Job done?

Assessing the labour market since 2010 and the challenges for the next government

The UK labour market has transformed almost beyond recognition since the government changed hands in 2010 – from skyrocketing employment during the 2010s, to a pandemic that has arguably had more of a lasting impact on the labour market than any other area of economic policy, and all against the backdrop of a historic wage stagnation. In this briefing note, we assess the labour market legacy the next government stands to inherit, the likely policy challenges over the rest of the 2020s, and what the two main parties are offering in their manifestos.

The Conservatives’ record on the labour market during their 14 years in office is mixed. On employment, rapid employment growth of the 2010s (driven by rising employment rates, not just a growing population) has been partially reversed since the pandemic, with the UK one of only six countries of 38 in the OECD whose employment rate has fallen since 2019. On pay, the record since 2010 is of a long-standing wage stagnation – average wages are now only £16 a week higher in real terms than they were at the time of the 2010 election. Pay growth has slowed post-financial crisis in other countries too, but the UK’s stagnation has been worse: had our wages grown at the same rate as the US or Germany since 2010, the average British worker would be earning £3,600 more each year. More positively, minimum wage increases have driven up pay in low-paid occupations.

The Conservatives and Labour have very different plans for labour market policy. While the Conservatives would like to stick with the status quo, Labour are planning the biggest overhaul of labour market policy in a generation. Labour are yet to fully spell out their plans in some areas – which makes the impact of their proposals uncertain – but plans include a higher minimum wage (perhaps linking to the real Living Wage), ‘day one’ rights to protection from unfair dismissal (although potentially with probationary periods), and giving workers on zero hours contracts minimum guaranteed hours reflecting their normal hours worked.