Could labour market stats tell us more than they do?

February 17, 2016

The latest release of UK labour market statistics again shows impressive headline numbers. The employment rate is the highest since comparable records began in the early 1970s, and the unemployment rate remains down at the low levels we saw in the years leading up to the financial crisis. But if we are looking for indications of how the economic recovery is progressing, or how government policy is changing the jobs market, these headline figures tell only a small part of the story. And while the published statistics below the headline numbers do offer plenty of additional insight – such as how pay growth is performing – there is much more we could be told. This blog uses the economically inactive and the underemployed as examples of how the publication of more granular data could improve our understanding of the labour market and the impact of policy.

There are 8.9 million people in the UK classed as inactive – these are people between the ages of 16 and 64 without a job, who have not been recently looking for work, or who are not available to start work in the near future. Around half of them are either students or those that are looking after the family or home; around a quarter more are long-term sick, and around one in eight are retired (although, recent increases in the state pension age for women mean that the proportion of total inactive people that are retirees has been falling).

Despite telling some kind of story, these categorisations are still relatively superficial. For instance, that somebody is looking after the family or home gives little indication of what their motivation is to do so. By extension, we do not know how far these people are from the labour market, or what would incentivise them to move closer to it (if anything). To look at this another way, we do know that 6.63 million of the inactive, around three quarters of them, tell us that they do not want a job. While it may be obvious why some of these people would rather not work – a lot of students, for example, want to concentrate on their studies – in many cases we have no idea. And we do not know any more about the 2.25 million inactive people who tell us they do want a job. Just over a third of these are temporary or long-term sick, and just over a quarter are looking after the family or home.

The suite of labour market policies announced since the General Election – whether that be benefit changes, increased childcare provision, the National Living Wage, or alterations to employment support – means some people in any of these inactive categories may change their behaviour and approach to work. Being able to understand as much as possible why they have done so will help inform the debate about future policy design.

As much as for the not-in-work economically inactive, the same principle applies to the in-work underemployed. Almost 8.5 million people work part-time, and 14.9% of them are doing so because they could not find a full-time job. This proportion has fallen from 17.9% over the last two years, giving a clear indication of an improving jobs market. But there is still a long way to go before this indicator gets back down to pre-recession levels – in 2008 less than 10% of part-time workers could not find a full-time job. The same pattern applies to those people working on temporary contracts but that would like a permanent contract. Again, this tells part of the story, but we do not know how long these people have been working part-time but wanting full-time jobs, or how long they have been on temporary contracts wanting something permanent.

It would clearly be impossible for the Office for National Statistics to publish every possible cross-sectional breakdown of its monthly labour market data, but there is some granularity that may be more worthwhile than others. One example would be the greater use of age categorisations. Policymakers care about the prospects of the young and their engagement – or lack of – with the world of work. They care about how people who are approaching retirement can bridge the gap between full-time employment and their reliance on their pension income. And they care about the people in between, who may be receiving state income top-ups if they are in a low-paid job.

On this basis, the Office for National Statistics should consider routinely publishing age breakdowns of more labour market indicators than they currently do. We get the patterns of employment, unemployment and inactivity broken down by age range, but we could usefully get more. For example, getting monthly updates on the numbers of economically inactive by age and by reason would aid understanding of trends in the labour market and could influence policy thinking.

Monthly labour market statistical releases will never be able to tell us the whole story, but they could tell us more of it than they do now.

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