There are now more vacancies than ever, but has this just been fuelled by low-wage jobs?

The most recent ONS figures cite over one million job vacancies in the UK. These are amongst the highest since records began 22 years ago, following a peak in April 2023, still 200,000 more than the pre-pandemic peak.

This is alongside an unemployment rate of 3.9%, amongst the lowest figures since the ‘70s.

It seems we have more jobs than workers – a good thing in most people’s books.

Yet some may question any good news about the labour market in these days of the gig economy and zero hours contracts. Higher wages are indeed likely needed to combat stagnant wage growth and the cost-of-living crisis. So, is this just a wave of low-paid jobs?

The ONS publishes data on the vacancies of, and average earnings of, workers in different industries. Industries which pay the bottom 20% of wages include education and hospitality. Those paying the top 20% of wages include information and finance.

Grouping these industries by their wages in five groups like this and seeing what share these groups have of the total vacancies makes the chart seen below.

If there were mathematical proportionality, each of the five groups would have exactly 20% of the vacancies. We see that the bottom 40%-paying industries make a disproportionate share of the vacancies. Especially the lowest 20-40%, which, at 38%, has nearly twice the number of vacancies than it should have if you expect mathematical proportionality to apply.

So, low-paying industries are over-represented in job listings when top-paying industries are under-represented. Does this prove that our bout of vacancies is fuelled by low-wage jobs?

Two problems arise. First there is only a correlation of -0.3 between the wage of an industry and its number of vacancies. A strong relationship is typically defined at ±0.7 or more. The pie chart and correlation do suggest a negative relationship, but it is not as substantial as one might expect.

Second, this is not a recent phenomenon. Looking at what today’s industry-groups’ vacancy shares were when vacancies were at their recent lowest in April – June 2020, we see the chart below:

Whilst there has been a doubling in the share of bottom-20% industries, this is almost entirely at the expense of the bottom 20-40% industries. The top three groups are almost unchanged.

This suggests that the recent spike in vacancies has not been fuelled by low-wage jobs. However, it is important to recall that higher-paying industries still are under-represented amongst job vacancies, which likely aggravates the UK’s stagnating wages and the cost-of-living crisis.

For further information or discussion about this article, please contact James Sharp.

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