UK’s labour market, based on the most recent data from the Office for National Statistics. It compares these recent data with those from 2019, and sometimes with earlier data. You can download the report here.
The report looks at a wide range of issues, including size of the workforce, the economically active and inactive, employees and self-employed, full and part-time workers. It also examines data on developments in nominal and ‘real’ (after allowing for inflation) pay. It shows that over a long period, the sector of the workforce whose pay has increased by far the most is the Finance & Business sector. The sectors that have relatively declined in pay are manufacturing, the public sector, and those in the ‘wholesale / retail / hotel / restaurant’ sector. The report summarises the position:
“It is indeed the finance & business sector that has consistently gained, in absolute and relative terms, over the whole of the 21st century to date. Since May 2000, nominal pay is up by around 93%, but in the finance & business sector by 110%. The average levels of pay in this sector are also far higher than elsewhere in the economy. In May 2000, average ‘whole economy’ pay was £312, and £362 for the finance & business sector, a differential of 23%. In May 2022, the respective figures are £601 and £803, and the ‘premium’ differential has climbed to 34%.”
Despite the relatively tight labour market, there is no evidence that wage increases are leading to a wage-price ‘spiral’. Real wages (allowing for inflation) are presently below their 2007-08 peak. Across the economy, total nominal wages were 12.9% higher in May 2022 than in May 2019, but in three sectors, the increase is less than 10% – in manufacturing, ‘wholesale retail hotel restaurant’ and public sector. On the other hand, again the ‘finance & business’ sector has done far better, with wages now 16.9% higher than 3 years ago. Overall, total real wages in May 2022 were down 4.5% on May 2021.
Here are some Key Points from the report:
We have in particular compared the labour market data for March-May 2022 with Q3 of 2019, which was the peak pre-pandemic quarter for UK GDP. GDP in Q1 2022 was 0.6% higher that in Q3 2019, due wholly to increased government consumption and investment.
- The post-16 population has increased by 463,000, but that for the 16-64 age group by just 119,000.
- Within the 16-64 age group, there has been a small decrease in the number of economically active people, but for the whole 16+ group, there has been an increase of 89,000. There is a significant gender divide, with the number of economically active women up 232,000, while the number of active men is down by 143,000. A similar gender pattern exists for the 16-64 group.
- The overall number of economically inactive is up by 132,000 for the 16-64 age group. The age cohort 50-64 has however seen a much higher level of withdrawal from the labour market since the pandemic, with an increase of 249,000 in the inactive. Of this, women comprise 106,000, and men 143,000.
- There are major changes in the reasons given for economic inactivity; a major one is an increase of around 300,000 due to illness, of which 267,000 relates to long-term sickness.
- For the whole 16+ population, the number in of those in employment of some kind was 32.753 million on Q3 2019, and 32.863 million in March-May 2022. An increase of 110,000.
- For the 16-64 age group, the increase in those in employment is just 15,000. Looking at the 50-64 age cohort, the number in employment rose by 32,000, while the group’s population is up 280,000.
- A strong feature of the current labour market data is the rise in number of those in full-time employment (whether employees or self-employed), up by 473,000. The number of part-timers has decreased over the period by 363,000.
- One of the major changes is the balance between those who are employees and those who are self-employed. The number of employees was 824,000 higher in 2022, while the number of self-employed was 706,000 lower. Most notably, the number of full-time employees has increased by 1.103 million, while the number of full-time self-employed is 641,000 lower, a fall of 18%.
- The report looks at changes in workforce jobs by industry between 2019 and 2022. The main reductions have been in wholesale & retail etc., manufacturing, agriculture, and other services. The main increases are in human health, public administration, professional scientific & technical, and admin & support services.
- In relation to changes in public and private sector employment, there has been an increase of 322,000 in the public sector, and a fall of 426,000 in the private sector. Over half of the increase in the public sector is due to a rise of 168,000 in NHS employment since 2019, followed by 85,000 more working in public administration (of which 60,000 in the civil service).
Nominal and real pay
- Average total nominal pay of employees in May 2022 across the whole economy was 12.2% higher than in May 2019. Within this, Manufacturing sector pay was just 7% higher, wholesale/retail etc. sector 8.8%, public sector 9%, whilst Finance and business sector pay has risen by 16.9%.
- Over the course of the 21st century since since May 2000, nominal wages across the whole economy have risen by 93%, in the public sector by 90%, in manufacturing by 82%, but in finance & business by 110%.
- Nominal wages in the finance & business sector are now 16.9% higher than 3 years ago. This sector has consistently gained, in absolute and relative terms, over the whole of the 21st century. Since May 2000, nominal pay is up by 93%, but in the finance & business sector by 110%.
- Turning to total real pay (i.e. pay after allowing for CPI price inflation), we note that weekly earnings in May 2022 were £501 compared with £499 in May 2019 – and compared to £516 in May 2018
- Real pay was 4.5% lower in May 2022 than in the same month in 2021