Productivity, Wages and the Labour Market

Since the 2008 financial crisis, the UK has witnessed weak economic growth and stagnant productivity. While employment remained high, many jobs offer little security or opportunities for training and progression. Self-employment, much of which is unstable and low paid, was the fastest growing form of employment between the early 2000s and the pandemic. And the best jobs have become highly clustered in small parts of the country. These trends risk creating barriers to successful careers and progression for talented people, with detrimental effects on productivity.

The aim of this project is to further understanding of the interactions between skills, jobs and career progression, their combined role in driving inequalities in economic outcomes and their consequences for productivity. A cross-cutting part of this agenda is to investigate the role of policy for tackling inequalities in work and promoting good jobs, earnings progression and productivity. We propose an ambitious programme of work that combines state of the art economic modelling, careful econometric methods, and the use of new and existing linked data from administrative and other sources, to provide much needed evidence in this area.

This project is made up of three large strands, each of which contains multiple projects within it.

The first strand of work will examine the role of jobs in developing the skills, careers and earnings of workers in the UK. Focussing on low-and medium-paid workers, we will identify the characteristics of jobs and firms in which less educated people succeed, with a focus on the particular skills these jobs need. We will examine the importance of employer-based training and of firms' characteristics for wage progression. We will look into how occupational structures change with the introduction of the National Living Wage.

The second strand of work will focus on the growing importance of self-employment and small business ownership in the UK. We will study the role of self-employment in developing the skills of workers; its importance in providing a source of insurance against unemployment shocks; and how self-employment can drive inequalities in income and access to employment rights. We will examine the transitions between employment, self-employment, and unemployment and how the tax system and other policy changes affect these transitions.

The final strand of work will study the role of the geographic distribution of industries and jobs for inequalities in careers and productivity. We will examine how the skills required by employers are matched to the skills of jobseekers, across the country and socio-economic groups. We will use these measures to examine how local labour market conditions affect career progression, in particular seeking to understand the effects on the careers of women, many of whom are unable to commute long distances for work. We will examine how local labour market difficulties caused by industrial change can have long term consequences on careers and productivity.

Brought together, the findings of this research programme will be crucial to inform the development of government policies that seek to boost employment, pay, and productivity, particularly for people with lower levels of education, from disadvantaged backgrounds, or in less prosperous parts of the country. We will engage with senior policy-makers throughout, including through roundtables that bring different parts of government together, to ensure that we tailor our research to the needs of policy-making as best we can and to ensure that the findings of our work are impacting on policy development.