Once again a good jobs performance highlights underlying concerns about labour productivity

Press Releases

17 Feb 2016

Nigel Meager, director of the Institute for Employment Studies, comments on today's ONS Labour Market Statistics:

‘Today’s labour market figures from ONS are once more, at first sight, very good indeed. All key indicators are positive with vacancies at a record high, the employment rate likewise, total hours worked growing strongly and unemployment down below pre-crisis levels.

‘This does, however, raise the question of why, in an apparently tightening labour market, pay settlements remain sluggish, with real earnings growth back down below 2 per cent, and real earnings levels still well below the pre-crisis level of 2007. This picture would be worse if we factored in the earnings of the self-employed.  Self-employment, also at record levels, creeping towards 5 million, still accounts for a large share of the growth in jobs (more than half of the 205,000 growth in employment in the last quarter were self-employed), but the earnings of the self-employed are not included in the official earnings figures. We know, however, from other sources that average self-employment income has been falling (partly because many of the new self-employed are part-timers).

‘All of this – the sluggish growth in earnings, the reliance on self-employment – highlights one of the enduring features of the current economic recovery, namely that the success in total jobs growth has been achieved at the cost of a very poor performance in labour productivity. Labour productivity growth still remains well below its pre-crisis trend, and is continuing to diverge from the productivity growth trends in our major competitors. Things have, if anything, got slightly worse on this front in the latest quarter; putting the latest jobs figures together with the latest GDP estimates shows that productivity actually fell by 0.2 per cent during the quarter, if measured as output per worker, and by a much larger 1.2 per cent if measured by output per hour worked.’


About IES

The Institute for Employment Studies is the UK’s leading independent, not-for-profit centre for research and evidence-based consultancy on employment, the labour market, and HR policy and practice.


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About Nigel Meager

Nigel is a labour economist by training, and a well-established international expert on labour market and employment policy issues. He has worked at IES since 1984, following posts at the Universities of Bath and Glasgow. He has been Director of the Institute since 2004. He has a long and varied research track record covering the functioning of national, regional and local labour markets, unemployment, skill shortages, labour market flexibility, changing patterns of work and equal opportunity policies and practices.