Feature: Fall In Unemployment Overshadowed By Widening ‘Wage Gap’

Jobcentre Plus.

Unemployment in the UK has fallen to its lowest rate since 2008 and now stands at 6%, according to the latest figures released by the Office for National Statistics (ONS).

ONS figures show that the number of people out-of-work and claiming Jobseeker’s Allowance (JSA) fell by 154,000 on the previous quarter (March to May 2014) to 1.97 million, which is 580,000 fewer than a year ago – the largest annual fall since records began.

The unemployment rate is the proportion of the working-age population who are both available and actively looking for work. It does not include people claiming sickness benefits, early retirees, working age students in full-time education and some other groups.

The number of people in work also continues to rise. According to the ONS there were 46,000 more people in work than for March to May 2014, however this represents the smallest rise since March to May 2013. There are now 30.76 million people in work, 736,000 more than a year ago.

However, the number of people regarded as ‘economically inactive’ (out of work and not seeking or available to work) has increased by 113,000 but remains 46,000 fewer than a year ago.

With the rate of employment slowing down, this may suggest that rather than moving into work some unemployed people may be leaving JSA to join the ranks of the 22.2% deemed to be ‘economically inactive’. This is supported by DWP figures which show that the number of people claiming sickness benefits is on the rise.

The headline figures from the ONS are:

  • Comparing the estimates for June to August 2014 with those for March to May 2014, employment continued to rise and unemployment continued to fall. These changes continue the general direction of movement since late 2011/early 2012.
  • There were 30.76 million people in work. This was 46,000 more than for March to May 2014, the smallest quarterly increase since March to May 2013. Comparing June to August 2014 with a year earlier, there were 736,000 more people in work.
  • The proportion of people aged from 16 to 64 in work (the employment rate), was 73.0%, slightly higher than for March to May 2014 (72.9%) and higher than for a year earlier (71.5%).
  • There were 1.97 million unemployed people, 154,000 fewer than for March to May 2014 and 538,000 fewer than a year earlier. This is the largest annual fall in unemployment on record. Records for annual changes in unemployment begin in 1972.
  • The unemployment rate continued to fall, reaching 6.0% for June to August 2014, the lowest since late 2008. The unemployment rate is the proportion of the economically active population (those in work plus those seeking and available to work) who were unemployed.
  • There were 9.03 million people aged from 16 to 64 who were out of work and not seeking or available to work (known as economically inactive). This was 113,000 more than for March to May 2014 but 46,000 fewer than for a year earlier.
  • The economic inactivity rate was 22.2%, higher than for March to May 2014 (22.0%) but lower than for a year earlier (22.4%).
  • Pay including bonuses for employees in Great Britain was 0.7% higher than a year earlier. Pay excluding bonuses for employees in Great Britain was 0.9% higher than a year earlier.

Low pay continues to overshadow the apparent progress made on unemployment. Research from the TUC (pdf) shows that 77% of new jobs created since 2010 have been in low paid industries, where the majority of workers are paid well below the average wage of £7.95 an hour.

Wage increases continue to lag behind rises in the cost of living – 0.7% compared to 1.2%. Despite a recent fall in inflation working people are still struggling to make ends meet.

The gap between current earnings and pre-recession levels has widened to 7.8% and could take eight years to recover, according to research from the Resolution Foundation. Matthew Whittaker, Chief Economist at the Resolution Foundation, said:

“After six years it’s very good news that the UK’s ‘jobs gap’ has closed, with the proportion of people in work today beating its pre-recession level. This isn’t just about London as areas like the North East have also performed very well. But employment rates in some other parts of the UK like the West Midlands look less strong.

“This year was supposed to be the year of the pay rise – so far all we’ve seen are further declines. Lower inflation may ease the squeeze on workers but anaemic wage growth together with below target inflation is not the kind of recovery that people want, and is not what the economy needs either.

“With the OBR warning this week that rising employment is failing to raise the tax take as much as hoped, it’s clear both quantity and quality are needed when it comes to creating new jobs. More high-quality jobs paying decent wages would obviously benefit working people, but it will boost growth, raise productivity and help tackle the deficit too.”

Commenting on the latest jobs figures, TUC General Secretary Frances O’Grady said: “The real value of wages has fallen again this month. This is not only the longest and deepest pay cut on record but there is no end in sight.

“Detailed analysis of the figures show that even the cash increase in pay was entirely due to the finance and business sectors.

“With these never ending falls in living standards and so many new jobs insecure, low-paid and self-employed, Britain’s workers have been excluded from the recovery.

Unite and the Citizens Advice Bureau welcomed the fall in unemployment but raised concerns that people were moving into low-paid and insecure employment. General secretary Len McCluskey said:

“The continued fall in unemployment is welcome, but scratch the surface and today’s figures reveal an economic recovery that is passing people by as the wage siege continues and the world of work becomes more insecure.

“This is a part time recovery built on the back of low wages and an explosion of self-employment which is leaving millions in an employment limbo land, without rights, security or guaranteed income. The government needs to look at this phenomenon and honestly assess what it means for the nation.

“This Tory-led government also needs to face up to the fact that people have seen their incomes drop in real terms by a staggering £1,600 a year on their watch, forcing families to choose between heating and eating this winter.

“This is not the basis for a sustainable recovery. Britain needs a pay rise and an economic recovery that benefits the majority and an economy built on secure, decent paid jobs.”

“It is time to share out the proceeds of growth by creating good jobs and giving people a decent wage increase. Ten of thousands will be joining the TUC’s march on Saturday to say Britain needs a pay rise.”

Gillian Guy, Citizens Advice Chief Executive, said:

“Following encouraging economic news today, Government needs to fill in the gaps in the UK’s dramatically changing jobs market. It’s good that we are moving in the right direction, but for many workers, low wages, unstable employment and a fight for fair treatment are the challenges which go hand in hand with this welcome rise in employment.

“Part-time jobs are a convenient option for many families, but far too many people not in full-time work or on a long-term contract are at risk of being treated unfairly.

“Agency workers or people on zero-hour contracts often struggle to get the same decent treatment which employees in full-time, permanent positions rightly expect. Getting decent childcare can also be a big problem for those with irregular working patterns. Lack of flexibility amongst providers and up-front payments mean 40 per cent of our clients say accessing childcare is a barrier to them working extra hours.”

Shadow Work and Pensions Secretary, Rachel Reeves MP, said Labour would tackle the scandal of low pay by increasing the minimum wage.

“Working people have seen their real wages fall by over £1,600 a year since 2010. The Government’s failure to act on low pay has led to millions of people struggling to get by, huge additional costs in Housing Benefit and Tax Credits paid to those in work, and the OBR warning about the impact on the public finances.

“That’s why Chuka Umunna and I will call on the Government to adopt Labour’s plan to raise the national minimum wage to £8 during a debate in Parliament on low pay later today. This is an important part of Labour’s economic plan to tackle the cost-of-living crisis and ensure we earn our way to higher living standards for all, not just a few at the top.”

Employment Minister Esther McVey said:

“All of our reforms are focussed on helping people into work and today’s record figures show that the government’s long-term economic plan to help businesses create jobs and get people working again is proving successful.

“Behind the record figures there are countless individual stories of people turning their lives around, of families who are now feeling more secure with a regular wage, and of young people escaping unemployment and building a career.

“We know there is always more to do, which is why it is vital to stick to delivering a plan for full employment that’s creating growth and jobs.”

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  1. The announcement and fanfare of reduction in unemployment is built on candyfloss Why thousands of people are on zero hours contracts. Those sanctioned aren’t on it nor are people getting job seekers under the umbrella of ‘universal credit’ are NOT included in the figures. Now if Tesco did this they would be under investigation for fraud. We can’t even protest under human rights – it is going to be scrapped. There are many things one can not in public due to the gagging order that has been sneaked through under the shadow of ebola. In closing can ask is Mr C middle name hitler of thatcher?

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