Labour market harks back to times past

Britain’s labour market is reflecting trends not seen since before the Industrial Revolution, the Bank of England’s chief economist has said.

Andy Haldane said falling union membership, flexible working hours, and the rise of the so-called gig economy appeared to mark a return to the labour market of the past.

“The move towards greater selfemployment and less unionisation is, in some respects, a shift back to the future in the nature of work,” Mr Haldane said.

“Prior to the Industrial Revolution, and indeed for some years after it, most workers were self-employed or worked in small businesses. “There were no unions. “Hours were flexible, depending on what work was needed to collect the crops, milk the cows or put bread on the table. Work was artisanal, task-based, divisible.”

However, Mr Haldane suggested trends were likely holding back wage growth, which has failed to keep up with soaring inflation in the wake of the UK’s Brexit vote. The Office for National Statistics (ONS) recently reported average wages grew by just 2.1% in the year to April, down by 0.2% on the previous month.

The fall was even greater when measured over a three-month period, confirming that wages are falling behind the 2.9% inflation rate. Mr Haldane said the steady decline in trade union membership – which has dropped from around 38% of employees in 1990 to 23% in 2016 – means fewer workers are benefiting from collective bargaining power.

Trade union membership is associated with higher wages of around 10% to 15%, even when skills, sectors and regional differences are taken into account, he explained.

Meanwhile, there has been a steady rise in the number of self-employed workers, which accounted for less than 8% of the workforce in 1980, but hit a historic high of 15% in 2016.

The use of zero-hours contracts, and employment in the so-called gig economy – which pays workers based on the number of deliveries or trips they complete – has also increased significantly.

ONS data shows that more than 900,000 people say they work on a zerohours basis in their main job, accounting for nearly 3% of the working population.

Picture: PA. Bank of England chief economist Andy Haldane.