CIPD Voice: Issue 19

While some economic indicators have arguably taken a hit as a result of the Brexit vote, it is indisputable that the labour market is not one of them. We are now approaching the point where the UK economy has generated almost a million additional jobs since June 2016. And contrary to conventional wisdom, the vast majority of these jobs have been permanent, full-time and skilled or highly-skilled. So who have these jobs gone to, and in which sectors?

The official labour market statistics show that women are among the big winners from the extraordinary strong employment growth in recent years. Women account for over 60% of the 967,000 net increase in the number of people in work since the Brexit referendum. It is well documented that the raising of the state pension age for women is a key driver behind the sharp increase in employment levels of older female workers. However, it is also true that we have seen strong growth in other age cohorts, such as women aged between 25 and 34, whose numbers in the workforce have swelled by around 200,000 during the same period. One of the possible explanations behind this growth is that employers have responded to the tightening labour market by targeting women returners. The higher female participation rate may have also been boosted by the Government’s new enhanced childcare package, which includes the introduction of 30 hours of free childcare for 3-4 year-olds alongside a Government top-up for each child for the vast majority of parents through its Tax Free Childcare scheme.

Another striking statistic is that the number of non-EU-born workers in the UK has grown by around 300,000 during the past three years*, which is at least partly due to the fall in EU net migration. An additional factor is that some employers have been able to make use of the migration cap exemption enjoyed by some occupations, notably public service occupations such as nurses and doctors, which are also, crucially, well represented on the shortage occupation list. This allows employers to waive the existing 30k minimum salary threshold which, incidentally, the Government proposes to extend to EU workers when migration restrictions are introduced for EU workers in January 2021.

The critical point for employers to consider, especially ahead of the introduction of restrictions of EU citizens in 2021, is that there is more flexibility in the salary threshold than people realise. What’s more, this flexibility looks set to increase further in the future following the publication of the much-expanded shortage occupation list by the Migration Advisory Committee (MAC). And let’s not forget that employers will also be able to take advantage of other routes that can boost supply. One of these is the Youth Mobility Scheme, which will allow EU citizens aged 18-30 to live and work in the UK for two years without a job offer. This route is already in operation for a dozen or so countries from outside the EU, that include countries such as Australia, New Zealand and Canada.

Other groups have also fared well during the past couple of years, notably workers from ethnic minorities, whose numbers have grown by 415,000 during the past three years*. In common with other groups, the underlying factor behind the increase is the tightening labour market. However, it is also possible that the sharp increase in the number of people from ethnic minorities with university-level qualifications may have boosted their employability chances, especially given the skilled composition of the employment growth during the past three years.

It seems, therefore, on the surface that the UK labour market is in rude health, and we should arguably cut it more slack than some commentators currently do. However, it is also true that rising recruitment pressures will only get worse unless employers and government maximise the potential of all groups in the labour market. For employers, reversing the long-term decline in skills investment and boosting the presently poor adoption of flexible working arrangements are quick wins that can help relieve recruitment pressures and increase labour supply. Meanwhile, the Government could look to extend its existing childcare offering to two-year olds, reverse the real terms sharp decline in adult skills funding and reform the Apprenticeship Levy to make maximise the under-utilised potential of jobseekers and workers.

* These figures are updated quarterly, so care should be taken not to make direct comparisons with the other data in this article

Gerwyn Davies

Gerwyn Davies, Labour Market Adviser

Gerwyn is the CIPD’s Public Policy Adviser for a wide range of labour market issues. With lead responsibility for welfare reform, migration and zero-hour contracts at the CIPD, Gerwyn has led and shaped the policy debate and achieved substantial national media coverage through various publications. These include Zero-hours contracts: myth and reality (2013) and The growth of EU labour: assessing the impact on the UK labour market (2014). In addition Gerwyn authors the institute’s high profile and influential quarterly Labour market outlook report. Gerwyn is an experienced labour market commentator, making regular appearances in the national media and on other public platforms, including several appearances before the House of Commons Work and Pensions select committee.