David Freeman and Nicola White join Miles to discuss how the Office for National Statistics (ONS) tracks employment and pay across the UK.

Transcript:

Hello and welcome again to Statistically Speaking, the Office for National Statistics podcast. In this episode, we enter the world of work and clock on for a shift with the ONS labour market team. We'll explore how they keep track of employment and pay across the UK and find out how the figures we hear so much about in the news should really be interpreted. At your service, are employees of the month, our head of labour market and household statistics David Freeman, and later on his colleague, senior statistician Nicola White.

David, let's start with the basics. And one common misconception you still hear around the official statistics on unemployment is that they're based on the number of people claiming out of work benefits. And so, the theory goes therefore, that they're subject to manipulation in some way. But to be absolutely clear, the figures don't come from any other government department. This is data that comes from the ONS talking directly to real people, in their tens of thousands.

DAVID FREEMAN
That's absolutely right, Miles. The bulk of the information that we publish as part of our labour market statistics come from something called the ‘Labour Force Survey’. As this is one of our big household surveys, every three months we sample 40,000 households across the UK. And we go and we interview the people in those households about their labour market status. So, are they working, are they not working. We also gather a lot of information about the people in those households, what age they are, whether they have got a disability, what ethnic group [they belong to], which gives a us rich picture of the UK labour market.

MILES FLETCHER

And by the standards of any survey, any regular survey, that's a huge sample isn’t it. I know we don't go in for superlatives, but it's possibly the biggest household survey regularly undertaken of any kind?

DAVID FREEMAN
I think it is the biggest one in the UK, outside of the Census of course, and again, through the data that we use, we’ll learn about the labour market, but the data will also feed into things like population estimates. So quite a wide range of uses, but its core purpose is really trying to measure the UK labour market.

MILES FLETCHER
And it's that time spent with people to gather a whole raft of data from them, and at scale, that can give a localised picture, which is so important too.

DAVID FREEMAN
Absolutely, we get a lot of information from the Labour Force Survey, either by age groups, by country of birth, also by regional level, and we have an annual version of the Labour Force Survey where we put the data together across a longer time period, which means we can get data down to things like local authority levels as well which is important for local government.

MILES FLETCHER

And how do we choose people to take part?

DAVID FREEMAN

It’s a totally random process. So we have access to the postcode directory for the UK, which is effectively a list of all the households in the UK, and we take a random sample of those. However, we make sure within taking that sample that we're represented across the country. So within each local authority area, we've got enough people to be able to give us a robust estimate of what's happening there.

MILES FLETCHER

You stay in the survey a little while, don’t you?

DAVID FREEMAN

You do, that's right, and that's one of the strengths of the Labour Force Survey. If you're selected to take part, you are in there for what we call “five waves”. So if you're selected in January, we'll also come back and talk to you again in April, July, October and the following January. And that's important because not only do we find out what people are doing now, as you say we find out how people have changed, and whether they have moved into employment, out of employment, how have their circumstances changed. And that gives a deep insight into how people are flowing through the labour market and changing over time.

MILES FLETCHER

So, big sample, lots of data coming in. When it comes to the analysis though, essentially, we group people under three big categories. Now the first of those is employment. It sounds self-evident, but what is the definition of an employed person?

DAVID FREEMAN
To be employed is to be someone who has done paid work in the reference week, so when we interview people we’ll say, what were you doing in the week before we're interviewing you? They are considered employed if they have done paid work for a minimum of one hour in that week. So the bar is, you could say it’s quite low, in terms of one hour of work a week. But we have looked, and not that many people work that little in a week – less than 3% of people work less than five hours. So, as well as you'll get paid, we have a couple of other areas as well. We cover people who are employees, so employed by a company, the self-employed, people in government training schemes and people who work for their family business and might not get a wage packet but benefit from working for that business.

MILES FLETCHER
What is the average number of hours that employed people do?

DAVID FREEMAN
Overall, the average is around about 31 hours a week, and that does differ between if you're full time or part-time. So if you're full time, then the average is around 36. If you're part time, the average is around 16 hours a week.

MILES FLETCHER
Okay, so that's a working week. Now who is unemployed? Technically speaking.

DAVID FREEMAN
The technical definition of unemployed, there are three elements to it. Firstly, you've got to be not employed, so not doing any paid work. But you must also be actively seeking work in the previous four weeks. So that means applying for jobs, going to interviews, looking through listings, etc. And finally, you must be available to start work in the next two weeks. So you have got to be available to start a job within the next fortnight after we interview you. Again, another international definition used across the world to define who's unemployed.

MILES FLETCHER
And how long do you have to be unemployed to be classed as long-term unemployed? Because that's a very important category to understand as well.

DAVID FREEMAN
To be considered long-term unemployed, a person must have been in that position for a year or more.

MILES FLETCHER
What's the average time that people are currently spending unemployed?

DAVID FREEMAN
It's a bit hard to say, we don’t have a technical age or an average time, but the majority of people who are unemployed have been unemployed for less than six months. So people moving into unemployment after having recently lost a job or moving through unemployment to get to a job. And it's just under 1 in 3, who have been unemployed for more than a year.

MILES FLETCHER
So if you don't satisfy any of those two definitions. You're not doing any kind of paid work and you're not actively seeking it in the way you've described, where does that leave you?

DAVID FREEMAN
Well, that leaves you in a third group that we call the “economically inactive”. And so these people are not in work, and are either not actively seeking work, or are unavailable to start work. So you can be looking for work and not available, and you'd be economically inactive, or you might be available and not looking, and again, you'd be economically inactive there. And the sort of people included in this category are the sort of people who may be looking after family or home, they are stay-at-home parents, or they have caring responsibilities that mean they can't work. They might have a long-term illness or disability which means they are not able to work, or they may have retired. It's the people who aren't working and are not looking or available for work.

MILES FLETCHER
One contentious area under this definition of the economically inactive is a group that swells and contracts according to the economic cycle, and it’s that group of people who are unable to work and are collecting benefits. What do we understand about that group at the moment?

DAVID FREEMAN
That group as you say, it does change over time. And the reason for that is because people on benefits depend on the rules around those benefits. So, over the years we have published something we call the “claimant count”. This counts people claiming benefits and the main reason they're claiming benefits is because they're out of work.

MILES FLETCHER

And that used to be the main measure of our unemployment, as it was understood.

DAVID FREEMAN
You’re absolutely right. If we go back to the early mid 90s, it was a lead measure. But at that point the rules around the benefits were such that the official unemployment count and the benefit count was about the same. However, when we moved to Jobseeker's Allowance in the late 90s, the rules changed on benefits. So fewer unemployed qualified for the benefits, and the two measures did diverge there.

MILES FLETCHER
It's been said that there's a very large group now who are on out of work benefits alone, and that is hidden unemployment?

DAVID FREEMAN
Some of these people will be unemployed if they're out of work, and actively seeking or available to work. However, out of work benefits will also include people who we would class as economically inactive. Such as people who have a long-term illness or disability that prevents them from working. They'll be getting out of work benefits because they're not working, but because they're not able to look for work, or not actively looking for work, we wouldn't count them in our unemployment statistics. So yes, there are a lot of people on out of work benefits, more than we would count as unemployed. But not all these people would fit that definition of unemployed that we use.

MILES FLETCHER
But nonetheless a very important indicator when you're thinking about how people might be helped into work.

DAVID FREEMAN
That's right. Yeah, and and it indicates what that potential workforce could be. But obviously, some of these people may need some help to get themselves into a position where they're able to look for work and gain employment.

MILES FLATCHER
Okay, well what that briefly explained, is how the headline measures - you might like to call them your classic ONS measure of employment and unemployment - work. But one criticism that you might care to make about this system is that it takes a while to process and the numbers when they come out...there's a bit of a lag isn’t there.

DAVID FREEMAN
There is a little bit of a lag, again because of the size of the sample, the amount of data we have to process and the fact that we have to make sure we're getting enough responses in. There’s about a six-week lag between the end of the period we're looking at and the data being published into the public domain.

MILES FLATCHER
So in order to speed things up a bit, and to have a timelier indicator of what was happening with employment, and this came in very useful with the arrival of the pandemic, we've been using faster sources of information to supplement the headline employment figures. Can you talk us through that? What progress has been made and how useful these other sources of data have been?

DAVID FREEMAN
Yeah, so probably the biggest one that we've been using throughout the pandemic has been the counting of people for the real time tax information from the Revenue and Customs department. So this is a big database that HMRC hold, and it contains information about everyone on a payroll. So if you are on a pay as you earn scheme, all your information is collated in HMRC for the purposes of calculating your tax. At the end of 2019, we started working with HMRC on publishing regular data from that system. I counted the number of people on payroll schemes and how much they're earning. The benefits of this are that it is a complete count of people on the pay as you earn scheme, so it gives us lots of information, meaning we can analyse smaller levels and small groups of people without impacting on the confidentiality of the data. When the pandemic started, we worked with HMRC to see if we could speed the data up, because previously it was at the same sort of pace as the Labour Force Survey, so about six weeks, and we managed to move to what we call a flash estimate. This means we can publish the data for a particular month within three weeks of the end of that month, which is so much faster and was a real benefit at the beginning of the pandemic. Getting information quickly about what was happening to employees on tax schemes.

MILES FLETCHER
And that was vital wasn't it, to inform the policy response to the pandemic when it arrived. Because you know, waiting a few weeks could have been too late for a lot of people.

DAVID FREEMAN
It could have been, and this is a big step forward in using this local administrative data in the labour market, and we've carried on doing that flash estimate. And as well as that we've been, over the pandemic period and up to the present day, adding more and more information from the pay as you earn tax data. So, a company produces data for a local authority level, we also do it by regional and industry. So, lots of information much more quickly than we can get it from our survey data.

MILES FLETCHER
You could say we've got the best of both worlds now. We've got the rich data coming out of the Labour Force Survey. But on the other hand, we've also got the much quicker data coming hot off the systems of HMRC to give that flash picture as you described it.

DAVID FREEMAN
One of the things that has been very developed over the pandemic is having this extra data and it provides a very, very rich picture. And when you put it together, you do get a very, very good picture of what's happening in the economy. I mean, the next step is to try and actually bring these data sources together. So linking data from the tax system to survey data, and trying to exploit even more, the benefits of having these sorts of information available.

MILES FLETCHER
Do you think we'll get to the point where we replace the survey completely? Or will it continue to have that very important central role?

DAVID FREEMAN
I think surveys will always have a central role. The tax data is brilliant. It does only cover employees, so we don't we don't cover the self-employed, you don't cover government trainees or people working for their family business. Also, the level of information we get from the Labour Force Survey is much bigger than we get from administrative data. On the tax system, we merely have information that's relevant to people paying tax. So that means we don't get a lot of the information that we get from labour force surveys - whether someone's got a disability, what their ethnic group is, what their nationality is - and these are all important variables in terms of informing government policy and giving a picture of what's happening in the UK.

MILES FLETCHER
You mentioned that the tax data was a development that was already in progress before the pandemic, but it was sped up given the urgency of that situation, but other sources of data have been coming in as well?

DAVID FREEMAN
Another big source of data that we've been working with over the pandemic period has been the online job vacancies data from a company called Azuna, who we've been partnering with over the period. And this has been another big step forward in calculating the number of vacancies in the UK economy. The data we are getting is really really timely, so we can take a download of data on the Friday, and we’re publishing it the next week. So really timely. And, the information you're getting in an online job vacancy means we can look at things like where the vacancy is, so what geography it’s located in, and some indication of the skills or the occupation of that vacancy as well.

MILES FLETCHER
Obviously, if you think about impacts of the pandemic for quite a period, over the last two years, when you add it all up, we spent a lot of time chained to our laptops, in many cases, working from home. How has that rubbed off on the workforce now, and what do we think is the lasting impact of the working from home trend?

DAVID FREEMAN
Certainly, on the latest data we've got, it does look like there's been a bit of a shift in terms of the number of people who work at home on a regular basis. Prior to the pandemic, fewer than three in 10 people had ever worked from home at any point, whereas if you look at the most recent data, around 35% of people are working from home regularly. So that 1 in 3 people are now doing some work at home during the working week.

MILES FLETCHER
So that's a huge change and we reckon that is, to some extent, showing signs of lasting?

DAVID FREEMAN
It does look like it is lasting. Home working doesn't necessarily work for everyone. When we did the analysis, there's quite a few professions or occupations where homework is relatively low. That’s particularly in the caring occupations, retail, catering and construction, where it's hard, or if not impossible, to work from home.

MILES FLETCHER
We'll have to see how that develops over the months ahead. But another phenomenon that was spotted as we emerged from the pandemic was what's been called ‘The Great Resignation’. Over 50s apparently disengaging with the labour market, and that I guess, is them going from employment in large numbers into the ‘economically inactive’ category? What do we know about that?

DAVID FREEMAN
You're absolutely right. This is something we've seen particularly in the last 12 months, people over 50 are moving out of the labour market into economic inactivity. Some of these people are retiring, so particularly the over 60s, most of those people are retiring. However, for the people aged 50 to 59, a lot of them are retiring for health reasons. They've developed a long-term illness, which again may be related to COVID, which is preventing them from carrying on with work. And this is having an impact on the overall labour market because the employment rate is still lagging behind where we were pre-pandemic, and a lot of that is down to these people moving outside into economic inactivity.

MILES FLETCHER
That's an important factor because other ONS statistics tell us that there were some 800,000 people who report, or we estimate, are suffering the effects of long COVID. So that would be a big factor in this, one might think, and it really isn't a question then of people having had a taste of being at home all the time and thinking, “Oh I just don't want to go back to work. Let's call it a day now”.

DAVID FREEMAN
You're right. So the older people aged 60+, again, particularly people who have got a private pension and won’t rely on the state pension, it is that retirement. But say for those 50-59s, while some of them are retiring early, there are people who believe themselves too ill to work

MILES FLETCHER
And what do we understand then from our lifestyle survey? About how people's patterns of leisure and work have changed?

DAVID FREEMAN
There are a few things to think about again, will the people who have moved out of the workforce want to go back into the workforce. Looking at those over 60, only about 18% of those want to go back and will consider returning to work. Whereas those in their 50s, just over half would consider returning to work, but looking for a job that suits their skills and would suit their lifestyle. So, people wanting more flexible work and something that will fit around their caring responsibilities as well.

MILES FLETCHER
So overall, how do we think the UK did in terms of dealing with a pandemic? And particularly its impact on the labour market compared with other countries? Did they see these kind of impacts as well?

DAVID FREEMAN
It's quite interesting when you look at the impact of the pandemic across different countries. In terms of the UK, we have a very similar pattern to the rest of Europe. We saw a drop off in employment rate at the start of the pandemic and then gradual increases. But that drop off in employment was about 2 to 3% of the employment rate, and that's in stark contrast to the USA and Canada where the pandemic impact was much greater in terms of falling employment - about nine to 10 percentage points of the employment rate. Moving onto inactivity, what seems to be the difference is the coronavirus job retention scheme in the UK, and similar schemes across Europe, kept people linked to their job and in employment, rather than moving into unemployment. Unemployment remains, again in the UK and across Europe, relatively low. But all countries, including the USA and in Europe as well, saw an increase in the level of inactivity during the pandemic.

MILES FLETCHER
So overall the UK not too exceptional really, in how governments responded to the impacts of a pandemic, and how those effects played out on the labour force.

DAVID FREEMAN
Not very different at all at the beginning of the pandemic. We're seeing a little bit of a difference now, and we touched on it earlier in terms of economic inactivity, is that the UK employment rate is still a bit below where it was pre pandemic, whereas the EU and USA and Canada, they've got back to about where they were at the beginning of 2020. This links to the over 50s moving out of the workforce. We're still a little bit behind other European countries at the moment.

MILES FLETCHER
And explains perhaps why the over 50s are the subject of particular research, extra research going on now to understand what's really going on there.

DAVID FREEMAN
Yeah, absolutely. Because that does seem to be the difference between us and the rest of Europe.

MILES FLETCHER
Okay, well I mentioned earlier on, the richness of the data that we get from the Labour Force Survey, and when you delve into the data, you get to explore some quite interesting topics. And one of them we uncovered the other day was that even in 2022, there are still some jobs that are dominated by one gender. Tell us about that.

DAVID FREEMAN
Yeah, so this is a really interesting thing. We do put out regular data, where we go right into the detail of some of the occupations. And it is interesting when you look at the sort of gender split in some of these jobs. So, there are a few jobs where we have hardly any women at all doing them, so that includes ship officers and metal workers, and at the other end of the spectrum, we've got very few men who say they are dancers or choreographers.

MILES FLETCHER
You might be less surprised to hear that pipelayers tend to be all male, but also veterinary nurses are almost exclusively female.

DAVID FREEMAN
That's right. And again, if you look at other occupations, that are predominantly female, they are things like midwives, school secretaries, PA’s and secretaries, child minders, nursery nurses and medical secretaries. And then if you go to the occupations that are predominantly male, they’re very much in the construction space, so carpenters, bricklayers, electricians and plumbers.

MILES FLETCHER
How do we classify people into jobs? We don't just listen to how people describe themselves. You have to fit into some classification, don't you? How does that work?

DAVID FREEMAN
Well, we have got a classification, it's called a ‘standard occupational classification’, and that gets updated regularly. The latest version was updated in 2020. And the way we classify people, when we do the interviews as part of the Labour Force Survey, we ask them what their occupation is. And then we take that description, and we match it onto our list of occupations. There are hundreds of potential occupations. We've got a computer programme that helps when you put the description in, it'll narrow it down to a few options, and then the interviewer can pick the most suitable of those options to match what the person has told us.

MILES FLETCHER

And that makes the figures internationally comparable. Again, you can't tell the Labour Force Survey, well, I'm an image consultant. They'd have to find a way of matching that against one of the definitions, and I see we were asked the other day whether ‘Social Media Influencer’ was a classified job, it turns out it isn’t. They're either marketing associates, or actors and presenters, it turns out. These classifications, they're reviewed every 10 years or so aren't they, perhaps the next update will recognise a job like that.

DAVID FREEMAN
If it grows in terms of importance and the number of people doing it, it's quite likely it could end up with a classification. I mean, the latest update started including programmers as a separate job description. They were lumped in with other things in earlier classifications, again because of a growing occupation.

MILES FLETCHER
It's quite a good test this. If your mum asks you if you've got a proper job yet. If you can point to the standard occupational classification, I think that that'll answer the question for her quite satisfactory wouldn't it. By the way, recent additions are coffee shop workers, not surprisingly, given the huge growth in coffee serving establishments, what other ones have been officially designated recently?

DAVID FREEMAN
Lots of jobs linked around the internet and web development and website development as well. You go back 15 or 20 years and it didn't even exist. And things like ‘Play Workers’ as well, with the use of child minding and child play facilities, they’re also new additions to the list.

MILES FLETCHER
So, working in the gig economy, you know, the hours might be irregular, you might be on a zero hours contract, but nevertheless, chances are you're your job is officially recognised.

DAVID FREEMAN
Almost certainly, even if your job may not have an official designation, you would still be fitting into the framework somewhere.

MILES FLETCHER
And it might be worth noting since we're sitting in the ONS, that data analysts have only been recently recognised as an official classified occupation.

Well, just as important as finding out what people do is the whole question of how much they get for doing it. And who better to talk to about that than our Head of Earnings at the ONS Nicola White, how does the ONS find out what's on people's salary cheques every month.

NICOLA WHITE
We use several surveys to estimate wages. So, one is a monthly survey, which gives us the latest picture of what's happening, and the other is once a year, and this allows us to measure not only weekly earnings but also annual earnings, hourly earnings and it enables us to also look at detailed characteristics such as age, sex, region and occupation. It's a much richer data source.

MILES FLETCHER
Again, this is a big national level, thousands and thousands of people.

NICOLA WHITE
For the monthly survey, we ask to provide us with the number of employees in their business, and then what they're paying out in wages that month, and then we just calculate the average weekly earnings. The annual survey is slightly different. It's filled in again by businesses, but we ask for a selection of employees so that we can collect the additional data that we require.

MILES FLETCHER
So, we're not just trusting people to come clean about how much they're earning because I wonder if people might be concerned about what the tax authority might say.

NICOLA WHITE
As we collect this from businesses, we think the quality of the data might be much better than giving the individual data.

MILES FLETCHER

For statistical purposes, what is the average wage in the UK?

NICOLA WHITE

So, the average weekly earnings for all employees at the moment is around 565 pounds a week. Then if we include bonuses into this, it increases it to around 600 pounds a week.

MILES FLETCHER

And what’s been the trend recently?

NICOLA WHITE