In November, the Resolution Foundation released a briefing looking at alternative ways of estimating employment rates [1]. The official source of data on employment, unemployment, and economic inactivity in the UK comes from the ONS Labour Force Survey (LFS), which has had significant issues with sample sizes and response rates in the last few years [2][3]. The result is that our primary source of labour market data has become less reliable.
A key issue until recently was that the total population size in the LFS did not match actual population projections and totals from population censuses. In December 2024, however, the LFS adjusted their survey weights going back to 2019 to better align with more recent projections. They also added some additional modelling to UK-wide population data to smooth the data, meaning that UK population estimates have been adjusted from 2011 onwards.
Updating the population size in the LFS did not change another key issue: the LFS has shown a general trend of decreasing employment rates over the past few years, even though tax data seems to show the opposite.
To understand what might actually happen with the UK labour market, the Resolution Foundation used administrative tax data, chiefly from HMRC Pay as You Earn Real Time information and statistics on the income of individuals with self-employment sources [4][5]. Their original publication predated the population re-weighting in the LFS, so they also used alternative population projections, although they have since released updated charts using LFS population data.
They found that employment rates based on administrative tax data closely followed labour market trends in the LFS between 2015 and 2021. Since then, however, administrative data has indicated that there are considerably more people in employment in the UK than the LFS-based labour market publications would suggest.
This led us to a question: is this trend reflected when looking at Scottish employment data on its own?
Employment is, after all, a key socioeconomic factor underpinning health inequality in Scotland [9]. Having a secure, good quality job has a significant role in determining an individual’s physical and mental health. At the same time, health can affect peoples’ ability to access and maintain work, which can have reverberations throughout the economy. Economic inactivity, wherein an individual is neither in work nor looking for work, is notably higher in Scotland than the UK average.
To understand this, we replicated the Resolution Foundation’s model, using LFS population sizes and employment data from HMRC. Subnational population data in the LFS has the amended weighting, but not the additional modelling, meaning that there is some uncertainty to Scottish population sizes before 2019, when the weighting came into play. To correct for this, our model also smoothed the population data, applying an even growth rate to the population size between 2015 and 2019.
Authors
Allison is a Fellow at the Fraser of Allander Institute. She specialises in health, socioeconomic inequality and labour market dynamics.