This month’s labour market statistics show early indications that the labour market is expanding, with HMRC PAYE data suggesting that there were 160,000 more individuals in work in October than September 2021. While these payroll figures could include people who lost their jobs at the end of September still receiving redundancy pay, the ONS are not expecting mass redundancies as a result of the closure of the scheme in the months to come. This is in line with estimations based on a recent Resolution Foundation survey, which indicated that 88% of the 1.1 million employees who were still furloughed by the end of September were in employment in October.

Older workers are retiring in large numbers

The employment rate increased 0.4 percentage points between April-June and July-September, which is largely driven by a record high net flow from unemployment to employment. In line with this, the unemployment rate decreased by 0.5 percentage points on the quarter to 4.3%.

Furthermore, the economic inactivity rate remained stable, although still relatively high, at 21.1%. This high rate of inactivity, which refers to those who are out of work and not looking for work, appears to be driven particularly by older workers. Around 400,000 workers aged 50 and over have become inactive, between July-September 2019 and the same period in 2021. This reflects the difficulty that older workers often experience in finding a new role once they have lost their job. For those who can afford to retire early, this may not be a problem, but some will struggle with the loss of earnings and pension contributions.

Therefore, with inactivity levels remaining high, there would be value in targeted employment support for people facing barriers in accessing work.

We must ensure the current rise in temporary work does not persist beyond the crisis

The number of temporary workers continues to grow, with 18.2% (259,000) more temporary workers in July-September this year compared with the same period in 2019.

In general, temporary workers appear to be more vulnerable to changes in the market than workers on permanent contracts. As we saw during the global financial crisis, an uncertain economic landscape means that temporary work often increases., and can become a lasting feature of the labour market over the medium term. Temporary work remained high from 2011 through the economic recovery, and only started coming down in mid-2016.

We are witnessing the same trend now, with the number of temporary workers now at a level similar to that in the wake of the previous crisis. There are advantages to temporary work, for employers managing unpredictable demand and workers looking to supplement their earnings to meet short-term pressures. But concerningly, the recent growth in temporary work doesn’t reflect worker preferences. The number of people who accepted temporary work because they could not find permanent work has increased by 43% (151,000) since 2019. It is important that this trend does not continue beyond the crisis, because of the potential long-term effects it has on workers.

Given that just yesterday the Prime Minister did not rule out re-introducing restrictions in some form, employers in sectors such as hospitality will continue to face uncertainty over the winter months, so there may be a need for further support from government to mitigate this risk.

Figure 2: Growth in employees on temporary contracts between 2019 and 2021

Source: Work Foundation calculations using ONS Dataset: A01 - Full-time, part-time and temporary workers (seasonally adjusted). 16 November 2021.

Government should prioritise workforce skills development to address labour shortages

Labour shortages across the economy remain an ongoing concern, with recent reports highlighting that some firms in hospitality, retail and logistics are offering sign-on bonuses of up to £2,000 in an attempt to plug gaps in their seasonal workforce. The number of job vacancies in August-October 2021 continued to rise to a new record of 1.17 million, an 40% increase on the pre-pandemic January to March 2020 level, with 15 of the 18 industry sectors showing record highs. Hospitality saw the biggest increase compared with pre-pandemic levels, with vacancies up by 79% (66,500).

Today’s headline statistics are a positive reflection of the success of the furlough scheme. Nevertheless, Government needs to focus on improving job quality and further investing in workforce skills and development, and the upcoming Levelling Up White Paper presents an opportunity to make ambitious proposals in these areas. As we highlighted in our skills research Learning to Level Up, investing in workforce skills and development now will be essential to maintaining and enhancing productivity through the recovery and beyond. Government should review eligibility for the Lifetime Skills Guarantee to maximise access and participation among workers on low pay, recognising that some workers who hold a level 3 qualification may benefit from access to further training. Additionally, further support with the indirect costs of training, such as childcare, should be offered to workers on low incomes.

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