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Bill Wells (Dept of Business Innovation and Skills) - Using the Labour Force Survey: Man and boy
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Bill Wells (Dept of Business Innovation and Skills) - Using the Labour Force Survey: Man and boy



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  • 2. LABOUR FORCE SURVEY PLUS. DESCRIBING DEVELOPMENTS IN THE LABOUR MARKET... •The LFS & administrative statistics combined is greater than the sum of its parts. •But good news is no news. So ONS needs to guide the public. …MUST USE THE LFS. BUT ON ITS OWN IT IS NOT ENOUGH. •You cannot rely solely on the LFS. It has some guilty secrets. And, for example… •…He who pays the National Minimum Wage piper must call the statistical tune.
  • 3. Labour market statistical presentation used to be dominated by the claimant count and manufacturing employment. Using that old system the latest figures would have been confusing (and misleading) as both unemployment and employment seemed to be falling… LATEST ANNUAL CHANGES: JSA TO OCT. 2013: EMPLOYEE JOBS TO JUNE 2013 [MONTHLY PRESENTATION BASED ON PRE-LFS & 1982 ILO LABOUR MARKET STATISTICS CONVENTION] JSA CLAIMANT COUNT MANUFACTURING EMPLOYEE JOBS 0 -33 -50 -100 D N A S U O H T -150 -200 -250 -267 -300
  • 4. …and with the claimant count and manufacturing employment become an increasingly smaller part of the labour market the focus on these aspects becomes increasingly inadequate. In addition, the ‘fiddling the figures’ presentation campaign convinced people that JSA was being reduced not by moving people into work but elsewhere. WORKFORCE JOBS, ALL KEY OUT OF WORK BENEFITS AND 'OTHERS ' OF WORKING AGE: ['OTHERS' = 16-64 POPULATION NET OF WORKFORCE JOBS (MINUS LFS 2nd JOBS) & BENEFITS] 30,000 28,145 25,000 20,000 D N A S U O H T 15,000 12,816 10,000 4,147 5,000 1,306 0 3,104 2,418 175 19
  • 5. The introduction of the LFS provided the opportunity to describe labour market developments in a much more coherent fashion. However, there is still far too much focus on unemployment, little mention of employment growth and hardly any mention of activity and inactivity… LFS ANNUAL CHANGE: AGED 16 & OVER: TO JULY TO SEPTEMBER 2013: S.A. 500 400 300 D N A S U O H T 200 378 100 0 -48 -149 -100 -200 ILO UNEMPLOYMENT LFS EMPLOYMENT ECONOMIC INACTIVITY 16-64
  • 6. …with the most appropriate description focusing on the rise in employment and how that is divided between the growth in the numbers in the labour market (activity) and the fall in ILO unemployment. ONS should guide the public in terms of presentation. LFS ANNUAL CHANGE: AGED 16 & OVER: TO JULY TO SEPTEMBER 2013: S.A. 500 400 381 378 330 300 200 200 D N A S U O H T 100 0 51 -48 -100 -149 -200 Employment Activity Unemp. Inactivity 16-64 65 & Over Population
  • 7. However, it is not enough just to use the LFS. Not only does it have its own ‘guilty secrets’… • Internationally, the LFS is comparable not harmonised. • The LFS is a household survey. It does not cover everyone in the UK:– Its coverage of communal establishments is not complete. – Not all short-term visitors to the UK are included. • The LFS is not representative. There are around:– 180 thousand more married men than women in the main data set. – 115 thousand more married women than married men in the household data set. • The LFS is 40 years old. Yet, it is almost impossible to get information relating to pre-1992 and impossible pre-1979. • The definitions of economically inactive due to being discouraged or retired are (marginally) incorrect in the UK LFS.
  • 8. …and sometimes, as in the case of the introduction of the National Minimum Wage, the use of the LFS was inappropriate. • When the National Minimum Wage was introduced in 1999 the objective was to be cautious in setting the initial rate. • However, workers believed that they earned less than businesses thought that they paid them and worked more hours. • Therefore, as the LFS related to the views of the workers, it was inappropriate as the basis for setting the NMW. This was because the basis for the NMW was what the business paid not what the worker thought they received. • Consequently, the NMW was set at an even more cautious level than planned and it took longer to get it to the right level. So, between 1999 and 2007 the NMW grew by more than average earnings. Since then it has grown in line with average earnings.
  • 9. The 1982 ILO Convention sets out the labour market structure. Consequently, using this to define both the ‘supply’ (individual) side with the ‘demand’ (business and government) side of the labour market provides a more comprehensive view – particularly from a policy perspective. Workforce Jobs Employment 16 & Over Economically Active 16 & Over ILO Unemployment 16 & Over Economically Inactive 16 & Over Of which 16-64 Years Of which 65 & Over Population JSA Inactive Benefits Other Aged 16-64 Other Aged 65 & Over
  • 10. THE LFS AND POLICY DEVELOPMENTS: LESSONS FROM THE PAST AND IMPLICATIONS FOR THE FUTURE: You won’t get a job if you do not look for a job… •…but if you look for a job there is a good chance that you will find one… •…as no-one seems to be unemployable… •…so how far should we push the promotion of active jobsearch? The streets of London are not paved with gold (for Londoners)… •…as worklessness is very concentrated in the great cities of the UK… •…which ironically is also where jobs are concentrated… •…implying that the problem is on the supply side – not a lack of jobs [British] People like the funniest jobs… •…so we need to maximise opportunities whilst minimising exploitation.
  • 11. If you do not look for a job then you will not find one – even if you want one… PROPORTION OF WORKLESS IN ONE QUARTER THAT ARE BACK IN WORK NEXT QUARTER: LFS LONGITUDINAL DATABASE 35% 30% 25% 20% 15% 10% 5% 0% Unemployed Inactive, not seeking, wants job Inactive, seeking not available Inactive, not seeking, doesn't want job
  • 12. …so, whether claimants are effectively looking for work helps to explain some of the variation since 1948 - from around ¼ of a million in the mid 1950s to over 3 ½ million in the 1980s before falling to a low of around ¾ million in 2008 and it currently at around 1 ¼ million. REGISTRANT AND CLAIMANT UNEMPLOYMENT: UK (Including Adult Students & Temporarily Stopped) & GB (Wholly Unemployed) 4,000 3,500 3,000 2,500 d n a s u o h T 2,000 1,500 1,000 500 0 UK REGISTRANTS GB REGISTRANTS UK CLAIMANTS GB CLAIMANTS
  • 13. Because (only a subset) of claimant unemployment was greater than the ILO measure, it is obvious that between the mid 1970s and late 1980s that there were people on the JSA count who were not ILO unemployed. This was partly due to policy changes… Difference Between ILO Unemployment(16-59/64)&Claimant Count 1,200 [Positive number means ILO is greater than claimant unemployment] 1,000 800 600 400 200 d n a s u o h T 0 -200 -400 -600 [CLAIMANT COUNT: UNADJUSTED FOR SEASONALITY & DISCONTINUITIES]
  • 14. …which led to a decline in the rate at which people leave the count as people remained on the count because they were not looking for - and hence getting – jobs. People who were ineligible were also not being moved off the benefit. Both of these elements had very damaging consequences for the number of long term claimants. 3,200 GB UNEMPLOYMENT BENEFITS BY DURATION: 12 MONTH AVERAGE 2,800 2,400 2,000 d n a s u o h T 1,600 1,200 800 400 0 Total Registrants 0-4 Weeks Registrants 0-26 Weeks Registrants 0-52 Weeks Registrants Total Claimants 0-4 Weeks Claimants 0-26 Weeks Claimants 0-52 Weeks Claimants
  • 15. The reduction in the the job search focus within JSA & other benefits and also the abandonment of the stricter benefit regime. So, between 1982 and 1986, you did not need to visit a Jobcentre in order to receive your benefits. So, the JSA policy changes had a bigger effect on ILO unemployment than JSA – with 1 million people on the count not ILO unemployed. 2.5 DIFFERENT MEASURES OF UNEMPLOYMENT: ONS ESTIMATES: APRIL EACH YEAR 2.0 S N O L I M 1.5 1.0 0.5 0.0 ILO UNEMPLOYED CLAIMANTS NON-CLAIMANT ILO UNEMPLOYED CLAIMANT NON-ILO UNEMPLOYMENT
  • 16. With the advent of Restart in 1986 and the general development of ‘Work is the best form of welfare’ from the mid 1980s the numbers of inactive JSA claimants fell sharply and the number of ILO NonClaimants also began to grow…. 1,200 CLAIMANTS WHO ARE NOT ILO UNEMPLOYED: AND NON-CLAIMANT ILO UNEMPLOYED: APRIL EACH YEAR 1,000 800 D N A S U O H T 600 400 200 0 Inactive Claimants Employed Claimants ILO Non-Claimants
  • 17. …as welfare to work ‘activation’ policies were extended to ‘inactive’ benefits in the 1990s and they have been ramped up since then. The numbers are now at a 20 year low and the rate of fall is getting faster. 'INACTIVE' OUT OF WORK BENEFITS: (ESTIMATED) 4,000 3,600 3,200 2,800 2,400 2,000 d n a s u o h T 1,600 1,200 800 400 0 All Inactive Benefits Lone Parent & Disability Benefits Lone Parent Benefits Income Support (Other) Disability Benefits
  • 18. Also, the major extension of working age is the equalisation of state pension age for women at 65 by November 2018. Women will, therefore, be covered by the JSA regime where job search is compulsory instead of the state pension age where it is not… ECONOMIC ACTIVITY RATE: FEMALES AGE 60-64 YEARS: LFS 40 36 32 t n C r e P 28 24 20 16
  • 19. …and there are plans to initially raise the state pension age to 66 from October 2020. This will combine with the removal of barriers in the benefit and pension system to working after 65 to increase the activity rates of older workers. There are, however, questions about whether it will be enough. ECONOMIC ACTIVITY RATE: AGE 65 YEARS & OVER: LFS 10 9 8 t n C r e P 7 6 5 4
  • 20. And, as well as ‘cleaning up’ JSA so that the claimants are ILO unemployed, the general policy of increasing labour supply also generates more employment – even during the recession… LABOUR SUPPLY & EMPLOYMENT: MILLIONS: LFS 32 Jun-Aug 1986 to Aug-Oct 2008 y = 1.41x - 13.9 Mill R² = 0.92 30 Aug-Oct 2008 to Jul-Sep 2013 y = 0.78x + 4.4 Mill R² = 0.79 28 T N Y O L P M E 26 Jan-Mar 1971 to Jun-Aug 1986 y = -0.13x + 28.3 Mill R² = 0.05 24 22 24 26 28 30 LABOUR SUPPLY [ECONOMICALLY ACTIVE] 32 34
  • 21. …and this has led to a good employment performance, including increases in employment rates for lone parents, the disabled & older workers – even during the recession. This has improved living standards for the most disadvantaged. EMPLOYMENT RATES: % POINT CHANGE SINCE 1998: 16 LFS: APRIL TO JUNE: NOT SEASONALLY ADJUSTED: 14 12 10 8 6 S I O G A T N C R E P 4 2 0 -2 -4 Not Long Term Disabled (16-59/64) Long Term Disabled (16-59/64) Lone Parents (16-64) Aged 65 & Over
  • 22. There are, however, groups – particularly young people – where it is difficult to promote job search (or indeed transitions into further education) because they are on ‘inactive’ benefits or not on benefits at all. JSA by contrast, is already approaching pre-recession levels… UNDER 25s WORKLESS NOT IN FULL-TIME EDUCATION: ON BENEFITS AND NOT ON BENEFITS [ESTIMATED] 700 600 500 D N A S U O H T 400 634 300 200 334 100 0 159 159 31
  • 23. …so, the biggest problem is activating for young people who are taking longer moving from education to work or further education – having fallen through the cracks in the education and the benefit systems. By contrast, the number of workless young people who are already in the labour market are close to pre-recessionary lows. LFS WORKLESSNESS: BY WHETHER THEY HAVE HAD A PAID JOB OR NOT: 16-24 YEARS EXCLUDING THOSE IN FULL-TIME EDUCATION: FOUR QUARTER AVERAGE 1,000 800 600 d n a s u o h T 400 200 0 HAD A JOB (Inc. Missing Values) HAD A JOB (Exc. Missing Values) NEVER HAD A JOB (Inc. Missing Values) NEVER HAD A JOB (Exc. Missing Values)
  • 24. In 2004/05 the proportion of Londoners in employment was below the national average. So, given its size, in order to have the biggest effect on the national average, it suggests a focus on London… Increase in Employment needed to reach national average 300 253 Employment increase needed (000). 200 80 100 75 64 52 23 9 0 London -100 N Ireland North East Wales North West W Midlands Y&H Scotland E Midlands -10 South West Eastern South East -35 -124 -200 -159 -211 -300
  • 25. er H am N le ts ew h H am ac kn e H ar y M in an ge ch y e Ea s te Ba r si rk ng in g t L a n i ve on r d Ke D poo ag ns l en i n Me gt rth ha on y m an r Ty Bl d C dfi ae h l na els ea u G w e Is nt W lin g e N ea stm ton th i P nst W e or al tT r th am a lb o Fo t So re G u th s t la w s g ar ow k C N it o M tti n y id dl gha es m br ou Sa g nd h w el l To w Employment rate % …and this is symptomatic of the problems across the country. The lowest employment rates were in the great cities, London Boroughs and some, but by no means all, ex-industrial areas… Bottom 20 LADs by employment rate 2004/5 City Ex-Industrial London Borough 66% 64% 62% 60% 58% 56% 54% 52% 50%
  • 26. However, the problem in cities was not a lack of jobs. Rather it is that the residents of the cities were not getting the jobs. They are being taken up by commuters. 130% JOB RATIOS AND EMPLOYMENT RATES Manchester 120% Inner London 110% Aberdeen Glasgow 100% Edinburgh Newcastle Cardiff London Leeds 90% Birmingham Middlesbrough 80% Gateshead Liverpool 70% Bradford Sheffield Outer London Sunderland 60% Employment rate Note: Job ratios constructed using 2000 data. Employment rates obtained from 2001 Local Area Labour Force Survey. 80 % 75 % 70 % 65 % 55 % 60 % 45o 50% 50 % Job ratio Bristol
  • 27. UK product & labour markets are characterised by near-’Perfect Competition’… UK product & labour markets are amongst the most open and competitive in the world with ‘light and even’ regulatory regimes… – 1st in the OECD Product Market Regulation Index; and – 3rd in the OECD Employment Protection Regulation Index. …and they are becoming increasingly individualistic and decentralised. Product Market - 2.1 Million Vat Businesses: Up nearly ¼ since 1984 - 4.2 Million Self Employed Jobs: More than doubled since 1979 Labour Market - 23.3 Million Non-Union Workers: Almost doubled since 1979 (95%) & up from < ½ to > ¾ of all LFS employment (47% to 79%)
  • 28. The UK’s ‘light and even’ employment regulation regime enables workers to move in and out of work easily. Consequently, there are always vacancies coming up as part of the high natural turnover in the UK… HIRING & SEPARATION RATES: OECD ESTIMATES: Annual Average: 2000-2007 30 25 15 10 5 Hiring Rate Separation Rate Ic e Sp D en U S C an Fi n U K Sv k Sl v C ze B el G er N or A us Po r Sw i Fr a Sw e Po l H ol Ire It H un re 0 G Per Cent 20
  • 29. …and because there are few legislative restrictions on types of work the UK has a greater range in work patterns . This diversity means that workers have more opportunities to find a job that suits then and their personal circumstances… UK Ger m any 4 7 5 0 5 0 44 4 1 3 8 3 5 47 Us ual Hours Work ed 3 2 2 9 26 2 3 2 0 0.0% 5 0 0.0% 4 7 10.0% 44 10.0% 4 1 20.0% 3 8 20.0% 3 5 30.0% 3 2 30.0% 2 9 40.0% 2 6 40.0% 2 3 50.0% 2 0 50.0% Us ual Hours Work ed France Italy Usual Hours Work e d 44 4 1 3 8 3 5 3 2 2 9 2 6 23 20 0.0% 5 0 0.0% 4 7 10.0% 44 10.0% 4 1 20.0% 3 8 20.0% 35 30.0% 32 30.0% 29 40.0% 2 6 40.0% 23 50.0% 20 50.0% Us ual Hours Work ed
  • 30. …and the range of opportunities provided by the UK’s ‘light and even’ employment regulation system has delivered not only a high overall employment rate but also generally higher rates for all age and sex groups (except the oldest)… EMPLOYMENT RATES BY AGE AND SEX: 2012: OECD ESTIMATES 100 90 80 70 60 T N C R E P 50 40 30 20 10 0
  • 31. …and not only that, but the UK has relatively few workers who are in forms of work that are generally not well regarded by the people in them – here temporary work… 28 24 20 T N C R E P 16 12 8 4 0 PERCENTAGE OF EMPLOYEES THAT ARE TEMPORARY: 2012:OECD ESTIMATES
  • 32. …and not only that, but the range of jobs also seems to deliver jobs that suit the workers. The proportion of involuntary parttimers is low and there are similar results for most other groups. 70 60 50 T N C R E P 40 30 20 10 0 SHARE OF INVOLUNTARY PART-TIMERS AS % OF ALL EMPLOYEES: 2012:OECD ESTIMATES
  • 33. However, there is still more to do. There is concern that there is exploitation associated with zero hours contracts. As it concerns exploitation the most appropriate official statistic is the LFS because it reflects what the individual thinks. According to the workers themselves there are a ¼ million people on such contracts… Thousands Estimated number of people on zero hours contracts, UK 300 250 200 150 100 50 0 Q4 2000 Q4 2001 Q4 2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Source: BIS estimates based on Labour Force Survey data Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012
  • 34. …and of the ¼ million on zero hours contracts around 90% are employees and only around 1 in 6 usually work zero hours each week … [This and subsequent information kindly provided by DWP. Any errors are, however, my responsibility.] NUMBERS ON ZERO HOURS CONTRACTS: LFS: Q4 2012 300 THOUSANDS 250 250 228 200 150 100 39 50 0 Total of which Employees of which number usually working zero hours
  • 35. However, only 30% of ZHC cases worked their usual hours in the reference week (but the remainder were just as likely to work more hours than fewer hours) and there are also other forms of contracts with variable hours. Actual compared with usual hours 60% ZHC Non-ZHC 50% 40% 30% 20% 10% Unknown 10+ hrs more 5-9 hours more 3-4 hours more 1-2 hours more Same as usual 1-2 hours fewer 3-4 hours fewer 5-9 hours fewer 10+ hrs fewer 0%
  • 36. Around 18% of ZHC are actually working zero hours as are around 10% of other workers. However, many of these will be due to events such as holidays… 40% ZHC Non-ZHC 35% 30% 25% 20% 15% 10% 5% 0% No hours 1-4 hrs 5-9 hrs 10-14 hrs 15-19 hrs 20-29 hrs 30-39 hrs 40-49 hrs
  • 37. Of the 18% of ZHC contracts with zero hours (around 10% of nonZHC cases) around 15% (9%) are temporarily away from work [the category we think is likely to contain the most exploitation] 100% 90% 80% 70% 60% 85% 50% Other Temp away 91% 40% 30% 20% 10% 15% 9% 0% ZHC Non-ZHC
  • 38. There are greater signs of problems with the current situation in ZHC cases. They are more likely to want more hours but it is still only a minority (35%), including 14% who are actively looking… 100% 2% 2% 90% 80% 70% 62% 60% 50% Unknown Don't need more Not lkng, prefer Lkng, prefer more Lkng, need more 85% 40% 30% 21% 20% 10% 6% 10% 8% 1% 2% ZHC Non-ZHC 0%
  • 39. …and not many people on zero hours contracts have succeeded in getting a second job – although it is greater than other workers. We do not, however, know whether this is due to restrictions associated with exclusivity contracts. 100% 0% 0% 90% 80% 70% 60% 50% 94% Unknown No second job Second job 96% 40% 30% 20% 10% 0% 6% 4% ZHC Non-ZHC