A Polarising Crisis? The changing shape of the UK and US labour markets from 2008 to 2012

14th November 2013

James Plunkett and João Paulo Pessoa

 The polarisation of the UK labour market intensified during the great recession and its aftermath as low- and high-skilled jobs expanded while middle-skilled jobs fell as a share of employment, reveals A Polarising Crisis? The report, produced in collaboration with the London School of Economics, lends credence to concerns that the long downturn may have pushed the UK towards a two-tier labour market.

A Polarising Crisis? examines in detail for the first time how the UK and US job markets have been changed by the 2008 financial crisis. It reveals that both countries have seen middle-skilled occupations decline while those at the top and bottom have grown since 2008. The findings also highlight how different industries have fared in the UK since the crisis struck, showing that:

  • From 2008 to 2012, employment in the lowest-paid third of sectors in the UK economy grew by 190,000 while the highest-paid third of sectors saw employment grow by 140,000. In the same period, employment in the middle-skilled third of sectors fell by almost 170,000.
  • The UK has had strong employment growth at the top and bottom of the labour market. At the top, the high-paying Business Activities sector (including consultancy work) expanded rapidly, growing by 16 per cent and adding 461,000 jobs between 2008 and 2012. At the bottom, the UK’s lowest paying sector, Hotels and Restaurants, grew faster than any other sector, with employment growing by 17 per cent or 218,000 from 2008 to 2012. But not all low paying sectors expanded: retail saw a decline in employment of 185,000 from 2008 to 2012, shrinking from 14.8 per cent to 14.1 per cent of total employment.
  • Employment in the UK Manufacturing sector continued a long-term decline, falling by 262,000 from 2008 to 2012 while Construction saw an even bigger decline, the sharpest of any sector, with employment falling by 339,000 from 2008 to 2012.
  • Public sector work saw sharply differing outcomes: while Public Administration and Defence saw employment fall by 271,000, there were gains elsewhere in areas such as Health and Social Work where employment rose by 314,000 from 2008 to 2012.

A Polarising Crisis? The changing shape of the UK and US labour markets from 2008 to 2012 by ResolutionFoundation

The report also contains new findings that feed into the debate about how the crisis has hit wages and employment. It finds that jobs involving non-routine tasks (such as caring for the elderly) have grown throughout the crisis. Meanwhile, jobs involving more routine tasks, (such as secretarial work) have borne the brunt of the falls in employment. The report finds that real wages show the opposite trend, having fallen more steeply in non-routine than in routine jobs.

The findings throw light on how the UK labour market is changing. In the short-term, they suggest that employers may have held on to non-routine workers during the downturn by squeezing their pay, while letting go of routine workers whose jobs are easier to automate. In the longer term, they reveal how a combination of cyclical and structural forces are reshaping the jobs market as industries like construction have seen falling employment due to lower demand— yet other sectors, particularly those dominated by non-routine roles like health and social care and business activities, appear to be expanding on the back of longer-running changes in demography and technology.

In addition to its results for the UK, the report also contains new findings for the American labour market. It finds that the 2008 crisis has accelerated the polarisation of the US jobs market even more so than in the UK. Low paying industries in the US have expanded significantly in recent years, with five of the six lowest paying US sectors seeing an increase in employment from 2008 to 2012 as employment in the lowest-skilled third of the US economy (on the basis of average pay in 2008) grew by 1.9 million from 2008 to 2012. At the same time employment in the highest-skilled third of sectors rose by 409,000. Meanwhile, every industry in the middle-third of the economy lost jobs in this period with employment in these sectors falling by a total of 4.4 million.

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A polarising crisis

13 November 2013
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