Beyond Politics: Labour Market Status in Wales

Wales Fiscal Analysis has brough together a report using various data sources to show the reality of the labour market in Wales and how economic shocks affect the nation. Analyses that are often carried out in isolation are included, such as labour market headline figures, gender differences, ethnic and country of origin differences, and higher education data. They show the connections between these factors, and how systemic differences mean that economic shocks impact individuals in varied ways, according to their gender, age and a host of other factors.

Earnings and Incomes

We confirm that incomes in Wales are skewed towards the lower end of the income tax base compared with England and Scotland. Of the 52% of the Welsh population paying income tax, the vast majority – 93% – pay income tax only between the basic rate tax thresholds of £12,570 and £50,270 per year. Among the top-earning ten percent of taxpayers in 2022, men earned an average income of £54,363 and women, £49,985.

In contrast to the 2008 recession, which caused deep unemployment and large reductions in incomes earned at the higher and additional rates, concerted government responses such as the furlough scheme and business support grants meant that personal earning instabilities during the Covid-19 pandemic were not as severe or discernible as they were in the aftermath of the previous global financial crisis. Importantly, there were clear gender differences here, with women more likely to be in lower-paying positions, but also positions that were furloughed.

Use of the Public Use Tape does not imply the endorsement of HMRC in relation to the interpretation or analysis of the information. Opinions, findings, conclusions or recommendations expressed in the paper are those of the authors and do not reflect the view of their respective organisations.

Economic Inactivity

Post-pandemic, there has been a heavy focus in public debate on economic inactivity and its implications for productivity. Rather than a significant difference in economic inactivity rates, we have found that the reasons for it have changed, with more men being inactive due to illness. Caring responsibilities are more prevalent among ethnic minorities and women and being a full-time student more frequent among men. Retirement is more likely to be stated as reasons for economic inactivity for men and those in those of white ethnicity.

Income and decision-making

Women’s incomes vary comparatively little over their lifetime, while men’s incomes increase considerably as they age. Men’s median earnings were particularly affected by the 2008 economic recession. Following a sharp decline after this recession, men’s income levels stabilised but have not returned to their pre-recession peak.

The results indicate that due to women’s care responsibilities and increased employment vulnerability, it appears they plan employment decisions on a longer-term basis and are less likely to deviate from these plans as a result of sudden economic shocks. Men seem more likely to make their decisions based on the economic context at the time. Men increased their presence in full-time education, part-time work, and caring for the household during previous economic downturns but tend to shift more decisively back into full-time work once the economic context permitted.

In Wales, economic inactivity seems to be lower for Asian or Asian British ethnicities and those of mixed ethnicities. Over the past two decades, levels of inactivity for white ethnic groups have increased relative to other ethnic groups.

The post-2008 recession period had a very significant impact on decisions regarding education and skills for most groups; this did not occur to anything like the same extent in the aftermath of the Covid-19 pandemic.

Finally, ethnic pay gaps currently give no cause for optimism. Although data availability does not allow definitive conclusions to be drawn, these gaps are associated with greater vulnerability in employment among ethnic minority groups.

Data Issues

The weakness of available data when studying the Welsh labour market and Wales in general must be highlighted. Wales is dependent on UK-wide data collection that often samples the nation as a region of England and Wales rather than a separate statistical entity as it does with Scotland and Northern Ireland. This often results in under-sampling (when the data exists at all) which makes studying labour market trends at local authority level difficult, if not impossible. Irregularity in collection and publication of data also decreases reliability. Finally, there is currently no official data available for LGBTQI+ groups’ participation and presence in the labour market.

Conclusions

The briefing aims to be a holistic image of the status of the Welsh labour market, which is often subjected to policies determined by Westminster. Those policies impact real people, who are struggling to find suitable positions, who are working more than one job to make ends meet, who are going to university part-time in search of better opportunities, who cannot afford childcare. For example, the end of the cap on bankers’ bonuses endangers once again the British economy as this was a decision made to prevent another crash like the one in 2008. In the meantime, individuals are dragged to higher income tax brackets without an appropriate increase in their wages.

We hope to bring an improved understanding of who Welsh workers are, their areas of work, and the obstacles they face.

Read the full report here.