The employment and unemployment figures out yesterday tell two stories. The first is the familiar one about what is happening to overall growth and pay levels, and what this might mean for interest rates and the like – the macro-economic implications.
It receives a huge amount of attention, for obvious reasons.
There is, however, another story, which instead focuses on the changing structure of the employment market, the way we work now.
This micro-economic story gets less attention but over time is just as important, maybe more so. Here’s why: start with these two facts – one is that the proportion of the labour force working for the public sector is now down to 18.8 per cent of the total, the lowest since the Second World War. We have figures up to September last year, when there were 5.67 million people.
If you don’t include the workers at Royal Bank of Scotland and Lloyds Banking Group, both included in the public-sector headcount in autumn 2009, the total is 5.49 million. (eventually the bank stakes will be sold, and arguably the Lloyds employees should be excluded as that process has already begun). The peak was reached in 2009, at 6.34 million, but back in 1999 the headcount was 5.45 million. So the increase in public-sector employment that took place under the Labour governments has not only been reversed; the proportion of the workforce is even lower because the workforce itself is larger.
The other fact is the increasing ranks of the self-employed. At 4.25 million in September, it is the highest ever, up 100,000 on the previous quarter. Go back to 1999 and it was 3.25 million. As you can see from the graph, the two lines are closing and it is plausible that they will cross over during the life of the next parliament. On a very long view, this shift in the balance of employment is even more dramatic. In 1959 there were six million public-sector workers and only 1.8 million self-employed.
Some other shifts: in the quarter to December 2013 we had 30.15 million people at work. That is up almost exactly one million on December 2011. We also had 1.06 million people over the age of 65 in work, nearly 200,000 more than there were two years earlier. So 20 per cent of the increase in jobs has gone to people over 65. Now look at the impact of migration: over the past year employment for people born in the UK rose by 276,000, while for people not born here the rise was 141,000. So people not born here are getting a third of the new jobs.
Then there is the part-time/full-time split. Over the past year full-time employment rose from 21.26 million to 22.07 million, so up 800,000. Part-time rose from 7.89 million to 8.07 million, up nearly 200,000. So the idea that all these new jobs are part-time is quite wrong: both full-time and part-time are going up in roughly equal proportions. But it is true that on a long view the proportion of part-timers has soared: back in 1959 only 4 per cent of us worked part-time, whereas now it is 26 per cent. This rise in part-time working must be associated with one last statistic: there are 1.17 million people doing second jobs.
At this stage it is important to stress that these are only numbers. They tell us what is happening, or at least what seems to be happening, but they don’t tell us why.
For example, we don’t know whether the rise in work among the over-65s is because people are forced to carry on working because their pensions are too small or whether they are choosing to do so. We don’t know whether immigrants seem to be doing so well in the job market because they accept lower wages or whether they have higher skills. You would need to dig deeper into the data to get a feeling for that.
We don’t know whether the rising number of self-employed is because they can’t find employment or from choice. We don’t know whether part-timers would really like full-time jobs, and vice versa – people may say they would prefer to work different hours but you don’t really know how far this is true. And we don’t know why people take on second jobs. Maybe they are piecing together the equivalent of full-time work, or maybe they are happy to do an evening job to pay for extras. You can only look at what people actually do, and not jump to conclusions about the reasons for their choice.
What is, however, beyond dispute is the extraordinary flexibility of the UK labour market. What seems to have happened as a consequence of recession is that longer-term trends, such as the rise in self-employment and part-time working, have speeded up. Hard times have made people more resourceful. But a more-flexible labour market is also harder to measure.
For example, to catch a feeling for wage growth you have to look at the profits of the self-employed. Is someone who has a full-time job but rents out a flat doing two jobs: being both an employee and a landlord? Are the profits from the latter part of their earnings? Well, yes. But that would not be caught in the Office for National Statistics earnings numbers.
Not only does this make the economy harder to measure, it also means that a lot of current legislation is inappropriate. We still have most labour legislation framed on the assumption that people are in jobs. That is understandable because that is still the vast majority of the workforce, but if the number of self-employed continues to rise – and it looks very much as though it will – such legislation becomes irrelevant to an increasing proportion of the workforce.
These are nice problems to have, for they are problems of success. But a country where more people work for themselves than work for the state will be a very different one from the country of five or 10 years ago.