Full employment launch slides july 2015

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At an event in Westminster chaired by new RF Executive Chair David Willetts, the Resolution Foundation presented early findings from its major new investigation into full employment. A panel of leading experts offered their take on the issue, followed by a Q&A.
Transcript
  • 1. Full employment and what it will take us to get us there Paul Gregg & Laura Gardiner Resolution Foundation July 2015 1
  • 2. Full employment and current labour market performance 2
  • 3. 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 3
  • 4. 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) 4
  • 5. …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 5
  • 6. …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… 6
  • 7. The UK’s record on labour market security and stability in this century 7
  • 8. 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 StateWe’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 8
  • 9. 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 9
  • 10. …but for men and young people, trends are less positive… 10 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
  • 11. …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 11
  • 12. 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 12
  • 13. …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 13 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
  • 14. …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 14 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
  • 15. …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 15 By gender By age Job-to-job moves (16-state pension age) Job-to-job moves: proportion of those in employment moving to another job each quarter All Male 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
  • 16. 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 16
  • 17. The concept of full employment and the policy response 17
  • 18. Full employment has no standard definition – some possible approaches: • Unemployment-vacancies ratio • Target rates for employment or unemployment: – Historical – International – The ‘low-activity’ workforce 18
  • 19. 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 unemployment would require a 1.1 million swing in the mix of unemployment vs vacancies 19
  • 20. Full employment = surpassing the UK’s past employment or unemployment record? An unemployment rate of around 4 per cent would imply reducing unemployment by around 550,000 20
  • 21. 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 21 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
  • 22. 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 22
  • 23. Full employment: a framework for development 23 Population growth ‘Near slack’ ‘Low-activity’ workforce participation Unemployed 550,000 to 900,000? Hours increases ? (emp. equiv) c.1.1 million by 2020? Regional gaps 900,000? Further trend improvements ? by 2020
  • 24. 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) 24
  • 25. Full employment and what it will take us to get us there Paul Gregg & Laura Gardiner Resolution Foundation July 2015 25
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