Issue 13

IN WORKING ORDER? THE STATE OF SCOTLAND'S LABOUR MARKET

By Jim McCormick, Associate Director Scotland, Joseph Rowntree Foundation

With one in five earning less than this, Scotland fares better than all parts of the UK except London and the South-East.

With impeccable timing, the Resolution Foundation published its analysis of Scotland’s recent labour market trends just as the ONS showed the employment rate returning to the level last seen in 2008 . In other words, the recession-induced ‘jobs gap’ has been closed. Scotland has reached this point about 15 months later than England, but it marks an important stage in economic fortunes. Job done? The answer is mixed.

While Scotland experienced a steeper drop in employment than England, the biggest impact of recession was felt in hours worked and wages earned. Pay rates slumped at an alarming rate, even if the squeeze in Scotland was rather less than for the UK as a whole. Since then, growth in pay rates has been better than the UK average, including for low-paid workers. Typical hourly pay rates have caught up with England, closing a long- established gap. Scotland’s progress in extending the voluntary higher rate of Living Wage is helping low-paid workers. With one in five earning less than this, Scotland fares better than all parts of the UK except London and the South-East. But that still leaves a growing number of Scots - 420,000 in 2015 - earning less. Three sectors of the Scottish economy account for half of low earners: retail, care and hospitality.

A closer look reveals a picture of substantial change rather than simply recovery to where Scotland was:

  • First, unemployment is still higher than it was going into recession.
  • Second, broader under-employment – the net share of the workforce not working enough hours – is well above the rate in 2008.
  • Third, overall employment growth has come mostly from part-time jobs and new self-employment. Full-time jobs are still below the previous level. Families relying on part-time work alone are much more likely to face in-work poverty and average earnings from self-employment are low.
  • Fourth, the kind of employment recovery we’re seeing is strikingly uneven. So, the Northern Isles and the North-East have an employment rate around 80% while Dundee and North Ayrshire lag at around 60%. Employment rates for single parents and people with disabilities remain well below their pre-recession peak. Meanwhile, the educational premium achieved at school by many ethnic minority Scots still doesn’t translate into better employment rates.

With adequate resources, the Joseph Rowntree Foundation argues much improved in-work support could be targeted towards those stuck in poorly-paid jobs or locked out of training.

At an event hosted by Standard Life to discuss the Resolution Foundation report, Cabinet Secretary for Fair Work Roseanna Cunningham welcomed evidence of labour market resilience but also struck a note of caution. Devolution of DWP employment programmes the Work Programme and Work Choice is included in the Scotland Bill following the Smith Commission’s conclusions. They offer an important opportunity to reshape employability support to long-term unemployed and disabled people seeking work. With adequate resources, the Joseph Rowntree Foundation argues much improved in-work support could be targeted towards those stuck in poorly-paid jobs or locked out of training. But, the Cabinet Secretary noted, the Chancellor’s Autumn Statement set out plans to shrink the size of these programmes and rely more heavily upon the distinctly reserved services of Job Centres. Devolution of this power with just one-seventh of the expected budget will make the task much tougher.

Looking ahead, the Fair Work Convention is due to report in March and a new labour market strategy for Scotland is anticipated. Targeting those sectors where low pay and poor progression are most common will be needed if in-work poverty is to be driven downwards. The next Scottish Government will have to grapple with operation of the UK Apprenticeship Levy and already-stretched care providers will be adjusting to payment of a rising minimum wage. Combined with decisions to be made on new income tax thresholds (even if rates aren’t changed), and a sharper focus on pay and prospects of workers is likely in the next parliament than to date.

Jim McCormick
is Associate Director Scotland with the Joseph Rowntree Foundation

By Jim McCormick, Associate Director Scotland, Joseph Rowntree Foundation

Issue 13

PREVIOUS ISSUES

Looking for a previous issue? Use the menu below to select an issue.