Earnings, Employment, Productivity and Consumption Understanding the Great Recession: From Micro to Macro Panel Discussion, 24 th September 2015, Bank of England Richard Blundell University College London and Institute for Fiscal Studies Thanks to Cormac O Dea, Helen Miller and Wenchao Jin
In contrast to previous recessions, real output per hour remained largely stagnant since 2008 130 125 120 115 110 105 100 95 90 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Quarters since the labelled quarter 1979 Q4 1990 Q2 2008 Q1
In contrast to previous recessions, real output per hour remained largely stagnant since 2008 104.0 Indexed to 100 2008 Q2 102.0 100.0 98.0 96.0 94.0 92.0 Output per hour worked 90.0 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 Output per worker
Changes to total output, employment and hours worked since 2008Q1 104 Indexed to 100 2008 Q1 102 100 98 96 94 92 90 Output Total hours Employment 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 Source: Cribb and Joyce (IFS, 2015)
Mean weekly real earnings fell strongly adjusted for RPIJ inflaoon and indexed to 100 in 2008Q1 105 100 95 90 LFS ASHE 85 Source: Cribb and Joyce (IFS, 2015), and Jin (2015)
Earnings and producovity growth Output per hour compared to mean hourly earnings in LFS (GDP deflated) since 2008Q2 105 Indexed to 100 in 2008Q2 100 95 Output per hour worked Mean hourly earnings 90 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 InsOtute for Fiscal Studies Source: Cribb and Joyce (2015), and Jin (2015)
Change in real median hourly wages by age group since 2008 Cumula:ve change in real median hourly wages from 2008 to 2014 2% 0% - 2% - 4% - 6% - 8% - 5.8% - 2.6% - 2.7% 0.2% - 10% - 9.0% 22-29 30-39 40-49 50-59 60 + InsOtute for Fiscal Studies Source: Cribb and Joyce (2015)
Change in real median hourly wages by sex since 2008 2% Cumula:ve change in real median hourly wages from 2008 to 2014 0% - 2% - 4% - 6% - 8% - 7.3% - 2.5% - 10% Men Women InsOtute for Fiscal Studies Source: Cribb and Joyce (2015)
Female employment stronger than male employment since the recession Employment rate (age 16-64) (%) 80% 75% 70% 65% Male Female 60% 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 InsOtute for Fiscal Studies Source: Cribb and Joyce (2015)
Employment rate for older workers: women aged 60-64 45.0 40.0 35.0 30.0 25.0 Euro area (13 countries) Germany (unol 1990 former territory of the FRG) Spain 20.0 15.0 10.0 5.0 France Italy United Kingdom 0.0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Blundell, Green and Jin (2014)
Falls in Real Earnings even greater acer allowing for composioon changes in mean real hourly earnings 1.5% 1.1% Average annualised change 1.0% 0.5% 0.0% - 0.5% - 1.0% - 1.5% 0.7% 0.6% 0.6% 0.5% - 0.4% - 0.6% - 1.0% - 1.2% 2002-2007 2007-2012 2012-2014 Actual change ComposiOonal effect Underlying change Source: Cribb and Joyce (IFS, 2015) and Blundell, Green and Jin (2014)
Household earnings and net incomes 2007 08 to 2013 14 (non- pensioners in working households, by percenole point) 5% CumulaOve income change 0% - 5% - 10% - 15% - 20% Gross household earnings Net household income (BHC) 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 PercenOle point InsOtute for Fiscal Studies Source: Living Standards, Poverty and Inequality: IFS, 2015
90/10 raoo and top 1% income share 5 10% RaOo of income at the 90th and 10th percenoles (90/10 raoo) 4 3 2 1 0 90/10 raoo (LH axis) Top 1% share of income (RH axis) 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Share of household income held by the top 1% of individuals InsOtute for Fiscal Studies Source: Living Standards, Poverty and Inequality: IFS, 2014
Non- and semi- durables per head 125 Quarter before recession = 100 120 115 110 105 100 95 90 1980 1990 2008 85 80 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Quarters since start of recession InsOtute for Fiscal Studies Source: Crossley, Low & O'Dea (2015)
150 Durables per head Quarter before recession = 100 140 130 120 110 100 90 80 1980 1990 2008 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Quarters since start of recession InsOtute for Fiscal Studies Source: Crossley, Low & O'Dea (2015)
Business investment has been very slow to pick up 8 6 Change since 2008 Q1, bn 4 2 0-2 - 4-6 - 8-10 business investment InsOtute for Fiscal Studies
Prospects Younger workers and families are acong as if they expect a long- run fall in relaove living standards evidence from consumpoon and saving. Real wages, producovity (and investment) have been slow to pick up we can expect the palern of lower real wages at the bolom to cononue, but with fairly buoyant employment due to increased supply. Most actual falls in real earnings have happened but cononuing strain on the tax- credit and benefit system and fiscal contracoon implies large benefit cuts
Prospects (cont.) Lille evidence of earnings progression for lower skilled and part- Ome workers longer term earnings growth will mostly come from high- skilled occupaoons, with perhaps some at the very bolom. Increasing inequality across the earnings distribuoon, and increasing pressure on the tax and benefit system. SOll much to do in focussing on older workers in general, on return to work for parents/mothers, and on entry into work. There are soll some potenoal big gains here, for example, as (higher skilled) women age in the workforce. ProducOvity (and human capital) is soll the key.
Extra Slides InsOtute for Fiscal Studies
RaOo of BA (equiv.) median wage to that of A- level (equiv.) Remarkably no cohort effects! BA premium stayed constant, even through the recession.
Business investment has been very slow to pick up 15 Change since 2008 Q1, billion 10 5 0-5 - 10 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 Business investment Household consumpoon: durable goods Household consumpoon: non- durable goods InsOtute for Fiscal Studies
Percentage Change in Food Expenditure: 2010-2012 UK 0.04 Change in Food Expenditure by Cen:le and HH type: 2010 to 2012 0.02 0-0.02-0.04-0.06-0.08-0.1-0.12 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 79 82 85 88 91 94 97 All HHs Pensioners w/o children with children InsOtute for Fiscal Studies Notes: Understanding Society Source: Blundell and Etheridge, 2014
Self employment as a share of total employment 16% Self- employment as a share of total employment 15% 14% 13% 12% 11% 2004 Q1 2004 Q3 2005 Q1 2005 Q3 2006 Q1 2006 Q3 2007 Q1 2007 Q3 2008 Q1 2008 Q3 2009 Q1 2009 Q3 2010 Q1 2010 Q3 2011 Q1 2011 Q3 2012 Q1 2012 Q3 2013 Q1 2013 Q3 2014 Q1 2014 Q3 InsOtute for Fiscal Studies Source: Authors calculaoons using Labour Force Survey (ONS series MGRQ and MGRZ).
Earnings for employees and the self employed Percentage of employees / self- employed individuals 25% 20% 15% 10% 5% 0% Self- employed Employees Earnings (per week, April 2014 prices) InsOtute for Fiscal Studies Source: Figure 2.14 of Cribb and Joyce (2015) Earnings since the recession
Employment and unemployment rates since 2007 Employment rate (age 16-64) (%) 75% 74% 73% 72% 71% 70% 2007 2007 Employment rate (LH axis) 2008 2008 2009 2009 2010 2010 Unemployment rate (RH axis) 2011 2011 2012 2012 2013 2013 2014 2014 9% 8% 7% 6% 5% 4% Unemployment rate (age 16-64) (%) InsOtute for Fiscal Studies Source: Fig 2.1 of Cribb and Joyce (2015) Earnings since the recession
ParOcularly strong growth in private sector Private sector employment (million) 26.0 25.5 25.0 24.5 24.0 23.5 23.0 Private (LH axis) Public (RH axis) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 2005Q1 Public sector employment (million) 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 InsOtute for Fiscal Studies Source: Fig 2.2 of Cribb and Joyce (2015) Earnings since the recession
NEET rate among young people 60% 50% 40% 30% 20% 10% 18-21 GCSEs or above 18-21 without GCSE 22-24 Degree level or above 22-24 GCSEs, A- levels, FE 22-24 without GCSE 0% 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Blundell, Green and Jin (2014)
Recent cohorts are also less likely to own a home 80% Born 1963 67 Born 1973 77 Born 1983 87 Homeownership rate (%) 70% 60% 50% 40% 30% 20% 10% 0% 20 21 22 23 24 25 26 27 28 29 Age 30 31 32 33 34 35 36 37 38 39 40 Source: Figure 3.13 of Living Standards, Poverty and Inequality: 2014 InsOtute for Fiscal Studies