‘Lower households incomes behind record employment’

The UK’s record employment is the result of workers feeling pressurised to work more to compensate for lower earnings over the past decade, according to a new report from the Resolution Foundation think tank.

It says UK workers’ hours have risen by a collective 65 million hours a week over the past decade.

The report, Feel poor, work more, also finds that reductions in the value of working-age benefits and increases in the state pension age for women have added to this ‘income shock’ for many people, explaining the large increase in those groups working.

The report notes that the earnings of a couple with two children and one full-time median earner are a fifth lower today than they would have been had pre-crisis real earnings trends continued – an annual income hit of £1,700.

Official figures out today show real average pay in the three months to September [with annual growth estimated to be 1.8%] was lower than it was back in August 2007. The latest Office for National Statistics figures also show a significant fall in part-time working [mainly affecting women] with a rise in full-time working.

Feel poor, work more highlights three key trends:

• More hours. Working more hours is the easiest way for workers to respond to an income shock
• More workers. Another key route to boosting family income is to raise employment within the household. The report shows a major, and new, rise in second earners. While the employment rate of coupled mothers saw no increase pre-crisis, it has increased by over five percentage points over the past decade. At the same time their average working week has increased by over two hours.
• More employment across crisis-affected economies. The report shows that other countries experiencing a similar income shock over the past decade have also seen employment levels rise significantly, bar a few exceptions in Southern Europe.

The Foundation notes that the combination of more people working (37 million hours) and people working more than they might have otherwise done (28 million hours) together mean that Britain is working 65 million more hours each week than they would be had the 2008 employment rate and pre-crisis hours-reduction trend continued.

The report says that while the employment boom has had an unwelcome cause, it should still be welcomed as it has helped households protect their living standards and closed employment gaps between places and groups.

Torsten Bell, Chief Executive of the Resolution Foundation, said: “The UK’s record employment level has been one of the most talked about but least understood economic phenomenon of the past decade. Higher employment has little to do with a more flexible labour market or welfare reforms [ie the introduction of Universal Credit]. Instead it’s a story about how households have responded to the unprecedented post-crisis income squeeze.

“Faced with shrinking pay packets, we have chosen to work more hours or re-join the workforce, as many thousands of women have done. The economic motto for many families has been ‘feel poor, work more’.

“Record employment should still be welcomed, as a key way that households have protected their living standards, and for closing worrying jobs gaps between people and places.

“But working more hours is certainly not always desirable. Our objective should be to retain high employment with the wage growth that drives allowing a return to the long term trend of a shorter average working week.”

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