3.1 General context
On this page
LAST MODIFIED ON: 12/11/2020
On this page
This chapter provides information about the labour market across the UK and Wales in particular. It reflects the different responsibilities of the UK Government and the Welsh Government as regards to employment and entrepreneurship.
For further information about devolution see the article on Main Executive and Legislative Bodies in Wales from the Eurydice Network's description of education systems.
Labour market situation in Wales
The UK is a large, open and competitive economy with low levels of regulation in its product and labour markets. The 2020 European Commission UK Country Specific Report states that the UK has high employment but low, stagnant productivity. Labour productivity and investment are low and not improving. The UK faces a broad need for more investment in equipment, infrastructure and housing, while also bringing down project costs. There is scope to improve the effectiveness of education and training systems in areas such as basic and technical skills. Tight regulation of the land market can also prevent capital and labour from moving to where it is most needed.A certain amount of market and economic volatility has occurred following the referendum of 23 June 2016, in which the UK voted to leave the European Union. During the transition period 31 January 2020 to 31 December 2020, trading relations between the EU and the UK will remain essentially unchanged. Beyond this period, however, they will depend on the outcome of the negotiations on the UK’s future relationship with the EU.
COVID-19 has a significant economic impact on the UK. A report from the Office for National Statistics for the period of September 21st to October 4th 2020 states:
- The arts, entertainment and recreation industry had the lowest percentage of businesses currently trading, at 70%, compared with 86% across all industries.
- Wave 15 (21 September to 4 October 2020), 48% of businesses experienced a decrease in turnover; since Wave 12 (10 to 23 August 2020), the trend has flattened compared with a previously steady decrease.
- In Wave 15 (21 September to 4 October 2020), 9% of the workforce were on partial or full furlough leave, unchanged from Wave 14 (6 to 20 September 2020).
- The accommodation and food service activities industry had the highest percentage of businesses with no cash reserves, at 7%, and had the highest percentage of businesses with a severe risk of insolvency, at 17%.
in Wales, the picture is less positive than across the UK. Data published by the Office for National Statistics (ONS) in 2017 shows that in 2017 Wales had the lowest Gross Value Added (GVA) per head of the United Kingdom regions at £19,899. Welsh performance on productivity and earnings was also noted as being relatively weak. In a 2016 article on Welsh economic performance, the Welsh Government Chief Economist noted how the country’s skills profile, economic geography and demographic structure (specifically, the high levels of dependents) are all reflected in the low GVA figure. Data published by the Office for National Statistics in 2020 shows labour productivity increased in 32 out of 44 enterprise regions in the UK between 2010 and 2018.
The UK recognises that it has skills gaps in important sectors which act as a main obstacle to people accessing employment. The 2017 UK Employer Skills Survey (published in 2017 by UKCES), showed skill shortages vacancies in Wales were at 23% in 2015. In 2017 this number of vacancies remained at 36,400 and recruitment activity was broadly unchanged. Results of the 2019 survey are expected to be published in 2020.
Labour market regulation
The UK has a lightly regulated labour market. In line with the Equality Act 2010, there are protections against discrimination in Great Britain (England, Wales and Scotland) on the grounds of age; disability; gender reassignment; marriage and civil partnership; pregnancy and maternity; race; religion or belief; sex; and sexual orientation. The Equality and Human Rights Commission has published guidance on this for employers.
Health and safety regulation is well established and comprehensive. Working time is controlled and flexible working promoted.
National Minimum Wage
There is a national minimum wage (NMW) and a national living wage (NLW) in the UK. The minimum national wages for under-25s in 2020 are set out in the table below:
National minimum wage for:
18 to 20
21 to 24
Source: National Minimum Wage and National Living Wage rates, GOV.UK.
The National Living Wage which stipulates a higher wage for older workers (those over 25) was introduced in April 2016.
The Low Pay Commission Report Spring 2016 outlines the reason for these two wages: the age structure seeks to help manage employment risks, given that younger workers have lower pay on average than older workers and face tougher labour market conditions. This means that if employers were to maintain a generally higher level of wages for all ages, there might be fewer opportunities for younger workers
All employees over 22 years of age are auto-enrolled into a designated pension scheme.
Youth and the labour market
There is no specific regulation of the youth labour market.
Persistently high youth unemployment is a long term, structural element of the UK economy. This has been significantly impacted by COVID-19. A youth unemployment report published by the House of Commons library in October 2020 states that in June - August 2020:
·581,000 young people aged 16-24 were unemployed, an increase of 35,000 from the previous quarter.
·3.54 million young people were employed, down 220,000 from the previous quarter
·2.74 million young people were economically inactive, an increase of 168,000 from the previous quarter.
In September 2020, 529,400 people aged 18-24 claimed unemployment related benefits. This was an increase of 294,400 claimants from March 2020, when the UK lockdown began. This represents an increase of 125% between March and September 2020. Some of this increase will be due to employed people who have become eligible for Universal Credit as part of the government response.
As noted by the Office for National Statistics, the employment rate is the proportion of people aged between 16 and 64 years who are in employment. Estimates for June to August 2020 show 32.59 million people aged 16 years and over in employment, 102,000 fewer than a year earlier and 153,000 fewer than the previous quarter. For June to August 2020, the estimated employment rate for all people was 75.6%; this is 0.3 percentage points down on the year and 0.3 percentage points down on the quarter. It’s important to note these figures are for the whole population and not young people specifically.
The November 2020 Statistics Wales' bulletin on key economic statistics shows that the youth unemployment rate in Wales was generally higher in Wales than the UK from the middle of 2017 till the beginning of 2020 where it has dropped to slightly below the UK rate. In the year ending March 2020, the APS estimates that 23,300 people aged 16-24 in Wales were unemployed, down 22.7% over the year. This represented 11.3% of the economically active in this age group, down 2.9 percentage points over the year. The equivalent UK rate was 11.7%, up 0.2 percentage points over the year.
Participation of young people in education and the labour market (year end 2018 and 2019 (the latest publication at the time of writing, November 2020), published by Statistics for Wales, contains estimates of how young people in Wales interact with the labour market:
- Participation of 16 to 18 year olds in education or training increased to 78.3% in 2019 compared to 77.6% in 2018.
- The proportion in employment decreased from 38.5% in 2018 to 36.3% in 2019. Prior to this, the proportion had increased year on year since 2011.
- The proportion who are NEET increased to 11.1% in 2019 from 10.6% in 2018.
- The proportion of 19 to 24 year olds in education or training has increased to 39.5% in 2019 from 38.8% in 2018.
- The proportion in employment decreased from 64.0% in 2018 to 63.4% in 2019. This proportion had increased year on year between 2013 and 2018.
- The proportion who were NEET in 2019 was 15.7%, a slight decrease compared with 16.0% in 2018. This proportion has fallen in each of the last 7 years.
There is a policy focus across the UK on improving the support available for young people who are at risk of being NEET. Specific policy measures to address this issue are described in the article 'Integration of Young People in the Labour Market'.
The UKCES publication Catch 16-24 (2015) outlines the key issues for young people in accessing work:
- they find it difficult to get work without experience and difficult to obtain experience without work
- access to opportunities for work placements and related activities is limited by geographical location (the so-called 'postcode lottery') and are more readily available in areas with strong economic performance
- young people are most likely to be recruited into low wage, low skilled jobs where the pathways for promotion and further learning and development are less clear-cut.
The Office for National Statistics has developed a framework for labour market statistics which describes the major concepts (earnings, employment, hours of work, labour disputes, economic inactivity, redundancies, claimant counts, unemployment, job and vacancies) that exist within the UK labour market and their relationship to each other. Details are available in the Guide to Labour Market Statistics.