Changes in the level of employment

The cyclical nature of the British economy is shown in the chart below. It shows the annual changes in total employment using data from the Labour Force Survey.

In the last two recessions we have seen severe cut-backs in employment levels throughout the economy. This had led to high unemployment and posed major problems for economic policy-makers. However in recent years the performance of the economy in creating and sustaining a higher level of employment has improved. Total employment has increased in each of the last six years. Despite fears of recession last year, the total number of people in paid work increased by 291,000.

What have been the main structural changes in the UK labour market in recent years?

The labour market is continuously evolving and this has implications for everybody involved in the world of work. Because the nature of the economy changes, we always expect to see structural change in the pattern of employment in the economy.

Some of the main long term structural changes in the labour market are as follows:

·        Shift from manufacturing to services. There has been a long decline in manufacturing employment in the economy and an increase in service sector employment. This is part of the process of de-industrialization. Total manufacturing employment now accounts for less than one-fifth of the employed labour force.  The underlying reason behind this is the faster growth of output in the service sector. This trend is shown in the chart below

·        Rising female employment - noticeably in service industries

·        Rise of flexible employment patterns including greater part-time employment and a switch towards short-term contracts

·        Expansion of self-employment - now over 3,00,000 people registered as self-employed.

·        Long term rise in part-time employment

·        Higher long-term unemployment

·        Long term decline in trade union membership and union density

·        Growing scale of economic inactivity - particularly for males over the age of 50, lone parents and people with disabilities

The UK labour market is a very different animal than twenty years ago. We have seen the development of a flexible labour market in which employment patterns change quite quickly - with important economic and social implications.