By Phil Jones
+ The official unemployment rate stands at 3.8% – 1.3 million people, a 45-year low.
+ Figures this low can often be used by government to demonstrate that the UK has a ‘strong economy’.
+ By accounting for ‘hidden unemployment’ however, which includes those falsely categorised as ‘economically inactive’, we predict that the real unemployment rate is closer to 8%.
+ This figure would put UK unemployment well above the EU average of 6.3%.
+ If we add the new category for the 'barely employed’ to these unemployment figures, which represents around 6% of the labour market, then the comprehensive rate of those who are unemployed or barely employed would be closer to 14%.
Despite the official figures on unemployment that are regularly utilised in debates around the apparent strength of the economy, there is good reason to believe that these numbers are wide of the mark. Using OECD numbers and the findings of a report by the Centre for Cities, we can approach a more accurate prediction of unemployment rates. It’s also possible – and arguably desirable – to consider the number of those on zero-hour contracts, in order to offer a new and more comprehensive way of understanding unemployment. Some suggest that the UK government has allowed zero-hour arrangements to proliferate because ‘having large numbers on such contracts massages the unemployment statistics downwards’. The data analysed here bears this theory out.
The report by the OECD and Centre for Cities titled ‘Trends in economic inactivity across the OECD’ concludes that many of the ‘economically inactive’ (around 8.5 million people) actually represent ‘hidden unemployment’. To reveal ‘hidden unemployment’, the report creates an adjusted ‘economically inactive’ category, which retains students, retirees and those caring for family, but moves every other group into the ‘unemployed’ category. These groups represent what the report refers to as ‘discouraged’ workers – those that would otherwise be looking for work but for the fact they believe there is none available. This is due to past policy interventions that have encouraged people to leave the labour market as a response to the decline in mining and manufacturing. While ONS figures show this group as relatively small, a mere 30,000, the report predicts that it represents a sizable proportion of the economically inactive. It does so by revealing the number of economically inactive as particularly high in cities hit worst by deindustrialization, including Liverpool and Sunderland.
While the report helps us to rethink the parameters of ‘unemployment’, it’s clear that the new, adjusted category is overly expansive. The inclusion of ‘long-term sick’ in the unemployment rate suggests that all people in this group are looking for or, at least, want to find employment. It may be the case that some of this group are looking for work, but it is unlikely that all are. For this reason, let’s use ONS figures and exclude the ‘long term sick’ (2.1million) for the time being, alongside ‘retirees’ (1.1million), ‘students’ (2.3 million), and ‘those caring for family’ (2million), temporary sick (160,000) from the 8.5 million, which leaves around 900,000 workers who remain unaccounted for in the other official categories. The majority of this figure is comprised of those that potentially want and would look for work but for the fact they have been discouraged by the decline of manufacturing and mining. A very small proportion of this figure also includes those that do not have to work at all because they live off other forms of income – savings, investments etc, but this group is so small it has very little bearing statistically.
If we add this 900,000 to the 1.31 million already included in the official unemployment statistics then we have 2.21 million, around 6%. This is a conservative estimate because, as the Centre for Cities’ report points out, at least some of the ‘long term sick’ would potentially be looking for employment if they were given greater support by the state. Let’s use a more conservative estimate than the Centre for Cities study and suggest that only half of the ‘long-term sick’ (around 1million) would (1) be able to work and (2) want to work with greater support from the government. It is worth including this moderate amount because, as the report notes, a disproportionate number of the ‘long-term sick’ are in the cities that have been worst affected by deindustrialization and have, therefore, potentially been discouraged from looking for work. This gives us 3.2 million as the total unemployment rate, around 8.1%.
Is it time to move beyond accounting merely for unemployment?
As well as hiding segments of the unemployed, official employment statistics also include pseudo forms of employment such as zero-hour contracts. These contracts are banned in many EU countries because they are not regarded as legitimate. In the UK, the decline in unemployment rates has correlated with the rapid ascent of zero-hour contracts as a main source of income. Official statistics put these workers at 901,000, around 3% of the total labour market. As the chart below demonstrates, those on zero-hour contracts as their main source of income rose sharply between 2012 and 2016 from around 250,000 to 900,000 people, where the number has remained relatively stable since.
Then, if we compare the above chart to the unemployment rate in the chart below, we see that the rise in zero-hour contracts as a main source of income ascends during exactly the same time as the sharp decline in unemployment numbers. Between 2012 and 2015, zero-hour contracts rose to account for 2.5% of the labour market, while unemployment dropped by a little over 2.5%. From this, we can speculate that zero-hour contracts absorbed a large proportion of the unemployed during this period.
On average, someone on a zero-hour contract works 25.2 hours per week and are three times more likely to want more hours than workers in more stable employment. These are workers struggling to make ends meet, at the beck and call of their employer.
It is interesting to consider the effect on the unemployment rate if, like most other EU countries, the UK banned or heavily regulated zero-hour contracts. We might expect the rate to rise substantially, even if this increase wouldn’t correlate exactly with the percentage change of zero-hour contracts (as many of these contracts would be transformed by employers into stable contracts – a move we at Autonomy would welcome).
As well as zero-hour contracts, many other forms of ‘unemployed work’, for instance, crowdwork platforms like Mechanical Turk or Clickworker, increasingly represent the majority of a worker’s income. A study by the TUC found that there are now 1.4 million people who access online labour platforms as their main source of income. Just like zero-hour contracts, this form of work involves no contracted hours, few rights and low pay. Perhaps more significantly, the business model of companies like Mechanical Turk and Deliveroo rests on the categorisation of the worker as an ‘independent contractor’ i.e., not employed whatsoever.
Contemporary patterns of labour, particularly the contractual arrangements described above, push current definitions of employment and unemployment to their limit. Instead, I suggest we should start to use the category ‘barely employed’ to describe those who, for all intents and purposes, are much closer to the unemployed despite ostensibly having employment. The barely employed have no contracted hours, no certain income, few to no rights, no routine, and so on.
If we add the 901,000 people on zero-hour contracts to the 1.4million people using labour platforms as their main source of income, then we have over 2.3 million workers who fall into the category of ‘barely employed’, a figure that represents around 6% of the labour market. This is a conservative estimate because it does not include the thousands of non-platform workers who also work as ‘independent contractors’ for companies such as Amazon, Hermes and DPD. Precise figures for how many ‘independent contractors’ these three companies have on their books has not been published, but rough estimates suggest around 40,000 overall.
While workers for companies like Deliveroo and Uber are included in employment rates, as it stands, we do not know how many of those who undertake work on platforms such as Mechanical Turk and Clickworker are also included. Because ONS makes their calculations based on surveys it partly depends on whether those generating the majority of their income on these platforms would classify themselves as employed. With richer, more nuanced data made available by the ONS we would have a better sense of how and to what extent the government includes the so-called ‘gig-economy’ in official employment statistics.
If we add the real unemployment rate of around 8% to the 6% of workers who are barely employed then we are given a figure of just over 14%. While necessarily imprecise due to the problems I’ve outlined above, this figure still offers a more accurate picture of unemployment combined with the ‘barely employed’ than official statistics because it is based on an altogether more nuanced approach to the available data.
1 Standing, Guy. A Precariat Charter: From Denizens to Citizens. London: Bloomsbury, 2015.
2 Trends in Economic Inactivity Across the OECD: The importance of the local dimension and a spotlight on the United Kingdom’. OECD & Centre for Cities. 2019. https://www.oecd-ilibrary.org/industry-and-services/trends-in-economic-inactivity-across-the-oecd_cd51acab-en;jsessionid=iiTq047Y280uUYKs143qMsZS.ip-10-240-5-125
4 Freeman, D. ‘Hiding in plain sight? Why economically inactive people aren’t in ‘hidden unemployment’. ONS Blog. 2019. https://blog.ons.gov.uk/2019/10/31/hiding-in-plain-sight-why-economically-inactive-people-arent-in-hidden-unemployment/
5 Economic inactivity by reason (seasonally adjusted). ONS. 2020. https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/economicinactivity/datasets/economicinactivitybyreasonseasonallyadjustedinac01sa
6 ‘ Economic inactivity by reason (seasonally adjusted). ONS. 2020.
7 ONS (2018) Contracts that do not guarantee a minimum number of hours: April 2018
8 ‘Platform work in the UK 2016-2019’. TUC and The University of Hertfordshire. 2019. https://www.feps-europe.eu/attachments/publications/platform%20work%20in%20the%20uk%202016-2019%20v3-converted.pdf
9 This rough estimate was calculated from very limited available data. An investigative piece for the Guardian in 2016 titled ‘Revealed: Delivery giant Hermes pays some couriers less than living wage’ states that Hermes has 10,500 ‘self-employed contractors’ on its books. https://www.theguardian.com/society/2016/jul/18/hermes-couriers-paying-staff-less-than-living-wage
A BBC article ‘Amazon creates 1000 ‘highly skilled’ jobs in three UK cities’ stated that the company has 27,500 workers. 6500 people work in corporate, AWS and R&D divisions. They estimate that 20,000 work in the warehouses. The majority of these are flexibly employed as ‘independent contractors’. https://www.bbc.co.uk/news/business-45906785
The DPD website states that it has 11,000 people working for the company in the UK. Many of these will be independently contracted couriers. https://www.dpd.co.uk/content/about_dpd/press_centre/company_profile.jsp
Phil’s research focuses on flexible employment. Alongside his report on flexibility for Autonomy, he is currently writing a book about tasking and crowdwork for Verso (2020).