The latest employment data shows that the pay gap is fueling discontent in the public sector and that there is a potential tipping point in the labor market that will worry ministers as much as employers.
Average wage increase 6.4% in the three months to November the strongest growth in 20 years excluding the pandemic period, but there is a gap between public and private revenues.
Private sector settlements were 7.2%, the upward pressure largely driven by the labor shortage that has defined the job market since the pandemic.
In the public sector, wages rose by only 3.3%, a gap of nearly 4% that is eroding the ability to hire and retain staff and fueling dissatisfaction among the workforce.
That dissatisfaction was expressed in the more than 460,000 working days lost due to strike in November, the highest monthly figure in 11 years, bringing the total since June to 1.6 million. (Those numbers would have been even higher had the RMT not canceled the three days of strike action planned for November)
Whether you work in the public or private sector, wages aren’t even close to keeping pace with inflation over 10%. As a result, real wages – the value of the pound in your pocket if you’re going to spend it in the real world – fell 3.8%.
Those differences, between public and private wage increases, and everyone’s wages and inflation, explain the demand for wage increases from health and education unions, as well as in legacy industries such as transportation and the postal service.
The post-pandemic job market
Wage aside, the data shows signs that the slowing economy may pull the labor market out of its curious post-pandemic state.
Undoubtedly, there is still a labor shortage, with one vacancy for every unemployed person.
However, the number of advertised jobs fell for the sixth consecutive quarter, something the Office of National Statistics attributes to “uncertainty between industries as [employers] continue to cite economic pressures as a factor holding back recruitment.”
The impact of economic inactivity is still significant, with 574,000 people leaving the workplace since COVID-19.
That figure fell 67,000 in the quarter, a bright spot for the Treasury, which has made the issue its number one priority, but it doesn’t tell the whole story.
The definition “economically inactive” encompasses a wide range of people, including students and those caring for the family or home, but at the heart of the increase is the flight of older workers, and perhaps more persistently, disease.
More than half of the newly economically inactive are over 50, and 325,000 of the total are on long-term illness.
Bring that number down by one overburdened NHS and seven million people on waiting lists is a huge challenge.
Too early to call a spinning job market?
Another figure to note is unemployment, once the headline figure in all employment data, which is rising again, marginally up 0.2% to 3.7%.
Given the fall in job vacancies, this could be a signal that the labor market has finally turned around and that the economic slowdown is finally outpacing demand for workers.
Maybe it’s too early to call.
You can’t walk down a high street without seeing posters looking for staff, and the hospitality industry says demand is as strong as ever. If they could meet that requirement, they would trade much more, which would contribute to growth instead of contraction.
The labor shortage undoubtedly remains a huge challenge, and here is another piece of intelligence to consider today.
Research by the UK in a changing Europe estimates a net loss of 330,000 EU workers since Brexit, the departure of 460,000 European workers being only partially offset by an increase in non-EU workforce.