By Gerwyn Davies, Senior Policy Advisor - Labour Market.

UK productivity growth of 0.3% over the past ten years recently won the Royal Statistical Society’s accolade as the ‘statistic of the decade’. However, analysis of the labour market by the CIPD has provided some equally interesting figures that illustrate how transformative the past decade has been in many ways.

An expanding workforce

One of the most dramatic statistics is that the UK workforce has grown by more than 3.8 million[1] since 2010; all the more notable given the drop of more than 300,000[2] in the public sector during the same period. While strong employment growth has been something of a global phenomenon, it is still extraordinary that the UK workforce has grown on average by around 100,000 jobs per quarter over the last ten years. 

A strong supply of labour from overseas is one of the reasons for the growth. Non-UK-born citizens account for more than half of net increase in employment levels since 2010. There are around 1.2 million extra EU-born citizens in work in the UK alongside an increase of around 850,000 in the number of non-EU born citizens. Taken together, non-UK-born citizens account for over half of the extra 3.8 million people in work in the UK. This is despite the introduction of a cap and tighter restrictions for non-EU citizens. 

Figure 1: Number of EU and non-EU-born citizens in employment

Looking ahead, one wonders whether the introduction of migration restrictions on EU citizens in 2021 will have as dramatic effect on the inflow of non-UK born citizens as some commentators expect. First, as Figure 1 shows, the stock of non-EU-born citizens in employment has been and remains much higher than the number of EU-born citizens. As the Migration Advisory Committee recently noted in its report, there are estimated to be around 170,000 recently-arrived non-EU citizens in lower-skilled occupations in the UK despite the absence of a route for lower-skilled migration from outside the European Union. This supply includes the dependents of skilled migrants. Second, non-EU migrants are set to be boosted by the government’s new post-Brexit immigration policy. This is due to lower minimum skill and salary thresholds, which includes a minimum salary threshold of just over £20,000 for shortage occupations, and the removal of the migration cap.

In contrast, it seems inevitable that the number of EU-born citizens in work in the UK will fall once free movement ends at the end of 2020. This is partly due to under-reported bureaucracy and the cost of recruiting skilled workers and the removal of low-skilled routes. This will only be partly offset by dependants of skilled migrants and the proposed Youth Mobility Scheme for EU-born citizens.

The growth in the number of non-UK-born citizens in work has not come at the expense of UK nationals. The most meaningful measure that shows how successful UK workers and jobseekers have been in finding employment is the working age employment rate. This has increased from 70.6% to 76.5% — an all-time high[1].

A changing workforce

Data also rebuts commentary that characterises the labour market as casualised, precarious and driven by low-skilled work. Official data shows that all the employment growth has come from full-time, permanent work. Temporary work has in fact fallen slightly over the decade as a share of employment. This is somewhat surprising given the historical tendency for firms to respond to uncertainty by hiring temporary workers. It may reflect employers’ increased efforts to attract workers against the backdrop of a tightening labour market. This could also explain the sharp growth in some flexible working arrangements in recent years; especially flexi-time and annualised hours (Figure 2). Over the past 18 months, the number of people that have flexi-time arrangements has increased to 4.1 million, an increase of just over 20%. In addition, the number of people on annualised hours has increased to 2.2 million, which represents an even more extraordinary increase of around 35%.

Figure 2: Number of people employed under flexi-time or annualised hours contracts

Source: Labour Market Overview: February 2020 (ONS)

What’s more, a substantial portion of employment growth has come from people performing managerial, professional and technical jobs. The biggest growth has come from professional occupations, with IT a stand-out performer. By contrast, the share of low-skilled or unskilled employment has fallen, except for some caring occupations. One can expect this trend to continue, especially given the risk many low-skilled and unskilled roles face from automation.

The past decade has also been a good one for women, which has confounded initial expectations that austerity would disproportionately impact them. The shifting gender balance in the UK workforce is reflected by the female working age employment rate. This has risen from 65.2% to 72.4% since 2010 compared with the male employment rate which rose more softly from 75.3% to 80.6% during the same period. Additionally, the UK economy has benefitted from an additional supply of more than half a million extra people aged 65 and over the past decade.

Work intensifying, discretionary effort falling

Despite this overall impressive showing, there are some issues of relevance and concern to HR professionals. The number of hours worked has crept up during the past decade for both part-time and full-time workers, reversing the downward trend of recent decades for full-time workers.

Besides an increase in working hours, evidence from the long running Skills and Employment Survey shows that work intensification has increased for many in the last decade, especially for people in high-pressure roles such as teachers and nurses. The same research shows that discretionary effort is falling, especially among private sector workers; and it seems reasonable to suggest that these trends are interlinked. It reflects the pay and productivity squeeze that has dominated the past decade, and which remains the biggest challenge facing many organisations.

People professionals must look for ways to address these challenges as we move on to the next decade. For example, in adopting technology, where the UK has lagged behind comparable countries, HR needs to play a more prominent role in ensuring that investment in technology has optimal results for both organisations and employees.

Specifically, HR should ensure there is early consultation with staff when AI or automation is being introduced, and ensure appropriate training is provided and changes are made to job design so the investment in technology enhances people’s skills and job quality and improves productivity.

Another route to empowering and motivating employees to improve productivity will be to grow flexible working arrangements (Figure 2). To improve uptake, these arrangements need to work for both individuals and the organisation and be underpinned by supportive line managers and working cultures underpinned by trust.

More inclusive flexible working arrangements can not only help improve productivity but also help improve the labour supply that will undoubtedly be constrained by the introduction of migration restrictions for EU citizens from 2021.

[1] These ONS figures are seasonally adjusted.

[2] All ONS figures are not seasonally adjusted unless otherwise stated.

[3] This figure excludes reclassification effects to reflect the number of bodies that have moved between the public and private sectors e.g. RBS.