Lynn Gambin, Institute for Employment Research, University of Warwick

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The impact of employment changes on poverty in 2020. This presentation was given at the 'Wales Labour Market 2020' conference held in Cardiff on 22nd November 2012. This event was organised by the …

The impact of employment changes on poverty in 2020. This presentation was given at the 'Wales Labour Market 2020' conference held in Cardiff on 22nd November 2012. This event was organised by the Bevan Foundation in partnership with the Joseph Rowntree Foundation

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  • 1. The impact of employmentchanges on poverty in 2020 Dr Lynn Gambin Institute for Employment Research University of Warwick Welsh Labour Market 2020 Wales Millennium Centre, Cardiff 22nd November 2012
  • 2. OutlineBackgroundOther StudiesAims and ObjectivesResearch Design and MethodsWorking Futures – BaselineHousehold income and povertyFindingsPolicy Implications
  • 3. BackgroundFocus on detailed analysis of employment patterns for anumber of reasons:• JRF over-riding concern - poverty & how to reduce it;• Policy interest in employment & work as the main route out of poverty;• Concerns about in-work poverty;• Many trends towards inequality getting worse;• Increasing polarisation of employment by skill level may result in growing income inequality.
  • 4. Other StudiesPrevious research:• Raising the level of skills can improve employment prospects, productivity and pay;• Changing employment patterns can impact on poverty (Dickerson using earlier Working Futures projections)• General projections of poverty based on IFS TAXBEN model (Brewer, Browne & Joyce (IFS)).
  • 5. Aims and Objectives• Improve understanding of how employment patternsimpact upon poverty and inequality• Develop robust projections of poverty and inequality(tied to “baseline” Working Futures 2010-2020 forecasts)• Identify the implications of changing economicstructure and related employment patterns for thedistribution of pay and, in turn, household incomes• Assess the implications of planned changes in taxbenefit policy within the context of the likely changes inthe structure of employment, skills & pay
  • 6. Research Design and MethodsQuantitative employment scenarios based on Working Futures “baseline” and other scenariosAssumptions about changing earnings & pay distributions within occupations & qualification & other groupsImplications for households based on the IFS poverty model of taxes and benefits (TAXBEN)More qualitative analysis of implications for more detailed categories (including vulnerable groups)
  • 7. Working Futures “Baseline” scenarioLatest in a long line of projectionsComprehensive picture of the UK labour market with focus on employmentFuture patterns of demand for skills, as measured by occupation and qualificationMain focus on the UK – but with implications for the devolved Nations, English regions, etcConditional projections – what if…..
  • 8. Working Futures Conditional forecastsAll projections are conditional on assumptions & “otherfactors”Assumptions include: - various exogenous factors (demographic assumptions; government expenditure, tax and monetary policy; what is happening in the rest of the world (economic activity levels, prices, exchange rates, etc)“Other factors” include: - the historical data used in the models - different vintages of data can make a big difference to the projected levels as well as to history
  • 9. Working Futures Wales• Output growth (GVA) was slower than UK average 2000 to 2010 and is projected to continue to 2020.• Population growth to be slower than UK 2010 to 2020.• Employment growth was stronger than UK between 2000 and 2010 but projected be same as UK to 2020• Employment amongst males to grow 2x as fast as for women. Male share of total employment to increase slightly.• Small shift away from full-time to part-time working; faster growth in part-time work for men than women.
  • 10. Working Futures Wales• Higher than UK growth in output in primary and utilities and manufacturing between 2010 and 2020. Business and other services to see fastest rate of output growth in Wales overall.• Employment growth expected to be higher than UK rate in: • Primary and utilities, • Construction • Trade, accommodation and transport• Relative shift of employment away from manufacturing towards service sector projected to continue• Trade, accommodation and transport to be largest sector in terms of employment in 2020.
  • 11. Working Futures Wales• Occupational change in employment – shift to higher occupations set to continue • To benefit women in particular – number of people in elementary occupations is projected to decline because loss of female jobs will outweigh gain in male jobs at this level• Qualification profile in Wales has improved and is projected to continue to improve • 2000 1/3 jobs held by people with no or low qualifications • 2020 fall to just over 1/5; more than 2/5 jobs expected to be held by people with higher level qualifications (Level 4+)
  • 12. Occupational shares of total employment (UK) 1. Managers, directors % share of total employment and senior officials25 2. Professional occupations20 3. Associate professional and technical 4. Administrative and secretarial15 5. Skilled trades occupations 6. Caring, leisure and10 other service 7. Sales and customer service 5 8. Process, plant and machine operatives 9. Elementary 0 occupations 1992 1997 2002 2007 2012 2017
  • 13. Changing demand by qualification (employment shares), 2010-2020 (UK) % shareQCF 4+ QCF 3 2020 2010QCF 1,2 2000 QCF 0 0.0 10.0 20.0 30.0 40.0 50.0
  • 14. Household income and povertySimulation of the future distribution of household incomesin the UKImplications for net household incomes derived byreweighting the FRS data - individuals in jobs forecast togrow in Working Futures are given greater weightThe pattern of jobs in each category (e.g. occupation)therefore matches that implied by Working FuturesProvides the link between the „individual‟ employment andearnings & the household income, drawing out the impactfor poverty & inequality.
  • 15. DefinitionsRelative poverty - an individual‟s household‟s net equivalised income (i.e.adjusted for different household sizes and compositions) is below 60 per centof the median in that yearAbsolute poverty - an individual‟s household‟s net equivalised income isbelow 60 per cent (or 50 percent) of the 2010/11 median adjusted for inflation.Inequality ratios 90/10 ratio of incomes at the 90th percentile in the household incomedistribution to incomes at the 10th percentile 90/50 the ratio of incomes at the 90th percentile to incomes at the median(50th percentile) 50/10 the ratio of incomes at the median to the 10th percentileChild poverty – a child‟s household‟s income is below 60 per cent of themedian. Child poverty may be measured in either relative or absolute terms,as defined above.
  • 16. Findings - Baseline Implications for poverty & inequalityMain findings in the “baseline”: Inequality and relative poverty set to increaseVarious reasons for this projected increase, including: 1) Interaction of inflation and general tax and benefit policy; 2) Changes to employment structure forecast by Working Futures.
  • 17. Simulated poverty measures, 2020/21 RELATIVE POVERTY RATES ABSOLUTE POVERTY RATES ( % with incomes < 60% of median) ( % with incomes < 60% of 2010/11Poverty rate (%) median) 45 40 35 30 25 20 15 10 5 0 children working age lone parents head of hh children working age w/o children age 65+ w/o children HOUSEHOLD TYPE 2009/10 baseline (2002/21) fixed employment structure (2020/2021)
  • 18. ALTERNATIVE SCENARIOSExploration of a number of alternative scenarios defined interms of employment structure and relative pay Main focus on employment structure (employment levels in 2020 assumed fixed)Scenarios considered changes in employment structure by: - Qualifications - Gender - PT/FT/SE status - Occupation - Sector - GeographyAnd changes in pay, e.g. closing of the gender pay gap, increasing returns to higher qualifications, etc.
  • 19. IMPROVING QUALIFICATIONSBoth an improvement in the highest qualifications (i.e. increasedshare of employment) and a general improvement inqualifications considered. • Improvements in qualifications are inequality-increasing when there are no changes in rates of return to particular qualifications • Increasing the share of employed people with the highest qualifications has some poverty-reducing effect – but this is small.Changing the returns to qualifications does not make a big difference to the distribution of income.
  • 20. Impact of improvement in qualifications levels on distribution of net household income by 2020-21 7% Working Futures employment changes only Increase in highest qualifications General increase in qualification level 5%Percentage change 3% 1% -1% 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 -3% Percentile point -5%
  • 21. Improving qualifications and lower returns to higher qualifications
  • 22. Gender Balance of Employment and Gender Pay Gap• Increase in the share of employment held by females (by2.5%) and a compensating decrease for males (-2.5%)• Decrease in the gender pay gap (increased female pay by3.0% with male pay held at baseline)ResultsBoth changes have very little impact on the household incomedistribution, including most poverty and inequality statistics.Except, poverty in lone parent families, which in both of these combined is about 1½ percentage points lower than in the Working Futures baseline.
  • 23. Gender scenarios – increasing employment shares and narrowing pay gaps
  • 24. Other Scenarios• More even split between Manufacturing and Services• Pay gap between the Financial Services and all other sectors• Redistribution to the regions outside London & the South East• Shift of employment to FT away from PT workImplications for measures of inequality and poverty:• Substantial changes to employment/pay structures result in small difference from “baseline”• Scenarios had little effect on the income distribution and virtually no impact on the simulated poverty and inequality statistics
  • 25. Implications for selected vulnerable groupsQualitative assessment of implications for potentiallyvulnerable groupsDisadvantaged groups are disproportionately non-employedGenerally shifts in the structure of employment have no clearcut and/or large impacts on most disadvantaged groupsPossible exceptions - women, disabled minority ethnicgroups disproportionately employed in the public sectorDifferences in household structures between and withingroups emphasises heterogeneity in experience of poverty
  • 26. Summary of Key FindingsPoverty & inequality are set to increase as a result of tax-benefit policy- changes in employment structure (as projected in Working Futures)exacerbate thisPolicies aimed at shifting the structure of employment (e.g. increasingskills) have a modest impact on lowering poverty, because: • Many individuals in low-income households are out of work -. changing employment structure will not alter this (though it might affect which individuals are out of work); • Changes to employment and pay impact on median incomes, and hence the level of the poverty line - this affects the relative status of workless households as well as those on low incomes; • Incomes at household level are key measures for poverty and inequality, but it is individuals who participate in the labour market.
  • 27. Implications for PolicyHousehold composition is crucial. • Being a low-paid worker is not a good indicator of being in a low-income household (as likely to be in middle-income households); • General labour market changes are therefore limited in achieving specific poverty or inequality objectives; • For a significant impact it is necessary to ensure a positive effect on workers in low-income households, rather than just those who are low paid themselves.A focus on general improvements in skills and employment willnot change matters significantly for those in poverty
  • 28. For further information:Lynn GambinInstitute for Employment Research, University of full report, Poverty and inequality in 2020: Impact ofchanges in the structure of employment is available as afree download at more details of the Working Futures projections see: