The UK’s Employment Miracle Post the Financial Crisis

 

In an earlier blog I focused on the major puzzle about the UK economy after the financial crisis of 2007 to 2008. Why, after this crisis, did employment grow so rapidly when real hourly earnings were falling. In this blog I want to show what kind of jobs were being created in this period of unprecedented employment growth.

 The UK labour market is a complex one. The growth in employment encompasses many different types of jobs. One important distinction is between part and full-time work, where women are much more likely to be part-time workers. Is this part-time work a matter of choice or are these workers unable to obtain the full-time employment they prefer? A second important distinction is between being a wage employee and being self-employed. A growth in self-employment, rather than wage employment, may indicate very different mechanisms of employment growth. A third distinction we need to consider is between the public and the private sector. There is a view among right-wing commentators that only jobs in the private sector are ‘real’. Finally, there is a view that the ‘gig’ economy has grown in importance and that rather than there being a jobs renaissance in the UK there has been a race to the bottom in the type of jobs being created. I now consider each of these dimensions of employment growth in turn.

 Full and part-time Work

 In terms of job creation, a rise in part-time employment is ambiguous. Are those working part-time because they cannot find a job or is it preference to balance household or child-care responsibilities or simply not wishing to work full-time. I will come to that below. In Figure 1 below I show the growth of full and part-time work for both employees and the self-employed, by gender, over the period after 1985.

 

Figure 1 Full and Part Time work by gender: 1985-2019

 

The growth in total employment was the focus of my last blog. I showed there that not only did employment grow very rapidly after 2010 but the employment rate, the proportion of the population in employment, grew to its highest level ever. In Figure 1 we see the type of job growth that underlay this remarkable growth in employment. The summary fact from the Figure is that both full time and part time jobs, meaning wage jobs and self-employment, for both men and women all grew. Between 2009 and 2019 (2009 being the lowest point reached by employment in the aftermath of the financial crisis) total employment increased by some 10 per cent. The most rapid rise was for full time female employment which increase by 14.3 per cent over this period, the lowest rise was for male part-time employment which only rose by 4.7 per cent.

 

Is part-time work preferred?

 

We are left with the question - how many of those working part time wish to work full time and how has that proportion been changing? The answer is shown in Figure 2.

 

Figure 2 Part Time Workers

 

It is clear from the chart of Figure 2 that at the time of the 2007 to 2008 financial crisis more than 50 per cent of male part time workers did want a full-time job, this was true for only about 20 per cent of female part time workers. If we think of those part-time workers who want full time work as ‘involuntarily’ part-time than in the immediate aftermath of the financial crisis their numbers increased for both men and women. However, this was a short-term effect. After 2014 the numbers of these ‘involuntarily’ part time workers decreased as a proportion of such workers. In fact, by 2019 the proportion of male workers who did NOT want a full-time job was the highest ever recorded since data in this form was collected in the early 1990s. For women there has been a long-term trend by which, again as a proportion of those working part time, they did want a full-time job. By 2019 this was just over 20 per cent. 

 

Private and Public sector jobs

There is a view among right-wing commentators that only jobs in the private sector are ‘real’. This view does not make a lot of sense as many public sector employees work in public services. It is also the case that with the privatisation program begun under the Thatcher government many workers have moved between being classified as public to being private sector, with no change in their jobs. Indeed, these shifts have complicated the task of the ONS in measuring private and public sector jobs. However, using ONS data which seeks to ensure that there is a continuity in the definition Figure 3 shows clearly that all the jobs growth that has occurred since the financial crisis has been in the private sector.

 

Figure 3 Private and Public Sector Employment

 

The ‘Gig’ economy

 A final major concern regarding the pattern of job creation after the financial crisis has been the notion of the gig economy where employment is precarious and hours variable. In a BBC report of February 2017, the gig economy was defined as one where, instead of a regular wage, workers get paid for the "gigs" they do, such as a food delivery or a car journey. It then said that ‘in the UK it's estimated that five million people are employed in this type of capacity.’ It is not clear where that number comes from. Clearly the notion of a ‘gig’ job is not clear cut.

 In using the ONS data to measure the size of the ‘gig’ economy there seem two options. One is to define the ‘gig’ economy as those who work part-time as self-employed.  A second is to identify the ‘gig’ economy with workers the ONS identifies as temporary. These are workers who are on a fixed period contract, agency temping, causal or seasonal work or, for some unstated reason in the survey, do not have a permanent job.  As we have seen by 2017 more than half of those working part-time do not want a full-time job so using the second of these definitions seems to capture better the notion of ‘gig’ work.

 In the left-hand part of Figure 4 I show the number of such temporary workers, classified as whether they are full or part-time.  In the right-hand panel I show temporary workers as a percentage of total employment. 

Figure 4 The ‘Gig’ Economy

If we view these temporary workers as being the gig economy than we obtain a number 0f 1.8 million in 1997 when this data was first reported by the ONS. The numbers then fell until the advent of the financial crisis, after which it rose back to the 1997 level. However, since 2015 the number have fallen back to the pre-crisis level. As the right-hand chart in Figure 4 shows as a percentage of total employment by 2019 the proportion of temporary workers in total employment was the lowest it has ever been. 

 The key fact of the UK economy over the period since 2010 up to 2019 is the rapid growth of all forms of employment, for both men and women, of which the ‘gig’ economy is by far the least important.

We are left with a major puzzle. Why in a period of falling real wages did employment for both men and women, and for full and part time work, expand so rapidly? In future blogs I will seek to answer that question.