The Scottish labour market: digging beneath the headlines...

Brian Ashcroft posted an appropriately withering response to the political comment triggered by the latest set of labour market data for Scotland. He explains why enthusiasm over Scotland's 'record level of employment' is, ahem, misplaced and why comparisons between the performance of Scottish and UK labour markets over the course of the recession really should appreciate the starting point i.e. Scotland entering the recession with lower unemployment/higher employment.

Therefore I'll not dwell on the issues covered by Brian except to stress that achieving the 'highest employment level ever' really isn't a historically significant event. By my reckoning this is a claim that could've been made precisely 40 times since the current data series for Scotland started in 1992. As Declan Gaffney explains here, employment tends to rise over time with population. As Brian reminds us, the salient point is that it's taken a full seven years to recover the pre-recession peak.

The concern here is that intemperate political reaction - covered largely uncritically by an under-resourced media - can embed the notion that the labour market is 'back to normal'. There are a number of reasons to doubt this is the case.

Unemployment remains high and the method by which the figures are reported on a rolling 3-monthly basis can be misleading. Here's the unemployment rate and level for the past year:

The level reported yesterday is actually marginally higher than between Sep-Nov last year and the rate is the same (isn't it revealing how politicians switch so easily between rates and levels depending on what story they want to tell?). The rate is still 2.4% above that of summer 2008. This isn't great but it's also worth noting Blanchflower's recent observation that the sample size from which this figure is derived is so small that Scottish unemployment is bound to 'bounce around like a rubber ball'.

A big and as yet largely untold story of the labour market's slow recovery is the increasing number of older workers:

Only the 65+  group that has surpassed its pre-recession peak employment rate and the 50-64 group is at least getting close - the collapse in the youth employment rate in the early stages of recession was hardly unexpected but its failure to recover is quite disturbing:

The better performance of older workers has been particularly pronounced over the past year with older women doing especially well:

Of course this isn't all bad; it's good that older workers can remain in work if they want to. But the downside is undeniable: less jobs for young workers and many people forced to work longer than they would like to due to pension changes etc. Stubbornly high youth unemployment/low employment is the most visible signal that the labour market is in far from rude health. Some research on the reasons why many more older people are choosing/being compelled to work longer is urgently required. A Commission on the Older Workforce anyone?

It's certainly true that many of the trends that have caused most concern over the past few years are now starting to level off. Yet anecdotal feedback from trade union workplace reps suggests that these trends are unlikely to return to pre-recession levels anytime soon. Underemployment for example has started to fall but, at 234,000, remains 40% higher than 2007 (and of course underemployment in Scotland and UK is high by European standards). Male underemployment - both full-time and part-time - continues to rise:

A major component of underemployment is involuntary part-time working which remains 50,000 higher than 2008:

The increase in involuntary part-time employment accounts for the total rise in part-time working since 2008:

The failure of full-time jobs to recover is matched by the fall in employee jobs:

Self-employment is particularly interesting because, given the lag in Scottish statistics, we don't yet know if the massive increase in self-employment at UK level over the very recent period (for the UK as a whole: 183,000 or fully two-thirds of the new jobs reported yesterday were self-employed as were 52% of all new jobs created over the past year) is being replicated in Scotland. Recent trajectories suggest that despite the small fall in self-employment in the year to December 2013 it is entirely possible that Scotland may be on the verge of an increase as the more volatile Scottish series catches up with the UK:

The increase in self-employment is a concern for the post recession cohort of self-employed are working less hours, earning less money, paying less tax and contributing significantly to the rising cost of in-work benefits. Again, it would be good to have some decent research (or at least some up to date figures) at a Scottish level.

And of course all the above tells us very little about the quality of new jobs being created. Extrapolating from the latest ONS UK figures, it's reasonable to estimate that there may be around 120,000 zero hour contract jobs in Scotland. We know from workplace intelligence that other forms of insecure working such as 'pay between assignment' contracts are also on the rise.

The weakness of the labour market is starkly apparent in the unprecedented decline in real wages since 2009. Since no new reliable figures have been published I can do no more than link to the STUC's 2014 Budget Submission which provided some analysis of who's fairing well (top corporate managers and executives) and badly (lowest paid workers in the lowest paid sectors).

In summary, it's good that employment is rising and unemployment falling in Scotland but the labour market is nowhere near a state that would justify the grand political claims of yesterday.

Stephen Boyd
STUC