This month’s labour market statistics indicates a broadly stable picture, with largely unchanged figures on employment (75.7%), unemployment (4.2%) and inactivity (20.9%). Unfortunately, due to concerns over the reliability of the usual statistics, the Office for National Statistics has not provided data beyond these headlines. This could mask a host of issues that are key to policy makers.

Flying blind

Without in-depth data, we cannot track flows from unemployment into work, or the other way around. This means we do not currently know if long-term unemployment is on the rise, which could mean that it is becoming more difficult for job seekers to obtain work.

With a slowdown in hiring and a slight cooling of the labour market over the past months, younger workers are usually the first to feel the effects. To prevent unemployment scarring – meaning a person’s ability to find work worsens due to a period of joblessness, it is key to identify early and take action. But we are currently flying blind.

In September 2023, a record number of 2.6 million people were out of work and not looking for work due to long-term illness – reflecting a very worrying trend, but we do not know if this problem is growing or changing at all.

Most concerningly, policy and budget commitments that will be brought forward in the Autumn Statement next week month must rely on outdated information. Policy makers will struggle to determine if, and what kind of action is required, with potentially damaging consequences for workers and businesses.

Strong wage growth and falling inflation sees modest, real gains for workers

With strong wage growth of 7.7% and falling inflation, the real value of wages has now risen by 1.3% on the year – the highest in two years. In previous quarters, we have often seen pay growth concentrated in specific sectors such as finance and business, with other sectors lagging behind. Although pay growth is still strongest in these areas, currently we are seeing above inflation pay growth in most sectors except for construction.

For sectors such as retail and hospitality, whilst we are seeing pay growth of 6.6%, this is being eroded entirely by inflation. These are low paid sectors and the lack of real wage growth could exacerbate existing recruitment issues for employers, particularly heading into the holiday period. Furthermore, we know that insecure work is concentrated within these sectors, and the level, and unpredictability, of pay can make it very difficult for people to make ends meet. Our recent research with the Chartered Management Institute shows almost half of insecure workers couldn’t pay an unexpected bill of £300 if it was due within the next seven days.

Figure 1: Change in regular pay in September 2023, three-month average



Source: Work Foundation calculations based on ONS (14 November 2023) Dataset A01: Table 15: Average Weekly Earnings (nominal) - Regular Pay (Great Britain, seasonally adjusted).

Gaps in evidence have implications for policy making on welfare – a topic that is likely to dominate the Autumn Statement

Although the headline figures paint a picture of stability, the lack of detailed and up-to-date labour market information presents an issue for evidence-based policy making. This is particularly problematic in the context of the Autumn Statement coming up later this month, and a likely General Election in 2024. Amidst worker shortages and sluggish economic growth, we need to have well-informed discussions about the best ways to tackle inactivity due to long-term sickness, and the right level of state support to ensure low-income families have a decent standard of living. These topics tend to become highly politicised and any decisions made around them should be based on evidence, to avoid the creeping in of political ideology.

The Office for National Statistics is undertaking steps to improve the reliability of their key statistics, for instance by using administrative data as a benchmark, but also importantly by returning to more face-to-face recruitment of respondents to enhance the survey response. This is costly, but effective, and Government should actively support the ONS to ensure it has the resources required to deliver these improvements. These past months have shown us the key role that these national surveys play in providing reliable information on the labour market, although the consequences of gaps in evidence will take some time to become evident.

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