February 2023

Stephen Evans, chief executive at Learning and Work Institute, said:
Real earnings are falling at their fastest rates since the financial crisis due to high inflation, leaving them no higher now than before the pandemic. A miserable 15 years for real wage growth means people would be earning £11,000 a year more on average if pre-financial crisis trends had continued. So as well as bringing inflation under control, we urgently need a growth plan for our economy. There was a welcome fall in economic inactivity, but it was driven more by a reduction in young people studying than older people returning to the labour market. Economic inactivity is still 500,000 higher than pre-pandemic, and almost 2.5 million people are out of the labour market due to long-term sickness. Only one in ten out-of-work older people and disabled people get help to find work each year, the Chancellor must change that in next month’s Spring Budget.
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1. Real earnings continue to fall due to high inflation

The latest data show average regular earnings grew by 6.7% in the year to December 2022. For public sector workers average regular earnings grew by 4.2%, while average regular earnings grew by 7.3% for private sector workers. However, high inflation means real regular earnings fell by 2.5% in the year to December 2022. There is now growing evidence that inflation has peaked, with CPIH inflation decreasing from 9.3% in November to 9.2% in December. This means we may see some recovery in real wages later this year. However, weak growth since the global financial crisis means average earnings are around £11,000 per year lower than if pre-crisis trends had continued.

Picture1 - Earnings growth


2. There are fewer potential workers for employers to recruit, with 630,000 fewer over 50s in the labour market since the pandemic started

Recruitment is more challenging for employers because of rises in economic inactivity – people leaving the labour market. This has been primarily driven by those aged 50 and over and people with long-term health problems and disabilities. The number of people aged 50-64 who are economically inactive has increased by 9.8% since the pandemic started.

Economic inactivity fell in the most recent quarter, though driven more by falls in the number of young people in education rather than older people returning to the labour market. But the challenge remains: economic inactivity is 480,000 higher than pre-pandemic, yet only one in ten out-of-work older people and disabled people get employment support each year. The Government needs to extend employment support to more people outside the labour market and employers need to think about recruitment and job design to attract and retain staff.

Picture2 - Inactivity reason


Picture 3 - Inactivity age


3. Employer demand for workers may be softening

There are some signs of employer demand for workers beginning to soften. Vacancies continue to decline from their peak of 1.3 million in March – May 2022 to just over 1.1 million in November 2022 – January 2023. However, vacancies remain at historically high levels.

Picture4 - vacancies


4. Strikes at their highest level since November 2011

December saw the highest level of industrial action in over 11 years, with 843 working days lost due to strikes. Given ongoing industrial disputes and strikes planned for the months ahead, the impact of industrial action on working days is likely to remain high in the immediate future. However, days lost due to strikes remain well below historic levels seen in the 1970s and 1980s.

Picture5 - Strikes


5. One million young people are not in either employment or full-time education

Over the past few months, the unemployment rate for young people aged 18-24 has begun to rise, with increases from a low point of 7.5% in June – August 2022 to 10% in the latest quarter (October – December 2022). The number of young people aged 16-24 not in employment or full-time education has also increased in recent months, to just over 1 million in October – December 2022, compared to a low point of 820,000 in June – August 2022.

Picture6 - Unemployment age


Picture7 - young people


6. The employment picture varies across the country

Employment rates this quarter are higher than the equivalent pre-pandemic quarter in 2019 in Scotland, Yorkshire and Humberside, and the South West, but are lower everywhere else. Economic inactivity this quarter is higher than the equivalent pre-pandemic quarter everywhere except Yorkshire and Humberside and Scotland. This varying picture, which is even greater at sub-regional level, shows the importance of tackling inequalities so everyone has a fair chance in life wherever they live.

Picture8 - Employment regions


Picture9 - Inactivity regions

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