The Welsh Labour Market Following the Great Recession

Stephen DrinkwaterWISERD, Swansea University

November 2012

Outline• Background to the Great Recession

• Recent Changes in the UK Economy

• Recent Changes in the Welsh Labour Market– GVA and Earnings– Employment– Unemployment

• Summary

Background to the Great Recession• Origins in the US banking sector due to over-lending to high risk individuals (sub-prime loans) – many of whom defaulted

Triggered a chain reaction in the financial sectors of many other countries in Autumn 2007 => many banks had bought the (toxic) debts

• In the UK, the loss of confidence within the financial sector was compounded by the house price bubble

Caused a big drop in UK inter-bank lending

• Expected that London would have borne the brunt of this– but not the case (Gordon et al., 2011)– also knock-on effects for other sectors such as manufacturing

Recent Changes in the UK Economy• Sharp fall in GDP from mid 2008 to early 2010 (6%)

− but relatively small decline in employment (2 pp)− may be because of pro-active initial government response but also

other factors (Gregg and Wadsworth, 2010)

• Only a very slow to recovery since then with further recent falls in growth => focus on deficit reduction− unemployment fairly stable at around 8% since 2009

• Nominal wages on upward trend but real wages have declined in past couple of years

• Figures also show other major EU economies => highlights employment situation in Spain

GDP in the UK and EU: 2000-11

Source: Eurostat Note: 2000=100

95

100

105

110

115

120

125

130

135

2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1

European Union (27 countries) Germany Spain France Italy United Kingdom

Employment Change (%) in the UK and EU: 2000-11

Source: Eurostat

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

EU27 Germany Spain France Italy United Kingdom

Unemployment Rates in UK and EU: 2000-11

Source: Eurostat

0.0

5.0

10.0

15.0

20.0

25.0

2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1

EU27 Germany Spain France Italy United Kingdom

Weekly Earnings in the UK: 2000-11

Source: ONS (ASHE)

300

350

400

450

500

550

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Nominal gross median earnings (£) Real gross median earnings (£)

Recent Changes in the Welsh Labour Market• GVA and earnings still relatively low– decline has stabilized in recent years

– relative earnings are lower for males – but high percentage of females employed in public sector

• Employment rate fell 2008-10 but has recovered since – similar to UK trend– have been further reductions in manufacturing

– especially at the start of the recession

• Increases in unemployment – again fairly stable since mid-2009

– but some variations by groups (gender, age, education and area)

Relative GVA in Wales, Scotland and Northern Ireland: 1997-2011

Source: ONSNote: UK=100

Relative Average Weekly Earnings of Males and Females in Wales: 1997-2011

Source: ONS (ASHE)Note: UK=100

Employment Rates in Wales and the UK: 1992-2012

Source: ONS

58

60

62

64

66

68

70

72

74

Mar 1992to May1992

Jan 1994to Mar1994

Nov 1995to Jan1996

Sep 1997to Nov1997

Jul 1999to Sep1999

May 2001to Jul2001

Mar 2003to May2003

Jan 2005to Mar2005

Nov 2006to Jan2007

Sep 2008to Nov2008

Jul 2010to Sep2010

May 2012to Jul2012

United Kingdom Wales

Employment in Selected Industrial Sectors

Source: ONS (APS)

0 10 20 30 40

UnitedKingdom

Wales

UnitedKingdom

Wales

UnitedKingdom

Wales

Man

ufac

turin

gPu

blic

Serv

ices

Bank

ing,

Fin

. &In

sura

nce

Jun-08 Jun-10 Jun-12

Unemployment Rates in Wales and the UK: 1992 - 2012

Source: ONS

0

2

4

6

8

10

12

Mar 1992to May1992

Jan 1994to Mar1994

Nov 1995to Jan1996

Sep 1997to Nov1997

Jul 1999 toSep 1999

May 2001to Jul 2001

Mar 2003to May2003

Jan 2005to Mar2005

Nov 2006to Jan2007

Sep 2008to Nov2008

Jul 2010 toSep 2010

May 2012to Jul 2012

United Kingdom Wales

Unemployment Rates by Gender: 2008-2012

Source: ONS

0 2 4 6 8 10 12

UnitedKingdom

Wales

UnitedKingdom

Wales

Mal

esFe

mal

esMay-08 Jul-10 Sep-12

Unemployment Rates by Age

Source: ONS (APS)

  June 2008   June 2010   June 2012

Wales UK Wales UK Wales UKAged 16-19 20.2 20.1   28.7 26.8   29.4 30.3

Aged 20-24 11.0 10.4 18.1 15.9 20.9 17.2

Aged 25-34 6.0 4.7 7.4 7.6 8.5 8.2

Aged 35-49 3.4 3.4 5.1 5.4 4.7 5.2

Aged 50-64 2.6 3.0   4.8 4.6   5.0 4.9

Aged 16-24 14.5 13.8 21.7 19.5 23.6 21.3

Aged 25-49 4.3 3.9 5.9 6.2 6.1 6.4

Aged 16-64 5.6 5.2   8.3 7.9   8.5 8.2

Unemployment Rates by Highest Qualification

Source: ONS (LFS)

  Apr-June 2008   Apr-June 2010   Apr-June 2012

  Wales UK   Wales UK   Wales UK

Degree 2.5 2.3 2.4 3.7 2.8 3.9

Higher Education 2.3 2.8 3.8 4.5 2.8 4.7

A-level/equiv. 2.5 4.2 7.2 7.1 8.5 7.6

GCSE/equiv. 6.1 6.7 11.4 10.3 10.1 10.8

Other qualification 7.0 7.8 15.0 11.2 13.1 11.3No qualifications 12.6 10.8   21.8 15.2   20.7 16.7

Unemployment in Selected Unitary Authorities

Source: ONS (APS)Note: * indicates estimate based on low number of responses

  June 2008 June 2010 June 2012Blaenau Gwent 4.1* 14.3 15.3Merthyr Tydfil 6.9* 13.7 13.9Torfaen 8.7 9.3 11.9Swansea 4.9 9.0 10.1Cardiff 6.4 8.9 9.8Newport 7.3 9.2 9.4Ceredigion 5.9 5.4 5.3*

Isle of Anglesey 6.7 5.3 5.2*

Flintshire 2.7* 7.1 4.4*

Summary• Welsh labour market seems to have been affected in a

similar way to other parts of UK− although London appears to have escaped fairly lightly− some areas (e.g. North East) have been harder hit

• Relative GDP and earnings have fallen in past couple of decades

• Future public sector cuts may lead to a continuation

• Concentrations of unemployment amongst some groups− young people, low qualifications and some Valley UAs