Archive for the ‘Earnings’ Category
Thursday, April 22nd, 2010
The latest unemployment figures take a bit of unravelling. The headline figure for the three months to February, using the Labour Force Survey measure, was up by 43,000 over the quarter to reach 2.5m. This is the highest figure since 1994. This gave an unemployment rate of 8.0% which was up 0.1% on the previous quarter. This is bad news.
However, the number of people claiming Jobseeker’s Allowance, which is also known as the claimant count, actually fell by 32,900 between February and March 2010 to reach 1.54m. This is a bigger fall than anticipated and this measure of unemployment has now fallen for four out of the last five months. This is good news.
 Are things getting better or worse in the UK labour market? So, how then do we reconcile two figures which are moving in opposite directions. It seems that one major factor to the fall in those claiming Jobseeker’s Allowance is that a number of new training schemes have been put in place which are particularly aimed at young people, and which are at least temporarily, keeping them off benefits. Thus, they cannot be unemployed whilst they are being trained. In fact, official figures show that the number of people on government training and employment schemes has increased by 12,000 or 11.2% in the three months to February.
The question is, when the training is over will there be any jobs available? I have already blogged this week about the possibility of a jobless recovery and given the upcoming cull in the public sector it would appear that unemployment will rise further over the next year or so.
An additional factor which would back this up is the fact that there are now 1.05 million people working part-time – because they could not find a full-time job. This number increased by 13,000 over the past quarter. We therefore have a major problem of underemployment.
The significance of this is that these people are now classified as ‘employed’, and it may be as the economy picks up that they will get the first opportunity to move into full-time jobs as the companies they work for start to expand. But as they work more hours they will still just be amongst the already ‘employed’. The point being that the labour market could expand fairly quickly without reducing the unemployment figures.
So, the future changes in the labour market are going to be difficult to call. One positive note is that the number of vacancies for the three months to March 2010 was up 9,000 over the quarter to reach 475,000.
Finally, average earnings figures were also published yesterday. These show that the annual growth rate for regular pay, excluding bonuses, was 1.7% for the three months to February 2010, up from 1.5% in the three months to January. But, what continues to astound, is the difference between the private and public sectors.
When bonus payments are excluded, which mainly apply to the financial sector, growth in private sector average earnings stood at 0.9% compared to a whopping 3.9% for the public sector. Mr Brown is obviously being very generous to government servants, but the day of reckoning cannot be far off.
Tags: average earnings, Employment, private sector, public sector, underemployment, unemployment
Posted in Earnings, Employment, labour markets, unemployment | No Comments »
Wednesday, April 21st, 2010
So, inflation is still on the rise. The government’s target measure of CPI rose from 3.0% in February to 3.4% in March.
This was mainly due to the cost of gas and petrol prices and a spike in food prices. A weak level of sterling is coupling with very high prices for oil and other commodities, and on top of that poor weather in Spain has added to food prices. Also, there may be a knock-on effect on food prices as a result of the UK becoming a no-fly zone over the past week – with dwindling supplies of some foods in the shops.
The RPI measure of inflation was 4.4% in March, up from 3.7% in February. This was affected by the same factors as the CPI but also a rise in mortgage interest payments. RPIX inflation, which excludes mortgage interest payments, was up to 4.8% in March from 4.2% in February. The recent trend can be seen in the graphic below.
 Source: ONS The latest comparable figures for CPI inflation show that the UK rate of 3.0% in February was far higher than the 1.4% for the EU as a whole.
What then are the consequences of this continued rise in prices?
Firstly, savers are suffering. Real interest rates are actually negative at the moment, and according to the Moneyfacts website the average no-notice account after tax and inflation is standing at a very enticing minus 2.82%.
Secondly, there could be an impact on wages and employment. Wage growth has been very restrained in the private sector but many wage settlements take RPI into account. With some economists suggesting that RPI could rise as high as 5%, this is likely to put some pressure on wage settlements. Given the delicate nature of the recovery this could well have a major impact on employment.
Finally, how is the Bank of England going to react? There will certainly be pressure on the MPC to raise interest rates although the governor of the Bank of England, Mervyn King, has maintained that he expects inflation to full back towards its target level over the coming months. A hike in interest rates will doubtless damage the recovery. However, the measure for core inflation, which removes the more volatile items in the measure, only rose from 2.9% to 3% last month, so perhaps pressures are not as great as they seem.
Tags: Bank of England, core inflation, CPI, Inflation, Interest rates, MPC, RPI, RPIX, savings, wage rates
Posted in Bank of England, Consumer Price Index, Earnings, Employment, Inflation, Interest rates, Monetary Policy Committee, sterling | No Comments »
Monday, April 19th, 2010
Once we’ve decided to which political party we are going to say “squeeze me I’m yours”, we are then going to be well and truly squeezed. And those in the public sector are going to be squeezed more than most.
This prospect has led the Chartered Institute of Personnel and Development (CIPD) to say that more than half a million public sector jobs could be axed in the next five years.
This could lead to a 10% reduction in the public sector workforce which currently stands at 5.8 million.
John Philpott, Chief Economic Adviser for the CIPD said that it was “misleading” to suggest that the pain of job losses could be eased by a combination of pay cuts or short-time working.
He said: “This strategy has been successful in the private sector during the recession as a means of avoiding redundancies during a cyclical downturn in the economy but is not an effective response where long-term structural change is involved.
“An economy with almost 30 million people in work and in which tens of thousands of jobs are lost and created every year should be able to cope with a period of large scale public sector downsizing without this resulting in higher unemployment.
“However, a favourable outcome depends on a return to health of the wider economy and increased demand for labour from the private sector.”
In fact the UK has been applauded for its flexible labour market in the private sector, which has resulted in much lower unemployment than had been anticipated during the recession. This was due to many employees agreeing to short-time working, pay freezes and even temporary pay cuts.
However, the monolith that is the public sector has been virtually unscathed during the crisis, with increases in average earnings far outstripping those seen in the private sector. All political parties are saying that they will tackle the structural problems of the public sector. The private sector was squeezed during the recession, and the public sector will be squeezed during the recovery.
Tags: average earnings, private sector employment, public sector employment, recession, recovery
Posted in Earnings, Employment, recession | No Comments »
Monday, February 15th, 2010
It looks as though jobs are going to be lost from the public sector faster than they are going to grow in the private sector. So says the latest Labour Market Survey produced by the Chartered Institute of Personnel and Development (CIPD) together with KPMG.
In a survey of over 700 employers it appears that those employers who plan to make redundancies expect to cut their workforce by 6.2% on average this quarter, compared with 3.8% in the previous quarter. This is against a background of an overall fall in unemployment in the three months to November, with unemployment currently standing at 2.46 million or 7.8% of the workforce.
The net balance of employers in the private sector between those expecting to recruit and those expecting to cut staff is currently negative at -5%. On the other hand, things are much bleaker in the public sector. Here the net balance was -31%, with the public administration and defence sector recording a figure of -62%.
 It looks like workers in the public sector will be bearing the brunt of job losses in the months ahead. According to John Philpott, Chief Economic Adviser at the CIPD: “The UK jobs market is still on the ropes, with a public sector fall in employment now a reality as it feels the impact of the longest recession in modern times.
“Unfortunately, there are more punishing rounds ahead. The private sector will be dealing with ongoing concerns about productivity, wage costs and inflation alongside the spectre of deep public spending cuts. With many private sector companies looking to move jobs abroad in an attempt to find the right balance between skills, quality and cost reduction, the jobs market needs all the continued support and protection it is getting from the government.”
In fact, the Survey shows that outsourcing of jobs is a growing concern. Ten per cent of private sector companies plan to outsource jobs abroad in 2010. Of these, over 50% plan to relocate UK jobs to India, while 37% plan to move jobs to Eastern Europe.
One positive point for inflation and input costs is that pay prospects are extremely subdued. In recent times public sector pay has been rising faster than that in the private sector, but currently the private sector is predicting a rise of 2% compared with 0.9% for the public sector at the next pay award.
Tags: Earnings, private sector, public sector, unemployment
Posted in Earnings, unemployment | No Comments »
Wednesday, January 20th, 2010
The number of people unemployed between September and November 2009 fell by 7,000 to reach 2.46 million, according to the ONS this morning. Many economists had been expecting a rise in unemployment to about 2.50 million. This is the first quarterly fall in unemployment since the three months to May 2008, and gives an unemployment rate of 7.8%.
However, there was a rise in the long-term unemployed. Those out of work for more than a year rose by 29,000 over the quarter to reach 631,000, which was the highest total since the three months to November 1997. This is obviously a serious problem and suggests that there may be a structural problem reflecting redundant skills in parts of the workforce.
The number of people who were claiming Jobseeker’s Allowance in December 2009, also known as the claimant count, also fell by 15,200 on the previous month to reach 1.61 million. This was the second month running that the claimant count has fallen and it reflected the largest monthly fall since April 2007.
 Is unemployment back on track?
This provides additional evidence that the economy is moving out of recession and is added to by the fact that the number of vacancies in the three months to December 2009 rose by 16,000 to 448,000.
On the other hand, the employment rate fell by 0.1% on the September to November quarter to reach 72.4%. This meant that the number of people in employment fell by 14,000 to reach 28.92 million. However, although this figure is worrying on its own, it is made worse by the fact that the number of people employed full-time during the quarter fell by 113,000 which was offset by a rise in the part-time employed of 99,000. It is not good news that we seem to be swapping full-time jobs for part-time ones, and this fact is in danger of being masked by the lower fall in total employment. In fact, the figures show that there were 1.03 million employees and self-employed people who were working part-time, solely because they could not find a full-time job.
As far as earnings are concerned, average regular pay excluding bonuses rose by 1.1% in the three months to November compared with a year earlier. The level of unemployment is therefore keeping earnings down reflecting the amount of slack in the economy. And, it looks as though this slack will get worse as we can expect something of a cull in the number of public sector jobs after the election. “Vote for us now and lose your job later” will probably be one of the more popular electoral slogans.
So, as far as unemployment is concerned, we have seen some surprisingly good figures but we are not out of the woods yet, and is doubtful whether the creation of private sector jobs from the recovery will be able to outweigh the loss of jobs in the public sector.
Finally, I have just come across an interesting, recently published article by the Federal Reserve Bank of San Francisco, entitled ‘Inflation: Mind the Gap’. This provides research that suggests that the Phillips Curve has made a comeback during the recent recession. You can access it here.
Tags: average earnings, employment rate, unemployment, unemployment rate, vacancies
Posted in Earnings, Employment, unemployment | No Comments »
Wednesday, December 16th, 2009
There was a fall in the number of people claiming Jobseeker’s Allowance, otherwise known as the claimant count, in November according to the ONS today. In fact the number fell by 6,300 over the previous month to give a total of 1.63 million out of work. This is the first monthly fall in this measure since February 2008.
The other measure of unemployment, which is the more generally accepted on an international basis, is the latest three month figure for August to October 2009, which shows an unemployment rate of 7.9%, which was unchanged on the previous quarter. The number of people unemployed according to this measure increased by 21,000 over the quarter to reach 2.49 million. This is the smallest increase in unemployment since the March to May 2008 quarter.
 We may be seeing more jobs at the end of the unemployment rainbow, but many of them are part-time.
There was also an increase in the number unemployed for more than 12 months of 49,000 over the quarter to reach 620,000. There was also an increase amongst 18-24 year olds as the unemployment rate in this category rose by 0.9 percentage points to reach 18.4%, which was the highest recorded figure since these records began in 1992.
The number of people in employment increased by 53,000 in the August to October quarter, to give a rate of 72.5%, which was unchanged compared to the previous quarter. However, whilst this looks like good news on the surface, it is important to look at the breakdown of employment. In fact, there were falls in both the number of men and women in full-time employment, but a rise of 120,000 in the number of women in part-time employment. And, according to the ONS, there are now just over one million people who are either employed or self-employed, who are working part-time solely because they cannot find a full-time job.
As far as average earnings are concerned, the public sector continues to grow at a faster rate than the private sector. Average earnings excluding bonuses for August to October rose by 2.7% in the public sector but only 1.4% in the private sector. The government announced in the Pre Budget Report that it was going to cap public sector wage increases to 1%, but only from 2011.
Tags: average earnings, Employment, employment rate, unemployment, unemployment rate, youth unemployment
Posted in Earnings, Employment, unemployment | No Comments »
Wednesday, December 9th, 2009
Mr Brown has just launched an attack on public sector pay which he describes as “excessive”. He announced the government’s paper on smart government, saying: “It cannot be right that taxpayers fund 300 local authority officials who have salaries over £150.000 or that in total over 300 staff across public sector bodies are paid more than £200,000.”
How is it that a man who has just spent 10 years as chancellor of the exchequer and 2 years as prime minister has only now discovered that there is ‘excessive’ pay in the public sector? I don’t suppose people will think that this is anything to do with the forthcoming election will they?
It seems Mr Brown is set on “naming and shaming” those civil servants and members of quangos earning over £150,000 per year. I think if I were earning over £150,000 per year of taxpayers money, I could put up with quite a lot of shaming. Water off a duck’s back comes to mind.
 Public sector services are now officially in the firing line. By contrast, the centre-right Reform think tank has just said that public sector employment costs need to fall by 15%, which is equivalent to one million jobs. Their director Andrew Haldenby said: “Politicians have to be more honest with the public about what needs to happen if they are to reduce the deficit. Radical changes won’t happen if they see their roles as defenders of the status quo. The public sector workforce has to shrink to become as productive as the private sector.”
Interestingly, Professor Greg Mankiw of Harvard mentions in his blog this week that he asked his freshman students how their views had changed over the course of the semester. He said: “Those who started out liberal said they came to appreciate market mechanisms more. Those who started out conservative said they came to appreciate the market’s limitations. In other words, after a few months of reading and discussing economics and public policy, most of them moved toward the political center and closer to agreement.”
Perhaps that is what we can expect in the UK. When the pendulum stops swinging it always ends up back in the centre, and no doubt there will be just enough fat taken off the public sector to appease voters, but not so much as would damage front-line services.
Tags: Earnings, Employment, public sector
Posted in Earnings, Employment, Public Finances | No Comments »
Friday, November 13th, 2009
There was a narrowing of the gender pay gap for all employees in the UK this year of 0.5 percentage points to 22%. The Office for National Statistics measures the gender pay gap by the median hourly pay excluding overtime. When full-time employment is examined, males earned an average of £12.97 an hour before tax compared to £11.39 an hour earned by women. The gender gap between full-time workers also narrowed from 12.6% in 2008 to 12.2% in 2009.
The pay gap for part-time employees, rather perversely, is the other way round as the small number of male part-time workers earn less than the large number of female part-timers. However, this gap also narrowed in the opposite direction from -3.7% to -2.0%.
 The gender pay gap has narrowed and is smallest for those in professional jobs such as banking.
Interestingly, the smallest gap was amongst professional workers, where men earn only 3.8% more than women. The largest gap was in the category of ‘skilled trades’ where the difference in wages was 26.2%.
Tags: Earnings, Gender pay gap
Posted in Earnings, Gender equality, Gender pay gap | No Comments »
Friday, September 18th, 2009
Latest figures show that public sector employment increased by 13,000 in the second quarter of 2009 to reach 6.039 million. Overall, employment in central government increased by 21,000, whilst employment in local government and public corporations fell by 5,000 and 3,000 respectively. There was also an increase of 1,000 in the number of employees in the Civil Service.
This is in stark contrast to the fall in private sector employment of 230,000 in the second quarter. When compared with the same quarter last year, public sector employment has increased by 289,000 although 235,000 of these were added due to the government’s takeover of banks such as the Royal Bank of Scotland, where employees have been reassigned from the private to the public sector. This is reflected in the “blip” in the final quarter of 2008 in the figure below.
 Source: ONS
The figure shows that public sector employment has continued to grow since the second quarter of 2008 and over the past two years the numbers employed in the public sector have grown from 19.7% to 20.9% of total workforce employment, whilst the private sector has fallen from 80.3% to 79.1%.
There are questions about the sustainability of these increases as it means more and more public sector workers are being financed by fewer private sector workers. Public sector wages have also been growing more quickly than those in the private sector. In the year to July pay growth (including bonuses) in the private sector stood at 1.2 per cent compared with 3.4 per cent for the public sector.
According to Matthew Elliott, chief executive of the TaxPayers’ Alliance: “Employing more and more people on wages that are growing twice as fast as the private sector, with pensions that are heavily subsidised, while the productivity of those workers falls every year is a hugely wasteful policy.
“The idea that the public payroll can simply expand again and again to somehow solve the problem of the recession is pie in the sky – in reality, this expansion is pushing up the national debt, threatening our credit rating and loading yet more spending commitments on to taxpayers that will hobble our chances of recovery.”
Now that Gordon Brown has “mouthed” the word ‘cuts’ at the TUC Conference we can expect a gradual reduction in employment within many government departments and local authorities as the government fights to bring down borrowing.
Tags: Earnings, Employment, government borrowing, private sector, public sector
Posted in Earnings, Employment, Public Finances, government borrowing | No Comments »
Monday, August 17th, 2009
Today the centre-left political pressure group, Compass, and 100 leading public figures launched a campaign to curb excessive pay. They called on the government to establish a High Pay Commission.
The statement says: “The crisis we find ourselves in is one significantly caused by greed. The salaries of those at the top raced away while the median wage stagnated. Inequality grew, and an economic crisis ensued. The unjust rewards of a few hundred ‘masters of the universe’ exacerbated the risks were all exposed to many times over. Banking and executive remuneration packages have reached excessive levels.”
The group claimed that performance pay cycles were too short and that some executives were being rewarded for failure, often at the expense of their own companies and the economy at large. Just as a Low Pay Commission was set up in 1997 to advise on introducing a minimum wage, so a High Pay Commission should be set up to launch “a wide-ranging review of pay at the top.”
Brendan Barber, TUC general secretary argued that: “The growing gap between executive and employee pay has a damaging impact on staff engagement and has created a new class of super-rich that float free from society. The government can no longer afford to ignore this.”
Just yesterday the Chancellor, Alistair Darling, gave an interview on this subject to the Sunday Times, saying that the government was ready to intervene. He said: “I am quite clear that some of the problems we have today were caused by the fact that some traders were incentivised to take risks which neither they nor their bosses fully understood.”
One of the major problems has been one of “moral hazard”. This occurs when traders and bankers receive financial rewards based on the volume of business which they are engaging in, knowing that if they make wrong decisions, their companies are so large that the government would have to intervene. It can be argued that if this view is widespread then any reasonable levels of business caution will go out the window.
The government is waiting for Sir David Walker to deliver an independent review of bonuses and the way companies are run, before making a final decision on whether to legislate.
Tags: Banking, bonuses, High Pay Commission, Low Pay Commission, moral hazard
Posted in Banking, Earnings | No Comments »
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