Labour Market

Labour Market Statistics – June 2017

Yesterday saw the release of new data on the performance of Scotland’s labour market.

The headlines were all taken by the fall in the 16+ unemployment rate to a record 4% (it was 4.1% for 16-64 year olds), the lowest since May 2008 and the joint lowest since the data are available (1992, if you’re interested!).

For sure, a low unemployment rate is to be welcomed, but as we have cautioned before, headline labour market statistics can mask a range of underlying challenges.

In this blog we focus on a number of interesting features of yesterday’s data including changes by age and gender; changing employment and in particular changes in self-employment, with a brief comment on earnings and productivity in light of rising inflation.


Here are the headline unemployment rates mentioned earlier, alongside these rates by gender.


In terms of differences by gender, there has been a recent re-convergence between the male and female unemployment rates in Scotland with both these rates now back to levels observed at the start of the financial crisis.


Looking in more detail at unemployment in terms of age, we see the record low in youth (16-24) unemployment of 12%. We can also see that the recent falls in both the unemployment rate, and in unemployment, span the age distribution with the biggest fall being among those 16-24 (generally referred to as ‘youth’ unemployment). Over the period Jan-Dec 2015 the unemployment rate for this group was 14.4%, in Jan-Dec 2016 it was down to 12%.



If unemployment is falling, most people expect that employment is increasing. That needn’t necessarily be the case, indeed much of the past two years has seen a trend of falling unemployment driven by people exiting the labour market (becoming economically inactive) rather than entering employment. If a person is not in a job, and is not actively looking for work and available to start work, this is known as being ‘economically inactive’. There are a number of reasons for economic inactivity from being in full-time education, being ill, looking after family members, etc.

Between 2012 and 2015 there was robust employment growth in Scotland. 2016 saw a period of falling employment and more recently, we have seen some increase in the number of people in employment, as the chart below illustrates.


These trends are also broadly reflected in changes in the employment rate for men and women in Scotland as the following charts illustrate.


In terms of changes by gender, the female employment rate is now above it’s pre-financial crisis peak, but this is not the case for men. More recently, as the chart below shows, we  have seen the female employment rate dip slightly, with the male employment rate increasing slightly.



One of the features of employment growth over the past few months in Scotland has been the rise in self-employment. The number of people in Scotland who are self-employed is now at a record high.


Zooming in to the past few years we can see that the rapid growth in employment from 2012 to 2015 was driven by growth in employees, while the more recent growth in employment comes at a time of falling numbers of employees and increases in self-employment. All of the growth in employment in the year to Feb-Apr 2017 is accounted for by growth in self-employment.


In terms of gender split, post the financial crisis of 2007-08 Scotland has generally had more self-employed women than men, however in the past few quarters we have seen a significant rise in the number of men who are self-employed. It is clear that the recent growth in employment, i.e. since mid 2016, seems to be being driven by increases in male self-employment.


Sometimes when thinking about self-employment people have in mind someone starting businesses and creating jobs. However, partly as a result of technological innovation, the self employed are a much more diverse group engaged in all manner of different types of self-employment. It includes people seeking more flexibility in their work pattern and opting to move into semi-retirement with some occasional work on the side, through to people freelancing, working for companies as courier drivers, taxi drivers etc. Self-employment is now a feature of the Scottish labour market that cuts across industry sectors and across different skill levels.

The concern that exists about this growth in self-employment relates to the type of self employment that people are entering. People becoming self employed to realise new opportunities, gain additional flexibility in their work pattern or in some other way improve their quality of life is to be welcomed. However, a number of jobs which might be classed as self-employment are associated with less stable and rewarding employment with fewer employment protections. This is obviously a concern.

More work needs to be done to understand the characteristics of this surge in male self-employment (e.g. by skill level and age), and to understand the types of self-employment being entered into.

Earnings and productivity

With rising inflation there is a real concern about the muted wage growth that we have seen in recent times. The most recent estimates of UK inflation hit 2.9%. Wage growth in Scotland, and indeed in the UK, has been muted for some time now. As we highlighted in our Scottish Labour Market trends report recently, median wage growth has averaged around 1.5% in recent years. Without improvements in wage growth, household’s budgets will soon be under additional pressure.

Central to improvements in pay is improvements in productivity- how much can be produced for each hour of work. At an economy wide level, this is calculated as real GDP per hour worked.

We discussed the Scottish productivity statistics in more detail in a blog post a few months ago, but a couple of things are worth emphasising.

Firstly, Scotland has closed the productivity gap on the UK as a whole in recent years. Unfortunately, this is not a reflection of improvements in Scottish productivity so much as a reflection of how dire UK productivity performance has been.

Secondly, recent productivity improvements in Scotland have been underpinned by falling numbers of hours worked rather than improvements in GDP.

Thirdly, with very weak economic growth in Scotland (recall the economy contracted by 0.2% in the final quarter of 2016), Scottish productivity is unlikely to improve anytime soon (unless there is a further fall in hours worked).


Recent falls in unemployment, in particular youth unemployment are to be welcomed. The 16+ unemployment rate is now at its lowest rate since May 2008, and the youth unemployment rate is around its lowest recorded rate.

However, the substantial rises in economic inactivity seen through 2016 is a continuing worry, with little sign of these increases being reversed, and indeed further increases in inactivity being recorded.

Employment has grown further this quarter, reaching 2.6 million people in employment in Scotland, and exceeds its level prior to the financial crisis of 2007-08. While the growth in employment in the period 2012 to 2015 was largely supported by a growth in employee jobs, the subsequent growth in employment is driven entirely by increases in self-employment, particularly among men.

More research is needed to understand the types of self-employment that are being entered into, to better understand whether this change reflects improvements in the labour market outcomes of those entering self-employment.



Fraser of Allander Institute colour logo

The Fraser of Allander Institute (FAI) is a leading economy research institute based in the Department of Economics at the University of Strathclyde, Glasgow.