Wait, things in the UK labour market are not getting worse?

It’s customary to bemoan the way the world is getting worse. All the good, middle class jobs are gone. The labour market is increasingly polarised. People are unsatisfied with their jobs and quitting in the millions. And so on. Of course, there are elements of truth to these sentiments, but it’s also important to put things into perspective.

That’s what the graph today is trying to do. It shows how the proportion of jobs in the UK has shifted since 1997 — primarily from lower-paying to higher-paying occupations.

Let me explain the graph, and then summarise the take-aways. The height and width* of segments in each column indicate the proportion of employment that each occupational group accounts for, in each of the years shown. The names of the respective groups are in the right hand column. [* I did this duplication on purpose, so it’s even easier to see how the proportions have changed over the years. Let me know if you don’t think this is legit!]

The darkness of the colour indicates median gross hourly pay for each occupational group in 2021, and the groups have been ordered from lowest to highest pay. For example, the median pay for elementary occupations in 2021 was around £10 per hour, while for managers, directors and senior officials it was more than double that, at around £23 per hour.

So, what do we see? Despite stories about the disappearing middle class, what actually seems to have been disappearing are low-paying elementary and administrative jobs.

This makes sense in the context of global megatrends, as well as UK specific developments. On the supply side, many more people are now more highly educated than they were in 1997. It’s hard to get data on the “stock” of people in the population back then, but to use a “flow” measure as a proxy: in 1995/96, 45% of the relevant age cohort achieved the equivalent of 5 or more GCSE grades of A* to C. By 2010/11, the equivalent figure was roughly 80%. For 2020, we do have “stock” data from the ONS, which shows that 92% of the workforce had the equivalent of 5 GCSEs at grades A*-C.

Things have also changed on the demand side of the labour market equation. As you would expect, the occupations that have shrunk are those which are easy to automate and/or where lower labour costs in other countries might have caused production to relocate. Hence the reduction in elementary and administrative occupations, factory jobs, as well as skilled trades. [I’m thinking the smaller figure in 2021 for customer service jobs might be COVID-19 related rather than part of a longer-term trend.]

The UK is far from the desired “high skill, high productivity, high wage” economy we would like to be (at least, compared to some other countries). But unless I’m missing something, the broad trend seems to be in the right direction.