GLASSDOOR – WRITTEN EVIDENCE ULS0004 – UK LABOUR SUPPLY

Executive summary

1. Glassdoor, Inc. (“Glassdoor”) is a worldwide leader on insights about jobs, companies and employees. Our online platform enables employees to anonymously share what it is really like to work at a company and is home to over 117 million workplace reviews, insights and company ratings.
2. Although beginning to loosen, the UK’s labour market is the tightest it has ever been. Job vacancies in many industries are near record levels while the labour supply has dropped significantly. Companies across all industries are expected to face acute hiring challenges and will need to think creatively to attract and retain talent. Labour shortages are expected to remain even as the UK faces a severe cost of living crisis.
3. Glassdoor data and research, drawn from analysis of the reviews on our platforms, reflect many trends uncovered in the Office of National Statistics’ (ONS) most recent labour market reports. These findings reveal that issues in the current labour market are being felt particularly acutely in specific sectors and industries.
4. Glassdoor welcomes the opportunity to respond to the House of Lords Economic Affairs Committee inquiry ‘Where have all the workers gone?’ and will be happy to provide further detail and expand on these points, ​​either in writing or in oral evidence.

About Glassdoor

5. Founded in 2007, Glassdoor is the worldwide leader on insights about jobs and companies. Our mission is to increase workplace transparency and help job seekers find jobs and companies they love.
    
6. Glassdoor is an online platform that enables employees to anonymously share reviews describing what it is really like to work at an organisation - according to their personal experience. Powered by the 117 million reviews, insights and company ratings posted on Glassdoor, we offer unique insight into the employee experience at over 2.3 million organisations. Alongside the latest job offerings, our reviews provide an authentic and candid look at what the workplace conditions, salaries, and culture of a company are really like from those who know the company the best - the employees.
    
7. Users must adhere to our Terms and Conditions[1] and Community Guidelines;[2] both are backed by a comprehensive multi-tier review and content moderation process.
    
8. Globally, some 59 million unique users visit Glassdoor monthly. More than half of the traffic comes from outside the US, with the UK platform receiving approximately 6.8 million monthly visits. In addition, the UK site hosts over 1.2 million open jobs.

Q1 - What are the recent trends in labour supply? How large are reductions in the size of the labour force?

9. The UK labour market is at a crunch point, with job vacancies in many industries near record highs. In contrast, labour supply has dropped significantly while companies across all industries face acute hiring challenges and need to think creatively to attract and retain talent. The following chart illustrates this:

10. Despite the economy showing signs of a slowdown or possible recession and the growth rate in job vacancies beginning to fall, it remains a job seekers’ market. And with vacancies staying high and unemployment remaining near historic lows, employees and job seekers are able to demand higher wages, flexibility and other benefits.
11. Driving the fall in labour supply are several factors. These include a significant number of people voluntarily leaving the labour force and an ageing population. According to data from the Office of National Statistics (ONS) labour market overview, the total UK population's economic inactivity (those not in the labour force) has increased 1.4 percentage points from pre-pandemic levels.[3] Moreover, the proportion of the population aged over 65 years has grown by 289,000 from 12.08 million to 12.36 million in the last two years, despite the increased mortality of the COVID-19 pandemic for this age group.
12. As can be expected, a large proportion (88.3 percent) of those aged 65 years and over are retired or otherwise not in the labour force. The overall ageing of the UK’s population means that a significant percentage of the current workforce will leave work permanently in the coming years. Long-term demographic change means that the number of younger people in the UK who will enter the labour market will not be sufficient to replace retiring workers.
13. Economic inactivity of those aged between 16 and 64 years has also increased 1.5 percentage points since pre-pandemic levels (December-February 2020).[4] This growth is almost entirely driven by those voluntarily leaving the labour market. There are several reasons why people are leaving the workforce voluntarily. The first is a slightly increased number of those choosing to retire early. The data shows that the percentage of those aged between 16 and 64 years of age who have retired early has increased by approximately 0.17 percentage points, from 2.71 to 2.88 percent. The second can be attributed to an increased number of people entering or returning to education or training, with the proportion of the population that are students rising from 5.15 to 5.78 percent, or 0.63 percentage points. Given the relatively large increase in economic inactivity among those aged 16-24 compared to other age groups, most of these new students likely fall into this age group. Those who are long-term sick have also contributed with an increase of 0.83 percentage points, saying they have left the labour force because of long-term sickness. This final category accounts for the largest share of the rise in economic inactivity.
     
14. Offering hybrid work patterns could be one way for companies to reduce turnover. Research published by the Glassdoor Economic Research team in September 2022[5] found that employees who mention ‘hybrid’ in their reviews are significantly more satisfied than their counterparts. And those who do not discuss ‘hybrid’ are nearly twice as likely to start job applications. These results suggest workers are generally happier, more productive and less likely to consider leaving if they are allowed autonomy and flexibility over their working pattern and feel this is worth mentioning in a Glassdoor review. Our research also found that companies where employees frequently discuss flexible work also have higher work-life balance ratings.[6]

Q2 - Which sectors and regions are most affected? Are the public and private sectors affected differently?

15. Certain trends in the labour market are not being felt evenly across the UK, nor between the public and private sectors, with both the North East of England and the public sector suffering disproportionately from issues including unemployment, slow wage growth and job dissatisfaction. This imbalance is demonstrated by the ONS’s latest employment and labour market statistics and is also reflected in Glassdoor’s own research based on reviews on the platform.
     
16. In March 2022 Glassdoor published a report on the employee experience in different cities and regions of the UK.[7] The report found that while many employees reported similar experiences, concerns about understaffing (probably as a result of the labour shortages) were particularly prevalent in North East England, Scotland, South East England, and Wales. Both unemployment and economic inactivity are the highest in the North East of England. Figures from the ONS have highlighted that between May and July the region’s average employment rate for ages 16-64 was 71.3 percent - compared to the UK rate of 75.4 percent.[8]
17. ONS data also shows that wage growth in the public sector has been much lower than in the private sector. As a result, public sector employees have felt a higher level of job dissatisfaction.
18. An analysis of Glassdoor data[9] from the platform finds that complaints about salary have increased among public sector employees, particularly in sectors with acute shortages like healthcare. Examining more than 700,000 reviews by UK-based employees on Glassdoor, negative mentions of ‘salary’ (and related words like ‘pay’ or ‘compensation’) have grown 16 percent since 2020, with most of that growth coming in 2021.[10] Reviews among public sector workers have seen the largest increase (+26 percent from 2021 and +42 percent from 2020) in salary complaints. In 2020 and 2021, public sector employees were less likely than most employees to discuss salary negatively – but in 2022, they shot to near the top. In contrast, workers in hospitality (restaurants, food service, travel and accommodation), who have seen unusually high pay growth, show the opposite pattern, with salary complaints dropping. The following chart illustrates this:

19. As the above chart demonstrates, despite the robust labour market and high nominal pay growth in many industries, many workers, particularly those in the public sector, feel negatively about their remuneration. This underlying sentiment could mean declines in public sector workers as current or would-be public employees choose private sector jobs over public ones, if and when such positions become more available.
20. As inflation continues to rise, it appears unlikely that the wage disparity between the private and public sectors will change anytime soon and, indeed, could widen. Instead, private enterprises will likely raise pay to attract employees in a challenging hiring environment, while fiscal pressure prevents high pay rises in the public sector.

Q3 - Which people have been leaving the labour market? What is the socio-economic and demographic breakdown?

21. The ONS September 2022 labour market overview reveals that demographically, the largest increases in economic inactivity have been seen among the 18-24 age bracket and the 50-64 age bracket.[11] Those ages 50-64, account for the largest share of the rise in economic inactivity (42.7 percent of the total increase). Those aged over 65 account for 29 percent of the rise in economic activity among the population aged 16 and over. However, there has been a recent increase in their participation in the labour market.
22. It is likely those aged between 16 and 24 who choose to leave the labour force have pursued education, given that many in this age range are students and the populations of both groups (those aged 16 to 24 who are economically inactive and those who are economically inactive because they’re students) have seen relatively large growth since the start of the pandemic.

Q4 - What factors are contributing to reductions in the size of the labour force?

23. Three main factors appear to contribute to reductions in the size of the labour force: the COVID-19 pandemic, immigration related to Brexit and the UK’s ageing population.
24. The COVID-19 pandemic dramatically impacted the labour market, with people leaving the workforce in droves for numerous reasons. For example, in 2020, there was an uptick in those who were neither working nor looking for work (the ‘economically inactive’) due to education. This is unsurprising considering that many people decide to pursue educational opportunities in rapidly cooling job markets and improve their knowledge during a recession.
25. At the same time, the number of economically inactive due to long-term illness has increased over 352,000 from the December to February 2020 average. This may be at least partially attributable to COVID and long COVID. With COVID rates constantly fluctuating, we may see a slight increase in these numbers in the near future.
26. The UK’s exit from the European Union has also contributed to the UK’s shrinking labour force. In general, EU-born UK residents have especially high employment rates - 82.9 percent of EU-born UK residents aged between 16 and 64 are employed compared to 75.3 percent of UK-born UK residents.[12] Though net immigration has remained fairly stable post-Brexit, with an increasing number of non-EU migrants making up for the decline in EU migrants, non-EU migrants typically are not moving to the UK for the same reasons as their EU-born counterparts and therefore are not filling the labour gaps left as result of Brexit.[13] ONS data shows that EU-born migrants have higher employment rates than either UK-born residents (75.3 percent) or non-EU, non-UK born residents (71.9 percent). In addition, non-EU migrants are more likely to be students than EU migrants. The non-EU migrants who do work tend to be here on skilled worker visas and thus are more likely to work in roles with stronger pay that require higher levels of training.[14] As a result, industries like hospitality and agriculture, which were particularly reliant on EU immigrants,[15] have been hit with a double blow post-COVID.
27. Added to all this is an ageing UK population which has contributed to the maturing of the workforce. The ageing has seen a higher proportion of people leaving the workforce as they reach retirement age than entering it.

Q5 - What effect are wage levels having on the supply of labour?

28. In a tale of two economies, average wages in the UK increased by 5.2 percent year-on-year in May to July 2022, according to ONS data, yet remained negative in real terms due to sky-high inflation outpacing wage growth[16]. As a result, despite high wage growth and a tight labour market, workers still feel the pinch as inflation emerges the biggest winner. A May 2022 survey by Glassdoor found that salary is the top consideration for job hunters[17] and one in four UK workers are concerned about finding a job that will support the increased cost of living. Making ends meet is a priority for many workers, suggesting that raising wages would positively affect labour supply.
29. However, high wages are unlikely to be the only factor to draw people into the labour market. As the whole economy faces uphill challenges due to the cost of living crisis, employers may consider other ways to attract employees. Glassdoor research reveals that beyond financial incentives to keep employees satisfied and draw in new talent, employers should focus on building great company culture and values, providing strong management for their employees and allowing access to career opportunities. The following chart illustrates the workplace factors driving employee satisfaction in the UK:

30. As demonstrated above, a company’s culture and values are the biggest driver of employee satisfaction.[18] This suggests that to retain talent, companies need a transparent mission and to ensure employees’ beliefs align with their own.
31. The Glassdoor Economic Research team[19] also discovered that the quality of senior leadership is critical to UK employee satisfaction, far more than compensation and benefits. A separate June 2022 study on leadership found that employees are twice as likely to talk about the failings of leadership than sing their praises. Negative use of the word ‘management’ appears in 13 percent of all employee reviews in contrast to positive uses, which are only in 6.3 percent of reviews.[20] The impact of toxic leadership is also felt more intensely by workers. Forty-four percent of employee reviews with low ratings for senior leadership mention ‘management’. In contrast, those rating their company highly for senior leadership mention this word in just 15 percent of reviews.
32. Access to career opportunities is also a better predictor of employee satisfaction than pay.[21] To support this, employers should re-consider whether job candidates need formal qualifications or whether they should implement long-term upskilling programmes.
33. Therefore, while wage levels impact job-seeking behaviour, once in employment salary is less important than other factors for workers’ day-to-day satisfaction.
34. Lastly, higher turnover can result in a reduction in aggregate labour productivity as workers take time off between jobs and lower initial productivity in the first months in a job. A hot labour market and high inflation increase the incentive for employees to shop around for a better-fitting and better-paying job, as switching jobs is often the best way for workers to increase their pay.

Q6 - How do recent changes in the UK’s labour supply compare with those in other developed countries?

35. As a worldwide leader on job insights, Glassdoor has analysed the recent changes in the UK’s labour supply and compared them against the performance of the labour market in other G7 countries based on figures from the Wall Street Journal. This analysis brought to light that the UK is the only one of the G7 countries whose employment rates are still below pre-pandemic levels.
36. In contrast, Japan and Germany have performed the best with low unemployment and high employment rates. The US and Canada fall in the middle, while France and Italy have much higher unemployment and lower unemployment.
37. One thing that remains constant across all G7 countries is labour force participation, or the percentage of the population over the age of 15 in the labour force, which is uniformly down. This could be attributed to the ageing of the workforce, COVID-19 impacting illness rates and people’s willingness to participate in the economy, particularly in in-person roles.
38. Regarding the gender gap in employment, in every G7 country, women have lower employment rates than men although Japan has seen the highest growth rates for female employment over the last decade, albeit from an extremely low base.

20 September 2022

9