Economy Watch: Focusing on quality of jobs might help inactivity problem
In recent times the Northern Ireland labour market has been performing strongly. This is evidenced by continued and sustained increases in the rate of employment and decreases in the rate of both unemployment and economic inactivity in the decade since the economic crisis.
Still, before we shower ourselves in praise for how well the labour market is performing, we need remind ourselves that we still have the second lowest employment rate in the UK, and also the UK's highest economic inactivity rate.
In any analysis of our labour market we are reminded (and rightly so) of the fundamental importance of not ignoring our high rates of economic inactivity. Nonetheless, when we look over the last decade, we have been making positive inroads. In Q1 2009 the rate of economic inactivity was 30%. In Q1 2019 it was 26.5%.
This decline is encouraging. Importantly though the story over this period has been somewhat different for males and females. Specifically, although the rate of female economic inactivity continues to be higher than that of males, it has declined substantially over the decade and leads to a reduction in the gap in economic inactivity between the males and females. In Q1 2009 there was a gap of 14 percentage points. By Q1 2019 the gap between males and females had halved to 7%.
Importantly, however, not all of the closing of the gap between male and female economic inactivity has been driven by the decline in female economic inactivity, but rather by a simultaneous increase in male economic inactivity. Since 2016 the rate of male economic inactivity has increased by three percentage points.
This is curious, not least because of the employment surge and the idea that 'there's work if you want it'. Also, it comes in spite of the fact there has been an increase in the proportion of males who are economically inactive but say they would like to work.
Why then are males increasingly choosing either not to enter the labour market or opting to exit the labour market? Recent Neri research looked at changes over time in reported reasons for male economic inactivity. We also looked at changes within the labour market and in particular in employment arrangements and conditions of employment. In doing so we see that an increasing proportion of males are either not entering or are exiting the labour market to become students or for 'other reasons', which includes 'discouraged workers'.
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There has been a three percentage point increase in males who are economically inactive because they are students over the period 2009-2019. There has also been a six percentage point increase in the proportion of males who reported 'other reasons' for their being economically inactive between 2016 and 2019.
Within the labour market there has been quite a substantial increase in the proportion of male workers who are employed on a part-time basis. This is not necessarily bad and indeed some argue that it illustrates that many workers are opting for more flexible working arrangements. The problem, however, is that part-time jobs are lower paid, tend to offer less security and offer little opportunity for skills development or career progression.
Male part-time employment also has some of the lowest earnings of all work. In 2018 median hourly earnings of part-time male workers was £8.50. This compares to £9.03 for part-time female workers and £11.40 for all workers. What is more, over the period 2017 to 2018, the lowest paid part-time male workers have saw a decline of 10% in their inflation-adjusted hourly earnings.
Taking all of this together it is difficult not to arrive at the conclusion that for an increasing proportion of males the labour market is not providing a solution. Because of this it appears that many men are making the decision to exit the labour market either in an attempt to upskill or reskill as students or just because they are so deflated by the system that despite wanting to work, it's just not worth it.
We often hear economic inactivity owing to student status cited as a 'positive' reason for economic inactivity because such individuals are developing their skills or adapting their skills to a changing labour market.
However, no amount of upskilling or reskilling is going to correct for the fact that the labour market is shifting toward an increased reliance on poorer quality part-time and lower paid work. The conclusion must be that while a focus on skills in policy is needed, it should not the be all and end all of labour market policy.
If males are increasingly exiting or not entering the labour market because the work available no longer pays, we need to question why work no longer pays. This leads us back to the inevitable need for policy to take seriously the quality of employment.