UK Labour Market

In 2011 employment fell steeply in wholesale & retail trade, accommodation & food and information & communication. This reflects the highly cyclical nature of these industries as consumers have cut back on their discretionary spending. It is likely that workers in low-skilled occupations, which predominate in these types of service industries, have borne the brunt of these sustained employment losses. In contrast other market services, such as professional and non-financial business services, experienced much smaller falls in employment in 2011 and employment is forecast to increase in the short to medium term.

In the public sector, heavy job losses are inevitable as a result of the government’s deficit reduction programme. The Office for Budget Responsibility has predicted a reduction in the public-sector workforce of 330,000 between 2010/11 and 2014/15, an estimate considered optimistic by many analysts. There is already evidence of these cut backs feeding through into the hiring behaviour of the public sector. The full effects of the government’s austerity measures, however, are not expected to be felt in the short term, since employment in the public sector is forecast to flatten off in 2011 and then decline in the medium term.

The implications of the reduction in the public-sector workforce for employment in the wider economy will depend on the extent to which jobs are permanently lost rather than transferred from the public to the private sector.

Total employment in the UK is expected to recover to 31 million in 2015 and just over 32 million in 2020. This compares to a high point of 31.7 million in 2008 and a low point of 31 million in 2010/2011. Overall, these results suggest that job creation in the private sector will eventually be sufficient to offset job losses in the public sector. However, the rate of generation of private sector jobs is insufficient to drive down unemployment to the kinds of levels seen before the crisis.

Over the period 2005-10, the UK total resident population increased by 1.8 million (3%) to 62.1 million. A faster percentage increase occurred in the working-age population, with net inward migration contributing to this increase. This was reflected in a 4.3% increase in the size of the labour force, which rose to 31.4 million in 2011.


Urban areas suffer most from unemployment There are pockets of high unemployment throughout the UK, generally concentrated around urban areas . The urban areas that experience particularly high rates of unemployment are generally those with ‘post-industrial’ economies, including Tyneside, Teesside, Hull, Liverpool, Leeds & Bradford, the west midlands conurbation and South Wales. Some urban areas, however, have relatively low unemployment rates.

These are mainly associated with a local economy geared to services and high-tech work. The case of Scotland, where unemployment is very high in Glasgow but low in Edinburgh, is striking, as is that of London, where pockets of high unemployment are mostly concentrated in the east of the city. Manchester does well relative to other large ‘post-industrial’ conurbations, although largely in the more affluent suburbs.

Youth unemployment is a major cause for concern

Young people are typically hit particularly hard by unemployment. In the recession, 74% of the decline in employment was among those aged 16 to 24, yet they comprise only 19.5% of the working age population. Arguably the biggest long-term challenge posed by the post-recession labour market is the significant growth in youth unemployment . This is worrying today – as the potential of too many young people goes to waste and they miss out on valuable experience – and troubling for the future, as all the evidence suggests that a failure to engage with the labour market early has a sustained scarring impact on individuals through their lives.

Youth unemployment is not a new challenge – pre-recession, one-in-five 16-17 year olds were neither in education nor work. However, as firms took steps to preserve existing jobs, they stopped generating new entry-level roles for those leaving education. Between the start of the recession to date, the unemployment rate for 16/17 year olds rose by 46%.

It is a similar story for 18-24 year olds, where over the same period unemployment has risen by nearly one third (32%).

Welcome steps have been taken to begin addressing the problem, with the expansion of apprenticeships, educational reforms, and a focus on delivering work experience to those on the margins of the labour market. But we need to do much more to avoid youth unemployment becoming an entrenched, structural problem in the way that it has in some Eurozone.

Future Jobs

On a national level, the UK labour market is expected to see a continued shift towards higher level occupations – by 2017 almost half (47%) of jobs will be for managerial, professional or associate professional roles . The pattern, however, is not simply a linear shift towards higher skilled roles. While the proportion of elementary roles will fall, they will still account for 10% of jobs in the economy. There will also be an increase in personal service occupations, as for example more people are needed to fill health and social care roles to look after an ageing population.

There is a view that increasing use of technology will drive-up the demand for skilled labour – while making redundant a large number of unskilled jobs. However, there is also a current debate on whether the UK is heading for an ‘hourglass’ economy. This argues that the routine tasks which can be replaced by technology are neither the managerial roles at the top, nor the low-skilled at the bottom such as cleaning or shelf-stacking.

The roles which are vulnerable are actually those in the middle range – including administrative, clerical and secretarial jobs as well as manual – and it is these jobs which will thin out over time. As a consequence, there is the risk of basic level jobs being increasingly filled by those with intermediate level skills, reducing the opportunities for those with only basic skills.

The need to replace those leaving the workforce means that there will be demand for people to fill occupations of all types over the next few years. By 2017, there will be a need to fill 13.5 million jobs, taking into account both job expansion and replacement of those leaving the workforce through retirement and other factors. Again, the largest number of jobs to be filled will be managerial and professional, personal services and elementary roles – although the demand for recruits to elementary roles will largely be to replace those leaving the workforce rather than the creation of extra jobs.