Jul 26, 2022
David Freeman and Nicola White join Miles to discuss how the Office for National Statistics (ONS) tracks employment and pay across the UK.
Transcript:
Hello and welcome again to Statistically Speaking, the Office for National Statistics podcast. In this episode, we enter the world of work and clock on for a shift with the ONS labour market team. We'll explore how they keep track of employment and pay across the UK and find out how the figures we hear so much about in the news should really be interpreted. At your service, are employees of the month, our head of labour market and household statistics David Freeman, and later on his colleague, senior statistician Nicola White.
David, let's start with the basics.
And one common misconception you still hear around the official
statistics on unemployment is that they're based on the number of
people claiming out of work benefits. And so, the theory goes
therefore, that they're subject to manipulation in some way. But to
be absolutely clear, the figures don't come from any other
government department. This is data that comes from the ONS talking
directly to real people, in their tens of
thousands.
DAVID FREEMAN
That's absolutely right, Miles. The bulk
of the information that we publish as part of our labour
market statistics come from something called the ‘Labour Force
Survey’. As this is one of our big household surveys, every three
months we sample 40,000 households across the UK. And we go and we
interview the people in those households about their labour market
status. So, are they working, are they not working. We also gather
a lot of information about the people in those households, what age
they are, whether they have got a disability, what ethnic group
[they belong to], which gives a us rich picture of the UK labour
market.
MILES
FLETCHER
And by the standards of any survey,
any regular survey, that's a huge sample isn’t it. I know we
don't go in for superlatives, but it's possibly the biggest
household survey regularly undertaken of any kind?
DAVID FREEMAN
I think it is the biggest one in the
UK, outside of the Census of course, and again, through the
data that we use, we’ll learn about the labour market, but the
data will also feed into things like population estimates. So
quite a wide range of uses, but its core purpose is really trying
to measure the UK labour market.
MILES FLETCHER
And it's that time spent with people to
gather a whole raft of data from them, and at scale, that can give
a localised picture, which is so important too.
DAVID FREEMAN
Absolutely, we get a lot of information
from the Labour Force Survey, either by age groups, by country of
birth, also by regional level, and we have an annual version of the
Labour Force Survey where we put the data together across a longer
time period, which means we can get data down to things like local
authority levels as well which is important for local
government.
MILES
FLETCHER
And how do we choose people to take
part?
DAVID FREEMAN
It’s a totally random process. So we have access to the postcode directory for the UK, which is effectively a list of all the households in the UK, and we take a random sample of those. However, we make sure within taking that sample that we're represented across the country. So within each local authority area, we've got enough people to be able to give us a robust estimate of what's happening there.
MILES FLETCHER
You stay in the survey a little while, don’t you?
DAVID FREEMAN
You do, that's right, and that's one
of the strengths of the Labour Force Survey. If you're selected to
take part, you are in there for what we call “five waves”. So
if you're selected in January, we'll also come back and talk
to you again in April, July, October and the following January. And
that's important because not only do we find out what people
are doing now, as you say we find out how people have changed, and
whether they have moved into employment, out of employment, how
have their circumstances changed. And that gives a deep insight
into how people are flowing through the labour market and changing
over time.
MILES
FLETCHER
So, big sample, lots of data coming
in. When it comes to the analysis though, essentially, we group
people under three big categories. Now the first of those is
employment. It sounds self-evident, but what is the definition of
an employed person?
DAVID FREEMAN
To be employed is to be someone who has
done paid work in the reference week, so when
we interview people we’ll say, what were you doing in the week
before we're interviewing you? They are considered employed if they
have done paid work for a minimum of one hour in that week. So the
bar is, you could say it’s quite low, in terms of one hour of work
a week. But we have looked, and not that many people work that
little in a week – less than 3% of people work less than five
hours. So, as well as you'll get paid, we have a couple of
other areas as well. We cover people who are employees,
so employed by a company, the self-employed, people in
government training schemes and people who work for their family
business and might not get a wage packet but benefit from
working for that business.
MILES FLETCHER
What is the average number of hours that
employed people do?
DAVID FREEMAN
Overall, the average is around about 31
hours a week, and that does differ between if you're full time
or part-time. So if you're full time, then the average is around
36. If you're part time, the average is around 16 hours a
week.
MILES FLETCHER
Okay, so that's a working week. Now who
is unemployed? Technically speaking.
DAVID FREEMAN
The technical definition of unemployed,
there are three elements to it. Firstly, you've got to be not
employed, so not doing any paid work. But you must also be
actively seeking work in the previous four weeks. So that means
applying for jobs, going to interviews, looking through listings,
etc. And finally, you must be available to start work in the
next two weeks. So you have got to be available to start a job
within the next fortnight after we interview you.
Again, another international definition used across the world
to define who's unemployed.
MILES FLETCHER
And how long do you have to be
unemployed to be classed as long-term unemployed? Because that's a
very important category to understand as well.
DAVID FREEMAN
To be considered long-term
unemployed, a person must have been in that position for a year or
more.
MILES FLETCHER
What's the average time that people are
currently spending unemployed?
DAVID FREEMAN
It's a bit hard to say, we don’t have a
technical age or an average time, but the majority of people who
are unemployed have been unemployed for less than six months. So
people moving into unemployment after having recently lost a job or
moving through unemployment to get to a job. And it's just
under 1 in 3, who have been unemployed for more than a
year.
MILES FLETCHER
So if you don't satisfy any of those two
definitions. You're not doing any kind of paid work and you're not
actively seeking it in the way you've described, where does that
leave you?
DAVID FREEMAN
Well, that leaves you in a third group
that we call the “economically inactive”. And so these people
are not in work, and are either not actively seeking work, or
are unavailable to start work. So you can be looking for work and
not available, and you'd be economically inactive, or you
might be available and not looking, and again, you'd be
economically inactive there. And the sort of people included in
this category are the sort of people who may be looking after
family or home, they are stay-at-home parents, or they have caring
responsibilities that mean they can't work. They might have a
long-term illness or disability which means they are not able to
work, or they may have retired. It's the people who aren't working
and are not looking or available for
work.
MILES FLETCHER
One contentious area under this
definition of the economically inactive is a group that swells and
contracts according to the economic cycle, and it’s that group
of people who are unable to work and are collecting benefits. What
do we understand about that group at the moment?
DAVID FREEMAN
That group as you say, it does
change over time. And the reason for that is because people on
benefits depend on the rules around those benefits. So, over the
years we have published something we call the “claimant count”.
This counts people claiming benefits and the main reason they're
claiming benefits is because they're out of work.
MILES FLETCHER
And that used to be the main
measure of our unemployment, as it was understood.
DAVID FREEMAN
You’re absolutely right. If we go back
to the early mid 90s, it was a lead measure. But at that point the
rules around the benefits were such that the official unemployment
count and the benefit count was about the same. However, when
we moved to Jobseeker's Allowance in the late 90s, the rules
changed on benefits. So fewer unemployed qualified for the
benefits, and the two measures did diverge there.
MILES FLETCHER
It's been said that there's a very large
group now who are on out of work benefits alone, and that is hidden
unemployment?
DAVID FREEMAN
Some of these people will be unemployed
if they're out of work, and actively seeking or available to work.
However, out of work benefits will also include people who we would
class as economically inactive. Such as people who have a long-term
illness or disability that prevents them from working. They'll be
getting out of work benefits because they're not working, but
because they're not able to look for work, or not actively looking
for work, we wouldn't count them in our unemployment statistics. So
yes, there are a lot of people on out of work benefits, more
than we would count as unemployed. But not all these people would
fit that definition of unemployed that we use.
MILES FLETCHER
But nonetheless a very important
indicator when you're thinking about how people might be helped
into work.
DAVID FREEMAN
That's right. Yeah, and and it indicates
what that potential workforce could be. But obviously, some of
these people may need some help to get themselves into a
position where they're able to look for work and gain
employment.
MILES FLATCHER
Okay, well what that briefly explained,
is how the headline measures - you might like to call them
your classic ONS measure of employment and unemployment - work. But
one criticism that you might care to make about this system is that
it takes a while to process and the numbers when they come
out...there's a bit of a lag isn’t there.
DAVID FREEMAN
There is a little bit of a lag, again
because of the size of the sample, the amount of data we have to
process and the fact that we have to make sure we're getting enough
responses in. There’s about a six-week lag between the end of the
period we're looking at and the data being published into the
public domain.
MILES FLATCHER
So in order to speed things up a bit,
and to have a timelier indicator of what was happening with
employment, and this came in very useful with the arrival of the
pandemic, we've been using faster sources of information to
supplement the headline employment figures. Can you talk us through
that? What progress has been made and how useful these other
sources of data have been?
DAVID FREEMAN
Yeah, so probably the biggest one that
we've been using throughout the pandemic has been the counting of
people for the real time tax information from the Revenue and
Customs department. So this is a big database that HMRC hold, and
it contains information about everyone on a payroll. So if you are
on a pay as you earn scheme, all your information is collated in
HMRC for the purposes of calculating your tax. At the end of 2019,
we started working with HMRC on publishing regular data from that
system. I counted the number of people on payroll schemes and
how much they're earning. The benefits of this are that it is a
complete count of people on the pay as you earn scheme, so it gives
us lots of information, meaning we can analyse smaller levels
and small groups of people without impacting on the confidentiality
of the data. When the pandemic started, we worked with HMRC to see
if we could speed the data up, because previously it was
at the same sort of pace as the Labour Force Survey, so
about six weeks, and we managed to move to what we call a flash
estimate. This means we can publish the data for a particular month
within three weeks of the end of that month, which is so much
faster and was a real benefit at the beginning of the
pandemic. Getting information quickly about what was happening to
employees on tax schemes.
MILES FLETCHER
And that was vital wasn't it, to inform
the policy response to the pandemic when it arrived. Because you
know, waiting a few weeks could have been too late for a lot
of people.
DAVID FREEMAN
It could have been, and this is a big
step forward in using this local administrative data in the labour
market, and we've carried on doing that flash estimate. And as well
as that we've been, over the pandemic period and up to the present
day, adding more and more information from the pay as you earn tax
data. So, a company produces data for a local authority level, we
also do it by regional and industry. So, lots of information
much more quickly than we can get it from our survey
data.
MILES FLETCHER
You could say we've got the best of both
worlds now. We've got the rich data coming out of the Labour Force
Survey. But on the other hand, we've also got the much quicker data
coming hot off the systems of HMRC to give that flash picture as
you described it.
DAVID FREEMAN
One of the things that has been very
developed over the pandemic is having this extra data and it
provides a very, very rich picture. And when you put it together,
you do get a very, very good picture of what's happening in the
economy. I mean, the next step is to try and actually bring these
data sources together. So linking data from the tax system to
survey data, and trying to exploit even more, the benefits
of having these sorts of information
available.
MILES FLETCHER
Do you think we'll get to the point
where we replace the survey completely? Or will it continue to have
that very important central role?
DAVID FREEMAN
I think surveys will always have a
central role. The tax data is brilliant. It does only cover
employees, so we don't we don't cover the self-employed, you don't
cover government trainees or people working for their family
business. Also, the level of information we get from the Labour
Force Survey is much bigger than we get from administrative
data. On the tax system, we merely have information that's
relevant to people paying tax. So that means we don't get a lot of
the information that we get from labour force surveys - whether
someone's got a disability, what their ethnic group is, what their
nationality is - and these are all important variables in terms of
informing government policy and giving a picture of what's
happening in the UK.
MILES FLETCHER
You mentioned that the tax data was a
development that was already in progress before the pandemic, but
it was sped up given the urgency of that situation, but other
sources of data have been coming in as well?
DAVID FREEMAN
Another big source of data that we've
been working with over the pandemic period has been the online job
vacancies data from a company called Azuna, who we've been
partnering with over the period. And this has been another big step
forward in calculating the number of vacancies in the UK economy.
The data we are getting is really really timely, so we can take a
download of data on the Friday, and we’re publishing it the next
week. So really timely. And, the information you're getting in an
online job vacancy means we can look at things like where the
vacancy is, so what geography it’s located in, and some indication
of the skills or the occupation of that vacancy as
well.
MILES FLETCHER
Obviously, if you think about impacts of
the pandemic for quite a period, over the last two years, when you
add it all up, we spent a lot of time chained to our laptops, in
many cases, working from home. How has that rubbed off on the
workforce now, and what do we think is the lasting impact of the
working from home trend?
DAVID FREEMAN
Certainly, on the latest data we've got,
it does look like there's been a bit of a shift in terms of the
number of people who work at home on a regular basis. Prior to the
pandemic, fewer than three in 10 people had ever worked from home
at any point, whereas if you look at the most recent data, around
35% of people are working from home regularly. So that 1 in 3
people are now doing some work at home during the working
week.
MILES FLETCHER
So that's a huge change and we reckon
that is, to some extent, showing signs of lasting?
DAVID FREEMAN
It does look like it is lasting. Home
working doesn't necessarily work for everyone. When we did the
analysis, there's quite a few professions or occupations where
homework is relatively low. That’s particularly in the caring
occupations, retail, catering and construction, where it's hard, or
if not impossible, to work from home.
MILES FLETCHER
We'll have to see how that develops over
the months ahead. But another phenomenon that was spotted as we
emerged from the pandemic was what's been called ‘The Great
Resignation’. Over 50s apparently disengaging with the labour
market, and that I guess, is them going from employment in large
numbers into the ‘economically inactive’ category? What do we know
about that?
DAVID FREEMAN
You're absolutely right. This is
something we've seen particularly in the last 12 months, people
over 50 are moving out of the labour market into economic
inactivity. Some of these people are retiring, so particularly the
over 60s, most of those people are retiring. However, for the
people aged 50 to 59, a lot of them are retiring for health
reasons. They've developed a long-term illness, which again may be
related to COVID, which is preventing them from carrying on with
work. And this is having an impact on the overall labour market
because the employment rate is still lagging behind where we were
pre-pandemic, and a lot of that is down to these people moving
outside into economic inactivity.
MILES FLETCHER
That's an important factor because other
ONS statistics tell us that there were some 800,000 people who
report, or we estimate, are suffering the effects of long COVID. So
that would be a big factor in this, one might think, and it really
isn't a question then of people having had a taste of being at
home all the time and thinking, “Oh I just don't want to go
back to work. Let's call it a day now”.
DAVID FREEMAN
You're right. So the older people
aged 60+, again, particularly people who have got a private pension
and won’t rely on the state pension, it is that retirement.
But say for those 50-59s, while some of them are retiring
early, there are people who believe themselves too ill to
work
MILES FLETCHER
And what do we understand then from our
lifestyle survey? About how people's patterns of leisure and work
have changed?
DAVID FREEMAN
There are a few things to think about
again, will the people who have moved out of the workforce want to
go back into the workforce. Looking at those over 60, only about
18% of those want to go back and will consider returning to
work. Whereas those in their 50s, just over half would consider
returning to work, but looking for a job that suits their skills
and would suit their lifestyle. So, people wanting more flexible
work and something that will fit around their caring
responsibilities as well.
MILES FLETCHER
So overall, how do we think the UK did
in terms of dealing with a pandemic? And particularly its impact on
the labour market compared with other countries? Did they see
these kind of impacts as well?
DAVID FREEMAN
It's quite interesting when you look at
the impact of the pandemic across different countries. In terms of
the UK, we have a very similar pattern to the rest of Europe. We
saw a drop off in employment rate at the start of the pandemic
and then gradual increases. But that drop off in employment was
about 2 to 3% of the employment rate, and that's in stark
contrast to the USA and Canada where the pandemic impact was much
greater in terms of falling employment - about nine to 10
percentage points of the employment rate. Moving onto inactivity,
what seems to be the difference is the coronavirus job retention
scheme in the UK, and similar schemes across Europe, kept people
linked to their job and in employment, rather than moving into
unemployment. Unemployment remains, again in the UK and across
Europe, relatively low. But all countries, including
the USA and in Europe as well, saw an increase in the
level of inactivity during the pandemic.
MILES FLETCHER
So overall the UK not too exceptional
really, in how governments responded to the impacts of a pandemic,
and how those effects played out on the labour
force.
DAVID FREEMAN
Not very different at all at the
beginning of the pandemic. We're seeing a little bit of a
difference now, and we touched on it earlier in terms
of economic inactivity, is that the UK employment rate is
still a bit below where it was pre pandemic, whereas the EU and USA
and Canada, they've got back to about where they were at the
beginning of 2020. This links to the over 50s moving out of the
workforce. We're still a little bit behind other European countries
at the moment.
MILES FLETCHER
And explains perhaps why the over 50s
are the subject of particular research, extra research going on now
to understand what's really going on there.
DAVID FREEMAN
Yeah, absolutely.
Because that does seem to be the difference between us
and the rest of Europe.
MILES FLETCHER
Okay, well I mentioned earlier on, the
richness of the data that we get from the Labour Force Survey, and
when you delve into the data, you get to explore some quite
interesting topics. And one of them we uncovered the other day was
that even in 2022, there are still some jobs that are dominated by
one gender. Tell us about that.
DAVID FREEMAN
Yeah, so this is a really interesting
thing. We do put out regular data, where we go right into the
detail of some of the occupations. And it is interesting when you
look at the sort of gender split in some of these jobs. So, there
are a few jobs where we have hardly any women at all doing them, so
that includes ship officers and metal workers, and at the other end
of the spectrum, we've got very few men who say they are
dancers or choreographers.
MILES FLETCHER
You might be less surprised to hear that
pipelayers tend to be all male, but also veterinary nurses are
almost exclusively female.
DAVID FREEMAN
That's right. And again, if you look at
other occupations, that are predominantly female, they are things
like midwives, school secretaries, PA’s and secretaries, child
minders, nursery nurses and medical secretaries. And then if you go
to the occupations that are predominantly male, they’re very
much in the construction space, so carpenters, bricklayers,
electricians and plumbers.
MILES FLETCHER
How do we classify people into jobs? We
don't just listen to how people describe themselves. You have
to fit into some classification, don't you? How does that
work?
DAVID FREEMAN
Well, we have got a classification, it's
called a ‘standard occupational classification’, and that gets
updated regularly. The latest version was updated in 2020. And the
way we classify people, when we do the interviews as part of the
Labour Force Survey, we ask them what their occupation is. And then
we take that description, and we match it onto our list of
occupations. There are hundreds of potential occupations. We've got
a computer programme that helps when you put the description in,
it'll narrow it down to a few options, and then the interviewer can
pick the most suitable of those options to match what the person
has told us.
MILES
FLETCHER
And that makes the figures
internationally comparable. Again, you can't tell the Labour Force
Survey, well, I'm an image consultant. They'd have to find a way of
matching that against one of the definitions, and I see we
were asked the other day whether ‘Social Media Influencer’ was a
classified job, it turns out it isn’t. They're either marketing
associates, or actors and presenters, it turns out. These
classifications, they're reviewed every 10 years or so aren't they,
perhaps the next update will recognise a job like
that.
DAVID FREEMAN
If it grows in terms of importance
and the number of people doing it, it's quite likely it could
end up with a classification. I mean, the latest update started
including programmers as a separate job description. They were
lumped in with other things in earlier classifications, again
because of a growing occupation.
MILES FLETCHER
It's quite a good test this. If
your mum asks you if you've got a proper job yet. If you can
point to the standard occupational classification, I think that
that'll answer the question for her quite satisfactory
wouldn't it. By the way, recent additions are coffee shop workers,
not surprisingly, given the huge growth in coffee serving
establishments, what other ones have been officially designated
recently?
DAVID FREEMAN
Lots of jobs linked around the internet
and web development and website development as well. You go back 15
or 20 years and it didn't even exist. And things like ‘Play
Workers’ as well, with the use of child minding and child play
facilities, they’re also new additions to the
list.
MILES FLETCHER
So, working in the gig economy, you
know, the hours might be irregular, you might be on a zero hours
contract, but nevertheless, chances are you're your job is
officially recognised.
DAVID FREEMAN
Almost certainly, even if your job may
not have an official designation, you would still be fitting into
the framework somewhere.
MILES FLETCHER
And it might be worth noting since we're
sitting in the ONS, that data analysts have only been recently
recognised as an official classified
occupation.
Well, just as important as finding
out what people do is the whole question of how much they get
for doing it. And who better to talk to about that than our Head of
Earnings at the ONS Nicola White, how does the ONS find out
what's on people's salary cheques every month.
NICOLA WHITE
We use several surveys to estimate
wages. So, one is a monthly survey, which gives us the latest
picture of what's happening, and the other is once a year, and this
allows us to measure not only weekly earnings but also annual
earnings, hourly earnings and it enables us to also look at
detailed characteristics such as age, sex, region and occupation.
It's a much richer data source.
MILES FLETCHER
Again, this is a big national level,
thousands and thousands of people.
NICOLA WHITE
For the monthly survey, we ask to
provide us with the number of employees in their business, and then
what they're paying out in wages that month, and then we just
calculate the average weekly earnings. The annual survey is
slightly different. It's filled in again by businesses, but we ask
for a selection of employees so that we can collect the additional
data that we require.
MILES FLETCHER
So, we're not just trusting people to
come clean about how much they're earning because I wonder if
people might be concerned about what the tax authority might
say.
NICOLA WHITE
As we collect this from businesses,
we think the quality of the data might be much better than giving
the individual data.
MILES FLETCHER
For statistical purposes, what is the average wage in the UK?
NICOLA WHITE
So, the average weekly earnings for all employees at the moment is around 565 pounds a week. Then if we include bonuses into this, it increases it to around 600 pounds a week.
MILES FLETCHER
And what’s been the trend recently?
NICOLA WHITE
It's been quite difficult to
interpret earnings recently given the pandemic, and one reason for
is because COVID has impacted the workforce. So many workers were
on furlough or had their hours reduced during 2020 and 2021. And
this meant that people saw their earnings fall, pushing down weekly
earnings, but in the following year, fewer people were on furlough
and hours returned to normal, so then weekly wages were higher.
Making that year-on-year comparison was quite difficult to
interpret. And adding to that, the actual makeup of the
workforce during 2020 and 2021 changed and because our statistics
is an average this will impact on the average. During the pandemic
we saw that lower paid people were at a greater risk of losing
their jobs. So where fewer people were in the workforce, this
increased average earnings. The way I like to think about it
is as thinking about height. So, if the shortest person in the room
leaves, the average height of those remaining will rise, but no
one in that room has got taller, have they. It's just the
makeup of the people in the room that has changed the average, so
if you think about that in terms of earnings, if someone's paid
less than the average earnings per week, they then lose their job.
Other things being equal, average earnings will increase and
this was quite prominent during 2020 and 2021. But we're now seeing
things return to normal levels.
MILES FLETCHER
Shaking out that furlough effect, if you
like. Compared to pre pandemic levels, how do we stand
now?
NICOLA WHITE
So at the moment, we're seeing when we
compare to pay for this time, the latest papers are 12 months ago,
we're seeing increases in regular pay, and in total pay which is
regular pay plus bonuses. And we're seeing some high bonuses that
have been paid out, particularly in March this year when we
normally get the bonus months. We're seeing levels we haven't
really seen before .
MILES FLETCHER
And what's been driving that
then?
NICOLA WHITE
The main sectors that are contributing
to this is the finance and business services sector, and
within here are financial and insurance activities. That's
banking, it's not unusual for these sectors to see large bonus
payments, and they're just continuing to be quite large, although
we did see some smaller bonuses paid during the pandemic. We've
then seen this rise to levels we haven't really seen
before.
MILES FLETCHER
And how disproportionate is the effect
of these city slickers getting Ferraris?
NICOLA WHITE
If you look at the data split by private
sector and public sector, you'll see public sectors very minimal
bonus payments there, whereas it is all being driven by the private
sector, and in particular the finance and insurance activity
sector.
MILES FLETCHER
Any other sectors in which people have
been getting bonuses?
NICOLA WHITE
Yes so there are other sectors such as
manufacturing and construction and wholesale and trade. They've
also been seeing quite large bonuses, particularly in
March.
MILES FLETCHER
And that's perhaps a reflection of the
shortages of appropriately trained and skilled workers in those
industries, and employers are having to shell out extra to get
people in.
NICOLA WHITE
Yeah, so bonuses are a way of retaining
staff, and that will not impact on basic pay. They were not
included in pay rises, but it’s a way to keep staff from
moving on.
MILES FLETCHER
Overall then, of course real pay
has suddenly become a talking point again. For years and years
when inflation was relatively low it was a concept that wasn't
discussed that much. Now inflation has gone back up and people are
concerned about the real value of their earnings. Just talk us
through how we measure that, and why it's so
important.
NICOLA WHITE
Yes, we do produce a real average weekly
earnings estimate which adjusts for inflation. So here we look at
the growth rates of wages, and we then adjust this by the latest
inflation rates. So as you've just said, inflation is
currently very high, so it is having a big impact on real wage
growth rates. Following the recent increases in inflation, pay
has now clearly fallen in real terms, both including and
excluding bonuses, so that’s excluding bonuses. Real pay is now
dropping faster than any time that we've seen since records began
in 2001.
MILES FLETCHER
What's the benchmark for the rate of
inflation that the ONS uses?
NICOLA WHITE
So, we use the CPIH version of
inflation. And that's what we adjust our estimates
by.
MILES FLETCHER
Because the ONS believes that's the most
reliable? If we were to take RPI, which of course we don’t
recommend, the real base situation would look even more
pronounced.
NICOLA WHITE
Inflation as measured by CPI, which at
the moment is slightly higher than CPIH. This would have an even
bigger impact on growth and real growth rates if we were to use
CPI, which is often used by the Bank of England.
MILES FLETCHER
So Nic, another issue in recent years,
of course, has been the gender pay gap, which we've heard a great
deal and that's not, it's important to explain isn't it, it's not
the difference between men and women getting different pay rates
for doing the same work, because that's been illegal for some time.
This is about women as a group being paid less than men as a group.
How does the ONS measure that, and how have things been
changing?
NICOLE WHITE
We use our annual survey to measure the
gender pay gap, and what we do is we calculate the difference
between the average hourly earnings of men and women as a
proportion of men's average earnings. For example, we'd say that
the gender pay gap currently is at 7.9%. What this means is that
women earn 7.9% less on average than men. If we had a negative
gender pay gap, for example, negative 4%, this would mean that
women earn 4% more on average than men. As you just said, it's not
a measure of the difference of the same job being paid. It's a
measure across all jobs in the UK.
MILES FLETCHER
But that’s all men, compared to all
women. But if you start to break it down, then a slightly different
pattern emerges, doesn't it?
NICOLA WHITE
Yeah, that's right. It's interesting to
look at this by age group, because there's a clear difference for
those aged over 40 and those aged under 40. With those full-time
employees under 40, they have a gender pay gap of around 3%. And
for those aged 40, this is around 12%. And this reflects the type
of jobs and the fact that women have had children at that
age.
MILES FLETCHER
So, it’s those family responsibilities,
taking people out of their careers?
NICOLE WHITE
And maybe working more part-time. It's
very much at the younger ages when the gender pay gap isn't as big,
but as you go into those older age groups it does become more
prominent.
MILES FLETCHER?
And perhaps there is an occupational
skills divide as well?
NICOLE WHITE
Yes, there is. So looking at ‘occupay
gap’ in this gender pay gap, the biggest gap is for processing and
machine operatives, which is at 16.2%. Women earn 16.2% less on
average than men, which probably you'd expect because these jobs
are generally held by men. But if we look at this at the other end
of the scale, so we'll look at the largest negative gender pay gap.
This is in the occupation of secretarial and related, where women
earn 7.4% more on average than men. So, the occupations kind of tie
in with the kind of jobs that men and women do tend to
do.
MILES
FLETCHER
If I knew someone for whom the world
of statistics had just become too exciting and they had to go work
in a less dynamic field, but were out to make a bit more money,
what should I recommend they do?
NICOLE WHITE
Okay, for full time employees, the
highest paid occupations are chief executives and senior
officials, and they're paid around about 90,000 pounds per year.
The lowest occupation for full-time employees
is playworkers, which includes teaching assistants, child
minders and nannies, and these are paid around 14,000 pounds
per year. But if you want to look at all employees, the highest
occupation is still the same group, which is chief executives and
senior officials. But the lowest paid occupation changes here, and
it's more school mid-day and crossing patrol occupations. And these
have a medium of around 3000 pounds per year. And this is because
much of these jobs are part-time.
MILES FLETCHER
So that's what's going on with pay. But
what's the current situation with employment in the labour market
overall then, suffice to say, David, it's complicated really, isn't
it?
DAVID FREEMAN
A very accurate description, I think
complicated or a very mixed picture at the moment. As we touched on
earlier, there are a lot of people who removed themselves from
the labour market and go into economic activity, particularly in
the over 50s age group. So that means it's held all the
unemployment down a bit. There's also a record number of vacancies,
which you would normally say is good news, but it's been at a
record high for quite a while, so over 1.3 million vacancies and
that for the first time is slightly more than the number of
unemployed people. So that means companies are struggling to fill
the jobs that are available particularly in things like the health
sector, hospitality and the retail sector.
MILES FLETCHER
So that's speaks of skill shortages then
isn't it, employers need people, but they haven't got the right
people.
DAVID FREEMAN
Yes, if you haven’t got the right
people, or not people in the right areas of the country, there's
plenty of challenges there in trying to make sure that these jobs
get filled and we find the right people in the right place. We're
also seeing falling self-employment as well. This is the one area
where we’re still lagging behind where we were before the pandemic
started. So the number of employees has reached its pre pandemic
level, but the number of self-employed is over three quarters of a
million below where it was before COVID-19 struck. So that's again
another challenge. Where have these people gone? Have they gone
into inactivity or employment or are they struggling to restart
their business after the pandemic.
MILES FLETCHER
Is that perhaps because of the
disruptive effects of the pandemic, when it was easier for a lot of
people to take one of the many jobs that are available rather than
to go back into self-employment with all the risks and uncertainty
that then implies.
DAVID FREEMAN
Potentially we have seen lots of
people moving into employment and leaving self-employment over the
pandemic period. I mean particularly with a lot of jobs that are
offering flexible hybrid working, people are finding it much more
constant, a bit more reliable than perhaps they were in their
self-employed jobs. And lots of jobs in self-employment would have
been hit by the pandemic. There were lots of jobs in construction,
in catering and in the service sector, which would have been hit by
the pandemic.
MILES FLETCHER
We said the picture was complicated, but
anytime where we have record high employment and a record number of
vacancies, there's good in this labour market too isn't
there.
DAVID FREEMAN
There is some good news, they say the
number of employees is back above where it was pre pandemic, so a
lot of people in employment. What's holding it back is
the self-employed. And, the level of unemployment is one of
the lowest we've seen since the mid 70s. It's down below 4%. So,
there are very few people out-of-work actively seeking work. That
again shows there's certainly scope for the labour market to expand
with the number of unfilled vacancies that we're
seeing.
MILES FLETCHER
On that largely positive note, it's back
to the daily grind we go. Thanks to Nicola and to David for joining
me, and thanks to you for listening. To comment on this podcast or
ask us a question please follow us on Twitter at @ONSfocus. I'm
Miles Fletcher and our producers at the ONS are Julia Short and
Steve Milne.