BILL WELLS: DEPARTMENT FOR BUSINESS, INNOVATION & SKILLS.

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.

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

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.

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)…

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.

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.]

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.

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…

…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.

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…

…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…

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

…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…

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…

…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…

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.

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…

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…

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.

BILL WELLS: DEPARTMENT FOR BUSINESS, INNOVATION & SKILLS.