WORK AND PENSIONS SELECT COMMITTEE:Labour market seminar: 26TH February:

‘Trends in part-time working and short-term employment contracts and the impacts on benefit claims.’ Summary

BILL WELLS:

DEPARTMENT FOR BUSINESS, INNOVATION & SKILLS.

Whilst there are differences within and between the different working age benefit rates it remains true that only around 5% of

people receive a main rate of benefits of more than £150 per week.

5

1 1

23

58

2

10

10 1 1

21

68

14 4

15

0 02

15

8

50

910

0 1

11

35

5

32

6

0

10

20

30

40

50

60

70

80

£0 0-£20 £20-£40 £40-£60 £60-£80 £80-£100 £100-£150 £150 & Over

PE

R C

EN

T

DISTRIBUTION OF WEEKLY AMOUNT OF MAIN OUT-OF-WORK BENEFITS: MAY 2013: WORKING AGE BENEFITS: SOURCE: DWP TAB TOOL

JSA LONE PARENT & OTHER ON IS ESA/IB/SDA TOTAL

…with only around 15% of employees earning less that £150 p.w. and less than 10% earning less than £100 p.w.

GROSS AND NET WEEKLY WAGES: ALL EMPLOYEES: SOURCE ASHE 2013:NET WAGES = GROSS WAGES NET OF INCOME TAX AND EMPLOYEE NATIONAL INSURANCE CONTRIBUTIONS:

£0

£150

£300

£450

£600

£750

£900

£1,050

£1,200

£1,350

£1,500

£1,650

£1,800

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Percentile

Gross Weekly Wages Wages Net of Income Tax and NICs

Housing benefit add complexity and cost to the ‘Making Work Pay’ agenda. Some claimant have a supplement to the main benefit rate -

usually around £50-£125 p. w. it is generally people in receipt of housing benefit that need income supplements in the form of tax

credits whilst in work.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

IN RECEIPT OF:

HOUSING BENEFIT BY MAIN PASSPORTING BENEFIT AND SIZE OF AWARD: %: SOURCE: DWP HOUSING BENEFITS.

JSA LONE PARENT & OTHER IS BENEFITS ESA PENSION CREDIT TOTAL

The wider range of opportunities provided by the UK’s ‘light and even’ employment regulation system has helped to deliver not only a

high overall employment rate but also generally higher rates for all age and sex groups (except the oldest)…

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10

20

30

40

50

60

70

80

90

100

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EMPLOYMENT RATES BY AGE AND SEX: 2012: OECD ESTIMATES

UK OECD AVERAGE

Employment is above its pre-recessionary peak. And as total hours have growth even faster there is, therefore, little sign of labour

hoarding due to involuntary part time working. Average hours are now at or above 2008 levels.

94

96

98

100

102

104

106

IND

EX

: A

PR

IL 2

008

= 1

00

MONTH IS MID MONTH OF THE QUARTER

EMPLOYMENT, TOTAL & AVERAGE ACTUAL HOURS WORKED: INDEX: APRIL 2008 =100: SOURCE LFS: SEASONALLY ADJUSTED

EMPLOYMENT TOTAL ACTUAL HOURS WORKED AVERAGE ACTUAL HOURS WORKED

The UK’s ‘light and even’ employment regulation has also helped the UK to show resilience during and since the recession. Those aged

25-64 and 65 & over are already above pre-recessionary levels…[But as there has been a population shift towards those aged 65 & over the overall

employment rate for all aged 25 & over are not quite above pre-recessionary levels.]

0

2

4

6

8

10

12

68

70

72

74

76

78

80

Per

Cen

t

Per

Cen

t

EMPLOYMENT RATES: AGES 25-64 & 65 & OVER:SOURCE LFS: SEASONALLY ADJUSTED

Aged 25-64 Years [LHS] Aged 65 & Over [RHS]

However, a major problem remains for young people leaving education. They are taking longer when they leave education to either move into

further/higher education or to move into work. Their experience differs from that of young people who have successfully entered the labour market – and had a job. Amongst this group the numbers are already

close to pre-recessionary lows.

0

200

400

600

800

1,000

TH

OU

SA

ND

S

WORKLESS UNDER 25 NON-STUDENTS: BY WHETHER HAD PAID JOB OR NOT: SOURCE LFS: AGE 16-24 EXCLUDING THOSE IN FULL-TIME EDUCATION: 4 QUARTER AVERAGE: BIS ESTIMATES

HAD A JOB (Inc. Missing Values) NEVER HAD A JOB (Inc. Missing Values)

Involuntary job losses rather than hours reductions was the main response to the fall in labour demand during the recession. However, subsequently, redundancies and other involuntary separations have

fallen back and total separations are now at pre-recessionary levels…

1.2

1.6

2.0

2.4

2.8

3.2

3.6

4.0

4.4

MIL

LIO

NS

JOB SEPARATIONS: ANNUAL FLOWS OUT OF EMPLOYMENT: AGE 16-64: LFS EXPERIMENTAL SERIES: N.S.A.

To ILO Unemployment To Economic Inactivity All Outflows

…and the type of jobs that fell during the recession - both (voluntary) part time workers and, particularly, full-time employees - are those most associated with falls in labour demand. Although there has

been strong growth recently, the job losses have not been recouped.

-1,200

-1,000

-800

-600

-400

-200

0

200

TH

OU

SA

ND

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EMPLOYMENT CHANGE SINCE APRIL 2008: 'DEMAND TYPE' JOBS' LFS

SUM OF 'DEMAND TYPE' JOBS FT EMPLOYEES PT WORKERS WHO DIDN'T WANT FT

A rise in hiring is the main reason for the recent good employment performance. This rise was concentrated amongst people moving from ILO unemployment into a job. As this was during a period of low/no growth it suggests a supply rather than a demand effect…

1.2

1.6

2.0

2.4

2.8

3.2

3.6

4.0

4.4

MIL

LIO

NS

HIRINGS: ANNUAL FLOWS INTO EMPLOYMENT: AGE 16-64: LFS EXPERIMENTAL SERIES: N.S.A.

From ILO Unemployment From Economic Inactivity All Inflows

…but the recession seems to have increased the number of workers willing to take up ‘Second Choice’ vacancies rather than remain unemployed. It seems to have largely been their choice

rather than having been imposed on them by their businesses…

-200

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

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OU

SA

ND

S

EMPLOYMENT CHANGE SINCE APRIL 2008: SUPPLY-SIDE 'SECOND CHOICE' JOBS: LFS

Sum of 'Second Choice' Jobs PT Workers who Want to Work FT Second Jobs Self Employed

The growth in employment over more than two decades has been amongst workers who usually work more than 16 hours per

week…

-1,000

-500

0

500

1,000

1,500

2,000

2,500

3,000

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OU

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MONTH IS MID MONTH OF THE QUARTER

EMPLOYMENT BY USUAL HOURS: CHANGE SINCE APRIL 1992: SOURCE: LFS: SEASONALLY ADJUSTED

0-6 HOURS 6-15 HOURS 16-30 HOURS 31-45 HOURS OVER 45 HOURS

…and the growth in the numbers of part-timers who would prefer to work full-time since the recession has been amongst workers

who usually work at least 16 hours per week…

PART TIME WORKERS WHO WOULD PREFER TO WORK FULL TIME:BY USUAL HOURS WORKED: CHANGE SINCE Q2 2008:

SOURCE LFS: NOT SEASONALLY ADJUSTED

-100

0

100

200

300

400

500

600

Q2 2008 Q2 2009 Q2 2010 Q2 2011 Q2 2012 Q2 2013

Th

ou

san

ds

Unknown Less than 16 16 - 30 Over 30

In terms of zero hours contracts it is the variability of the hours (and pay) on offer which is important rather than the precise nature of the contracts themselves. For example, ONS have indicated that the apparent doubling of such contracts in the last year is due, at

least in part to publicity raising awareness of this type of contract…

0

100

200

300

400

500

600

700

TH

OU

SA

ND

S

NUMBER OF ZERO HOURS CONTRACTS:SOURCE: LFS: OCTOBER TO DECEMBER: NOT SEASONALLY ADJUSTED

2013 ONS ESTIMATE ONS: 2000 TO 2012 BIS ESTIMATE 1997-1998

…but, because zero hours contracts are a very small part of overall employment zero hours/short hours are much more

prevalent amongst workers who are not on zero hours contracts than amongst workers who are…

0

500

1,000

1,500

2,000

2,500

3,000

No hours 1-4 hrs 5-9 hrs 10-14 hrs

TH

OU

SA

ND

S

WEEKLY HOURS ACTUALLY WORKED BY ZERO HOURS CONTRACT: 000sSOURCE LFS: OCTOBER TO DECEMBER 2013: NOT SEASONALLY ADJUSTED

ZERO HOURS CONTRACTS NON-ZERO HOURS CONTRACTS

In the labour market as a whole the numbers working less than usual hours because employers vary their hours have fallen over time. However, within

this total, there has been a growth of around 100-150 thousand in the number working zero hours.

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300

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400

3.8

3.9

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NUMBER WORKING LESS THAN USUAL HOURS DUE TO: VARIABLE HOURS:LFS: 4 QUARTER AVERAGE

Total [LHS] Worked Less than Usual Hours [LHS] Worked Zero Hours [RHS]

Variable hours contracts – including zero hours contracts – can provide opportunities for workers who are unlikely to be on benefits. For example, a quarter of zero hours contracts are taken up by students compared to less

than 10% of workers not on zero hours contracts…

18%

3%

7%

5%

75%

92%

0% 0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

ZERO HOURS CONTRACTS NON-ZERO HOURS CONTRACTS

PROPORTION IN EDUCATION BY ZERO HOUR CONTRACT STATUS: SOURCE LFS: OCTOBER TO DECEMBER 2013: NOT SEASONALLY ADJUSTED

In Full-Time Education In Part-Time Education Not in education Unknown

However, there are also more signs of potential problems in zero hours contracts. There are more likely to want to work or need more

hours - 37% compared to 13% - including 16% who are actively looking…

10%

2%6%

1%

21%

10%

62%

86%

2% 2%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

ZERO HOURS CONTRACTS NON-ZERO HOURS CONTRACTS

NEED MORE WORK AND JOBSEARCH BY ZERO HOURS CONTRACT STATUS: %: SOURCE LFS: OCTOBER TO DECEMBER 2013: NOT SEASONALLY ADJUSTED

Need More Hours & Looking Prefer More Hours & Looking Prefer More Hours but Not Looking

Don't Need More Hours Unknown

CONCLUSIONS• The UK’s labour market system of benefits, employment regulation

and National Minimum Wage are all structured around providing universal basic minimum standards.

• And this combined with a long standing traditions of allowing workers and employers to determine their own terms & conditions is currently delivering a system where the majority of people are better off in work than on benefits; employment overall and for all age groups is high by international standards; and the employment record during and since the recession has been good.

• However, there is still more to do. Including:-– Helping young people make the transition from education to work more

easily and quickly; and

– there are a significant number who would prefer to work more hours both amongst those who usually work more than 16 hours a week – who have taken up a ‘Second Choice’ job rather than stay unemployed;

– and amongst workers whose variable hours – including zero hours contracts – mean that their hours are low or they are not working.