UK labour mobility and earnings - what changed between 1992 and 2016?

New labour market histories that span the British Household Panel Survey and Understanding Society help researchers track changes in working lives. 

The labour market in the UK has evolved since the early 1990s. The growing gig economy and increase in temporary work have brought changes to how people earn and live. Now researchers who want explore the UK labour market over the last 24 years can use combined British Household Panel Survey and Understanding Society data thanks to new work from Fabien Postel-Vinay (UCL) and Alirezera Sepahsalari (Bristol University).

Postel-Vinay and Sepahsalari have created the first set of labour market histories that span BHPS and Understanding Society. BHPS concluded in 2008 and was replaced by Understanding Society, which has a larger sample but a slightly different design. This research from Postel-Vinay and Sepahsalari includes a new way of cleaning, imputing and harmonising BHPS and Understanding Society labour market histories. This is the first time that data from both surveys has been ‘spliced’ in this way and offers a new longitudinal perspective on labour market stocks, flows and earnings.

A representative sample

 As well as creating the combined dataset, Postel-Vinay and Sepahsalari also carried out a validation exercise on the data to see how it performed against time series produced by the Office for National Statistics (ONS). They found that the BHPS/Understanding Society series matched the ONS series, confirming the representativeness of the BHPS and Understanding Society sample.

What’s changed in the UK labour market?

When looking at the changes to the UK labour market, this research pays particular attention to flows between paid employment, self-employment and unemployment. The period of time studied covers significant changes in how people experience work. The researchers found that: 

  • The transition rates in and out of work, as well as the job-to-job transition rate have been on a downward trend since around 2000. 
  •  After over 15 years of steady growth, real labour earnings started falling in 2008 and have been very subdued ever since.
  • At the aggregate level, real pay growth is more strongly associated with the job-to-job transition rate than with other measures of labour market slack, particularly the unemployment rate or the rate that unemployed individuals find work. 
  • Self-employment rates have been on the rise since the mid-2000s. 
  • While the incidence of self-employment increased in parallel for both highly-educated and low-educated groups since the mid-2000s, there was decline in inactivity rates for the high-educated, and a (relative) decline in paid employment for the low-educated workers.
  • The self-employment premium has stayed consistently higher for those with low-education than for those with high-education. This education gap, however, has narrowed since the early 2000s: the self-employment premium of high-educated workers has remained roughly stable, whereas that of low-educated workers has dropped sharply over a few years around the mid-2000s.

You can read the full results of the research in the Understanding Society Working Paper