The UK’s unemployment rate has recently fallen below 4% for the first time since 1975, standing well below the EU average of 6.5%, with 112,000 less unemployed persons than last year. A record 76.1% employment rate is coupled with an increase of 3.4% in average weekly earnings, effectively outpacing inflation.
Minister for Employment Alok Sharma attributes the rise in employment rates and average wages to the strengthening economy, and “pro-business policies”. The UK government has been backing business growth via the Industrial Strategy and toughening rules on businesses, whilst investing in infrastructure and training projects, strategies supporting older workers, and the tackling of inequality issues in various areas of the UK.
Against a backdrop of growing concerns of economic stagnation brought along by Brexit, this sudden surge in employment rates might appear rather paradoxical. How do the two reconcile?
Economic critics primarily argue that employment figures are generally back dated, thus providing month-old pictures of the current situation. However, Gertjan Vlieghe, a Bank of England rate-setter, paints a gloomier picture. Companies appear to currently favour hiring more workers to keep up with customer demand rather than investing (long-term) in infrastructure, machinery or technology. Many of these new hires are also being employed part-time or on zero-hour or agency bases, and so their employment stands rather precariously on the job security scale.
“Firms want to avoid making such investments at the wrong time or in the wrong sector”, Vlieghe states. It thus becomes much easier – and less costly – to kick employees out than to reverse other forms of investments in case of a potential economic crisis. Vlieghe believes that if his interpretation is correct, it would mean that while jobs are successfully being created, investment seriously lacks.