The latest labor figures reveal a pay gap that is fueling public sector discontent and a potential turning point in the labor market that will worry ministers almost as much as employers.
Average wages rose 6.4% in the three months to November, the highest growth in the last 20 years, excluding the pandemic period, but there is a gap between public and private earnings.
Private sector settlements were 7.2%, upward pressure largely driven by labor shortages that have defined the labor market since the pandemic.
In the public sector, wages rose by just 3.3%, a gap of nearly 4% that affects the ability to recruit and retain staff and ferments discontent among the workforce.
That misfortune is expressed in more than 460,000 working days lost to the strike in November, the highest monthly number in 11 years, bringing the total to 1.6 million since June. (Those figures would have been even higher had the RMT not canceled three days of strike action planned for November)
Regardless of whether you work in the public or private sector, wages don’t even come close to keeping up with inflation more than 10%. As a result, real wages – the value of a pound in your pocket when you come to spend it in the real world – fell by 3.8%.
Those differences, between public and private wage increases, and everyone’s wages and inflation, explain the demand for wage increases by health and education unions, as well as in legacy industries such as transportation and postal services.
The labor market after the pandemic
Away from wages, the data contain signs that the economic slowdown may be reversing the labor market from its unusual post-pandemic state.
It is undeniable that there is still a shortage of workers, with one vacancy for every unemployed person.
However, the number of job adverts fell for the sixth consecutive quarter, something the Office for National Statistics attributed to “uncertainty across industries, such as [employers] continue to cite economic pressures as a factor preventing recruitment.”
The impact of economic inactivity remains significant, with 574,000 people out of work due to COVID-19.
That figure fell by 67,000 in the quarter, which is a glimmer of light for the Treasury that made the issue a number one priority, but it doesn’t tell the whole story.
Definition “economically inactive” it covers a wide range of people, including students and those looking after family or home, but at the heart of the rise is the flight of older workers, and perhaps more seriously, illness.
More than half of the newly economically inactive are over 50 years old, and 325,000 of the total number are chronically ill.
Reducing that number by an overburdened NHS and seven million people on waiting lists is a huge challenge.
Too early to call the job market turning?
Another number to note is unemployment, once the headline figure in all labor data, which rose again, slightly by 0.2% to 3.7%.
Given the drop in vacancies, it could signal that the labor market has finally turned around, and that the economic slowdown has finally outstripped the demand for workers.
It might be too early to call.
You can’t walk down the high street without seeing posters looking for staff, and the hospitality industry says demand is as strong as ever. If they could meet it, they would have much more trade, contributing to growth rather than contraction.
The lack of workers undoubtedly remains a major challenge, and there is another intelligence to consider today.
The UK’s Changing Europe survey estimates a net loss of 330,000 EU workers from Brexit, a departure of 460,000 European employees only partially offset by an increase in non-EU staff.