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Estimating the relationship between exports and the labour market in the UK

Economic theory tells us that trade can help boost employment outcomes in the long run. However, the benefits of trade are not necessarily experienced equally, or at all. Evidence suggests that some sectors do better than others and that the impact on labour can differ by gender and skill group. Given the different sectoral and skill mixture of age groups and regions, it is also highly likely that the impacts also differ across these dimensions.

Organisations such as the Organisation for Economic Co-operation and Development (OECD) and the European Commission have produced estimates for some of the impacts of trade on the labour market. While these estimates can capture cross-border supply chain interactions, they are often very aggregate and do not explore the distributional impacts across different labour market characteristics and regions.

Some countries, such as the United States and Canada have sought to improve their understanding of the distributional impact of trade by estimating these various impacts. However, a gap in existing statistics exists for the United Kingdom, particularly when looking at distributional impacts.

This project, commissioned by the Department for International Trade (DIT), produces for the first time a comprehensive set of indicators to estimate the aggregate and various distributional impacts of UK exports on the labour market. This allows for an in-depth understanding of the relationship between exports and the labour market in the UK. The indicators are highly detailed and include a large number of sectors, a yearly time series covering the years 2014-16, a large number of trading partners, breakdowns by gender, occupation group, age group, qualifications, and UK NUTS1 region.

Key findings:

  • We estimate that UK export production supported around 6.5 million full-time equivalent (FTE) jobs, or 23% of total UK FTE jobs, in 2016Around 58% (3.8 million) of these jobs were in exporting industries (jobs supported ‘directly’ by exports) and 42% (2.7 million) were in the UK supply chain of exporting industries (jobs supported ‘indirectly’ by exports).
  • The number of jobs directly and indirectly supported by exports is estimated to have increased between 2014 and 2016 by around 387,000.
  • The sector whose exports support the largest number of jobs is Manufacturing. • The sectors most dependent on exports (in terms of absolute number of jobs) are the ‘Professional, scientific and technical services’ and ‘Admin and support services’ sectors.
  • The country which supports the largest number of jobs through exports is the United States (US); UK exports to the US supported directly and indirectly around 1.3 million UK jobs (or 4% of all UK FTE jobs). Over the same period, exports to the EU and the RoW supported 2.8 million and 3.7 million UK FTE jobs, respectively.
  • Over a quarter of FTE jobs directly and indirectly supported by UK exports are estimated to be in London.
  • Given the sectoral make up of exporting sectors, we estimate that the median wages are on average higher for both direct and indirect jobs: showing the importance of exporting for supporting high wage paying sectors.
  • Further estimates are derived for personal characteristics to provide insights into the challenges and opportunities that a change in exporting may have for particular parts of the population. For example, our estimates suggest that men benefit disproportionately from UK exporting activity: of all the UK FTE jobs that are directly and indirectly supported by exports, 36% are held by women and 64% by men. Similar estimates are derived for people with different qualifications, occupations and ages.

Authors

James is part of the knowledge exchange team, which involves connecting academia to business, government, and the public. He has a Masters in Applied Economics, a degree in Mathematics, Statistics & Economics and is experienced in working on a wide range of projects for public and private sector clients.

Mairi is the Director of the Fraser of Allander Institute. Previously, she was the Deputy Chief Executive of the Scottish Fiscal Commission and the Head of National Accounts at the Scottish Government and has over a decade of experience working in different areas of statistics and analysis.

Ben is an economist at the Fraser of Allander Institute working across a number of projects areas. He has a Masters in Economics from the University of Edinburgh, and a degree in Economics from the University of Strathclyde, as well as experience working on a variety of projects for public, private, and third sector organisations. He also focusses on business survey design and dissemination.

Adam is an economist at the FAI who works closely with FAI partners and specialises in business analysis. Adam's research typically involves an assessment of business strategies and policies on economic, societal and environmental impacts.

Find out more about Adam.

Knowledge Exchange Associate at the Fraser of Allander Institute