A “REMARKABLE” growth in employment over the past five years to a record high of 75 per cent of the working population has levelled off and is not expected to rise further, according to a respected think tank.
In a new report, the Institute for Fiscal Studies (IFS) said average earnings were still “substantially below pre-recession levels” and were being squeezed by inflation.
Its findings came in an analysis of the UK labour market in recent years and the challenges facing the next government.
The IFS said there was no evidence that jobs in low-skilled occupations had driven employment growth and a higher number of workers still wanted to work more hours. Although that figure had fallen since 2012, it was still higher than at the time of the financial crash in 2008. The number of workers not born in the UK had increased faster than the number of UK nationals since 2008, but the employment rate of UK-born individuals was at a record high.
It identified a key future challenge as pay growth, which would “continue to disappoint” unless the poor rate of productivity growth could be redressed.
“It is hard to overstate how important this is to increasing living standards in the long run,” it said.
Jonathan Cribb, a senior research economist at IFS, and an author of the report, said: “Record employment rates along with stronger earnings growth at the bottom than at the top of the distribution have helped reduce labour market inequality. However, over the last year employment growth has flattened out. With the unemployment rate now lower than before the recession, further rises in employment look increasingly difficult to achieve.
“Earnings on the other hand have done very badly indeed. Adjusted for inflation, average earnings remain well below pre-recession levels. A period of this length over which earnings have fallen is unprecedented in modern times. Tackling this will require a turnaround in the UK’s recent dire productivity performance. This should be a central focus of the next government.”
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