Changing Jobs? Change In The Uk Labour Market And The Role Of Worker Mobility

9th January 2022

A report from The Resolution Foundation published on 6 January 2021.

This report is about the nature and speed of change in the UK's labour market, about how past periods of rapid change have happened, and about workers' experiences as they have lived through these changes. It is written with an eye to the upheaval we expect to see in the coming decade as the effects of Brexit, Covid-19, and the net zero transition work their way through the economy. It forms part of the Economy 2030 Inquiry, a joint research project between the Resolution Foundation and the Centre for Economic Performance at the London School of Economics.

Policy debates are dominated by strongly held misconceptions about economic change such as: it's speeding up; it takes place mainly by workers in shrinking sectors losing their jobs; and that it undermines job quality for some via a ‘polarisation' of the labour market into bad and good jobs. There certainly are bad outcomes for those workers who do face involuntary job loss, and periods of faster economic change have been associated with higher rates of such job losses. But we need a richer understanding of how economic change happens, especially if we are to make a success of navigating the faster change we expect to see in the 2020s. In particular, we highlight three key facts about the UK's recent experience of economic change:

Structural change (the reallocation of labour across different sectors) has been slowing down in recent years, not speeding up.[1] Alongside this, the rate at which workers move between jobs and sectors has also slowed down.
Sectors can decline through older workers leaving and fewer younger workers joining, as well as through workers in the middle of their careers being forced out. To a significant extent, and as far as it is possible to tell with the available data, this was the case for the fall in manufacturing employment since the 1980s. Involuntary job losses do happen, however, particularly in declining sectors, and these can have serious negative repercussions for the workers involved.
In recent years, and in contrast to some other countries, occupational change has tended to involve ‘upgrading' (the growth of higher paid occupations) more than it has ‘polarisation' (the growth of high and low paid jobs), especially for women.
[1] Of course, there are other ways in which the labour market is changing besides the sectoral composition of employment. The growth of alternative forms of employment (such as zero-hour contracts and self-employment) and market concentration are also important. One justification for focusing on sectoral reallocation here is that this is the type of change we might expect to be triggered by the ‘shocks' facing the country in the 2020s.

There have been significant changes in the sectoral composition of the UK labour market in the past half century. The most significant shift has been the fall, in absolute terms and as a share of jobs, of manufacturing, and the rise of several service sectors, including business services. Employment has also grown significantly in parts of the public sector - especially in healthcare and education. In 1970 there were 7.7 million jobs in manufacturing, accounting for 29 per cent of the total. By 2021 that number had fallen to 2.5 million jobs, 8 per cent of the total. Over the same period, the number of jobs in professional services, education and health rose from 3.7 million (14 per cent of the total) to 10.6 million (31 per cent of the total). Other service sectors which have seen significant jobs growth are hospitality and administrative services. The structural transformation from manufacturing to services was driven by technical change and the automation of manufacturing jobs; by globalisation, which meant manufactured goods could be more readily imported and production moved overseas; and more generally by changes in consumption patterns.

Alongside sectoral change there has also been occupational change, where the main trend has been one of occupational ‘upgrading', meaning jobs growth has been highest in higher-paying occupations. In the 1980s and 1990s this was accompanied by growth in low-paid occupations, giving rise to a story of jobs ‘polarisation'. Since the 2000s, jobs growth in the lowest-paying occupations has been negative, meaning ‘upgrading' rather than ‘polarisation' is a better description. The consistent trend, though, has been stronger jobs growth of higher-paying occupations. Occupational upgrading has occurred for both sexes but has been more pronounced for women than men. Total female employment grew by 4.3 million between 1992 and 2019, almost all of which (3.9 million) is accounted for by employment growth in the ‘top’ three occupation groups (managers and directors, professional and associate professional occupations).

It may feel like change is speeding up, with stories of ‘robots taking our jobs’ appearing in the press, and new ways of work, such as the gig economy, emerging. But when it comes to the sectors we work in, which ultimately stems from consumption patterns, productivity and the types of goods and services the UK produces, the pace of change has been slowing down. The 1970s and 1980s was a time of rapid change - this was when the shift from employment in manufacturing to services was at its most intense. But since then, the rate at which different sectors have grown and shrunk (underneath changes in overall employment) has trended downwards. In 2021, the reallocation of labour across 21 industry sectors, compared to a decade ago, was equivalent to 7 per cent of total employment. This is about one-third as high a rate of reallocation as the 1980s peak. Looking further back, the period around World War 2 was also a period of fast change. Although we don’t have data as far back as we do for employment by sectors, the pace of occupational change measured by the dispersion in employment growth rates doesn’t appear to be slowing down. This suggests that occupational upgrading isn’t wholly dependent on sectoral change and occurs in part within sectors.

Download the full report HERE