Scotland on brink of finally closing its seven year long ‘jobs gap’

RF warns that stronger employment gains will be needed to boost future pay and living standards

Scotland is just 9,000 jobs short of closing its post-crisis ‘jobs gap’ and returning to its mid-2008 employment rate, the Resolution Foundation said today (Wednesday) as it publishes a major new report on the Scottish labour market. This milestone could be reached later this morning when the latest official employment figures are released, but comes 15 months after England closed its jobs gap.

The Foundation’s analysis finds that Scotland is one of just three parts of the UK yet to restore pre-crash employment rates (along with Northern Ireland and the South East of England). Scotland’s employment rate stood at 74.6 per cent immediately before the recession and reached 74.3 per cent in August-October 2015. England closed its ‘jobs gap’ in 2014, with its employment rate now at a record 74.3 per cent.

The report, titled The State of Working Scotland, finds that while Scotland has experienced a comparatively disappointing performance on employment since the crash, it has undergone a less severe squeeze on pay.

Typical pay in Scotland is currently 5.7 per cent below its 2009 peak, compared to a drop of 9.1 per cent across England. Analysis released earlier this week by the Foundation showed that typical pay in Scotland is now – at £11.92 an hour – marginally higher than England (£11.84).

The Foundation argues that stronger employment gains will be needed if Scotland is to maintain its new pay advantage. Even if the overall ‘jobs gap’ is closed today, it expects unemployment in Scotland to remain higher than in England and full-time employment to remain below its pre-crash level. This risks holding back pay in Scotland by limiting the ability of those in jobs to argue for higher wages. The Foundation also notes that the share of ‘underemployed’ workers – those seeking to work more hours – is still above pre-recession levels.

With further cuts to working-age benefits set to bite in the coming years and pre-announced UK wide tax changes disproportionately benefiting higher income households, the Foundation say that prospects for living standards of low and middle income Scots inevitably rest on the strength of the labour market. Closing the jobs gap would be a positive step not just for the employment rate but living standards more broadly.

Conor D’Arcy, Policy Analyst at the Resolution Foundation, said:

“Scotland enjoyed a significantly higher employment rate than England in the years running up to the financial crisis. But its relatively poor track record in recent years means that it has fallen back in line with England.

“This puts Scotland’s new-found pay advantage over England at risk and it’s vital that its job gap is closed sooner rather than later. Attention must then turn to why Scotland is lagging behind some other areas of the UK, and what can be done to speed up its sluggish employment growth.

“In order to move towards full employment, it is important for employers to offer ‘pull factors’ to encourage people who may not actively be looking for work to enter the labour market, such as flexible working and paying at least the voluntary Living Wage. The next Scottish government should play a central role in fostering such change. With new powers over disability benefits and back-to-work programmes, whoever wins in May’s election must make it their focus to re-establish Scotland’s reputation as a labour market leader.”