Trends and Foresight

1. Trends and Foresight Report 3 Jobs & Skills / Poverty & Inequality Prepared for Big Lottery Fund June 2014

2. Introduction to the report • This is the third report produced to support the Fund identify areas of emerging need in the UK. • This report focuses on two broad topic areas: Jobs & Skills (covering employment trends, skills shortages and job creation) and Poverty & Inequality (covering income, austerity, relative poverty and the impact of changes in government spending)

3. Jobs & Skills

4. Employment Trends

5. Summary • Employment increasing and claimant count falling from 2013-14 • Public sector employment will continue to decline for the next 5 years, while private sector grows • Population growth propels a ‘jobs gap’ • Unemployment varies only slightly from region to region, but sharp disparities are visible at local level • Perceptions of individual and state responsibility are shifting

6. Employment and Unemployment There are more people in employment than ever before in the UK and this trend is largely driven by population growth. Although the unemployment rate is falling (along with the claimant count) it rose by far less than expected during the recent downturn, making unemployment a less pervasive issue than in previous recessions Total employment set to increase; unemployment falls

7. Public sector austerity to continue until 2020 Spending cuts are forecast to continue into the next parliament (after 2015 general election) and will have a major impact on public sector employment – even as the private sector continues to grow Source: Oxford Economics

8. The Jobs Gap The Jobs Gap, as calculated by the Resolution Foundation, is the number of jobs being created against the number of jobs that need to be created to keep employment steady. Recent rises in employment have been a result of population growth, rather than necessary rates of job creation Source: Resolution Foundation: Sizing the UK Jobs Gap, 2013

9. Unemployment: Regional Picture The national picture varies only slightly – with unemployment highest in England and Northern Ireland

10. Unemployment: Local Picture At local level the disparities are far more pronounced – within the space of a few miles (especially in densely populated areas) the trends vary very sharply Greater Manchester London Source: Local Futures, Labour force survey 2013

11. Young men disproportionately affected by unemployment Claimant Count (Jobseeker's Allowance) by age and sex for May 2014, thousands Source: ONS

12. Unemployment:International comparison Unemployment rates in Europe have remained high since 2012, despite those in the UK falling. The free movement of labour across Europe could facilitate a rise in the rate of economic migration as Europeans come to the UK for work

13. Unemployment: historical comparison Although Unemployment rose over the course of the downturn, this rise was far less severe than in previous recessions – although women have been affected more than in the 1990s recession 1990s recession 1980s recession 2009 downturn Source: Labour force survey

14. Less support for state help for unemployed since the 1980s, but an increase during the downturn Overall, the proportion of people agreeing that it is definitely the Government’s responsibility to provide the unemployed with a decent standard of living has halved since the 1980s. Against this, the percentage believe that it definitely isn’t the Government’s responsibility has more than doubled Do you think it should or should not be the government's responsibility to … provide a decent standard of living for the unemployed Source: British Social Attitudes 2013

15. Less sympathy for the unemployed is part of a wider trend As well as a long term shift in views on the state’s responsibility towards the unemployed, there is also a change in sentiment about benefits overall – with 54% saying they are too high Source: British Social Attitudes 2013

16. Underemployment & Zero Hours

17. Summary • Underemployment, rather than unemployment, has been the central jobs story of the downturn • There have been sustained rises in all forms of ‘vulnerable’ employment • Zero Hours Contracts disproportionately affect younger people, those aged 50-64 and certain sectors (such as accommodation) • Women are also disproportionately affected – more than half of all zero hours jobs are worked by women – 59% in 2011 (a change since 2005)

18. Underemployment One of the reasons for this was the rise in part-time and temporary work, which has led to a substantial rise in the number of Underemployed - those who want to work more hours but cannot Overall, the UK has seen substantial rises in all forms of ‘vulnerable employment’ – from Zero Hours contracts to self employed workers 137% rise in number of people employed on Zero Hours contracts, Q4 2012-Q4 2013 2.7m Official estimate of zero-hours contracts in the UK, according to ONS Source: ONS

19. Underemployment Underemployment has risen across the UK And it disproportionately affects the young

20. Part time, temporary, self employed Since the onset of the recession there have been sustained increases in the number of people in potentially vulnerable employment – those that are either on temporary or part time contracts, or those that are self employed Source: ONS

21. Employment trends by gender

22. The zero hours debate • Zero hours contracts in theory benefit certain people – making the debate around their (increasing) use less clear cut • If the employee prefers to work without contracted hours, the benefits include flexibility and the ability to turn down work if they do not wish to do it • If the employer offers a zero hours contract with no alternative, however, the employee can struggle to work enough hours, and fail to achieve an appropriate level of job security

23. Zero hours contracts Zero-hours contract - is where a person is not contracted to work a set number of hours, and is only paid for the number of hours that they actually work. In employment on zero hour contracts, 2013 Percent of people in employment on a zero hour contract Source: ONS

24. Zero Hours is mainly an issue for younger people – but also affects pre-retirement workers Proportion of people in employment, on Zero Hours contracts, by age Q4 2013 Source: ONS

25. Almost half of accommodation businesses use Zero Hours Source: ONS

26. Young people

27. Summary • Nationally, the youth unemployment rate is dropping, as is the number of 16-24s classed as NEET • But hotspots still exist and the national figure hides regional differences • The cost of living means students are increasingly likely to be economically active

28. Youth Unemployment The total number of unemployed young people has almost doubled since the turn of the century, with one in five economically active people aged 18-24 unemployed – almost 800,000 in total

29. Young people in the labour market Most people in FTE were economically inactive... ...and most people not in FTE were in work

30. Students and the labour market • Young people in full time education are increasingly having to balance work and education – In 2014, more than a third of full time students are economically active (with 25% of these unemployed) • Unfortunately, due to the huge rise in the number of students over the past 20 years, labour market comparisons cannot be made – although this is a trend to monitor over the next few years

31. Proportion of NEETs are falling Although they are most likely to be underemployed, and unemployed, the total proportion of NEETS has actually fallen over the past two years

32. Young people and the labour market: Regional perspective

33. Youth unemployment hotspots Although youth unemployment has fallen nationally to 17%, there are a number of regions around the UK where the figures are very high – in some cases 25% or more of people aged 16-24 are unemployed

34. Jobs & Skills

35. Summary • Since the outset of the downturn, companies going out of business has been the main cause of job destruction (with fewer businesses entering the market) • Optimism is increasing in the private sector, but the public sector expect to continue to decline • Skills shortages are a particular issue in Scotland • Across the UK, health and care (and related areas) are the jobs most difficult to fill

36. Job creation Components of job creation and destruction, 2004-2011 Gross job creation and loss from 2004 to 2011

37. Overall effect of recruiting new staff and/or making redundancies in the next three months, by sector Job prospects, by sector Private sector firms are continuing to drive the upturn in employment prospects, with the net employment score increasing to +37 from +27 in the winter 2013–14. Prospects in the public sector remain poor, however. Source: CIPD, Labour market Outlook Spring 2014

38. Recruitment intentions Recruitment intentions are strongest in education (77%), human health and social work activities (72%), financial, insurance activities and real estate (70%) and the information and communication (70%) sectors. Nearly three in five employers in the voluntary and not-for-profit sector (58%) plan to hire in the second quarter of 2014, down from 67% reported in the winter 2013–14 report. Source: CIPD, Labour market Outlook Spring 2014

39. Skills Skills shortages are a particular issue in Scotland, where more than 1 in 4 job vacancies are caused by skills shortages Source: UK Commission’s Employer Skills Survey 2013

40. Skills Shortages Most common cause of skills gap is job specific skills – implying that there is insufficient training at a basic level. Other prominent areas could be addressed during education – such as problem solving or organisation Source: UK Commission’s Employer Skills Survey 2013

41. Roles most difficult to fill Difficulty filling roles in social and health care could create damaging workforce deficiencies Source: CIPD, Labour market Outlook Spring 2014

42. Qualifications of Older Workers The vast majority of under 50s left school no earlier than age 16 – meaning that these age groups are far less likely to have no qualifications. Amongst the over 50s, however, significantly more people left school at 15 or under – and those aged 50-69 are likely to still be in the workplace Understanding Society Wave C

43. Skills shortages: Older Workers In the South East of England and London, skills shortages amongst older people are less prevalent – the majority of these people have some qualifications. In other places, however, notably the North West and Wales, a far great proportion of over 50s have no qualifications Proportion of residents aged 50+ with no qualifications (residence based) (January- December 2013) Source: Local futures

44. Qualifications gap: regional picture Proportion of residents aged 16+ who are qualified to Level 4 or higher (2011) Proportion of residents aged 16+ who are qualified below Level 2 (2011) Source: Local futures

45. Jobs and Skills: Implications • The economic downturn has not had an effect on unemployment in the same way as previous recessions – although it has had a significant effect on the labour market • ‘Vulnerable’ types of employment, from temporary to part time work have all increased over the past few years and are likely to continue in the short term as job creation struggles to keep pace with a rising population • Underemployment and zero-hours contracts are a related issue – with people in work (and therefore excluded from many state benefits) but unable to work the hours they need • Problems with skills exist in different sections of society • Although youth unemployment and NEET rates are declining nationally, there are areas where the figures remain high – particularly in the North East and Northern Ireland • Older workers are the most likely to suffer from skills shortages, as those aged between 50-69 are significantly more likely to have left school without qualifications • The need for targeted support in the labour market is shown by the variance in trends from one locality to another • Especially in cities, trends in unemployment and related issues can vary very sharply from one place to another – often in wards or regions that are geographically very close

46. Jobs and Skills: Areas of emerging need • Skills shortages in health and social care • Roles in the health and care sector – covering both skilled and unskilled professions - are among the most difficult to fill • There is a need to ensure that these professions – critical to society – are able to recruit adequately • Deficiencies in these areas can have serious knock-on effects for clients – causing areas of further need • Rising numbers in employment are obscuring the jobs gap • Although unemployment is slowly decreasing and total employment rising, this is due partly to underlying population growth • This rate of population growth is creating a jobs gap – where jobs are not being created fast enough to maintain the same level of employment • Older and younger people most affected • Groups at either end of the labour market have been the worst affected by trends in employment and underemployment – including skills shortages and zero hours contracts

47. Poverty and inequality

48. Summary • Economic recovery is underway and in 2014 the economy is likely to reach its pre recession peak – meaning that it will be the same size it was before the crash in 2008 • Inflation has maintained its drop from its 2011 peak, and is now below wage growth for the first time in three years • Wages will not surpass pre-recession levels until 2017

49. Economic prospects Although wages are expected to rise sharply in 2014 (although not for public sector workers) and continue to grow afterwards, there is a long way to go to make up for the decline in wages in 2009 – especially as this was followed by high than average inflation. GDP is expect to grow steadily over the next 5 years Source: Oxford Economics 2014

50. Wages will not recover fully until 2017 (at the earliest) Source: Oxford Economics 2014