Market
Since 2000 the growth in employment has moderated to average what is still a high growth rate of 3.1 per cent over the 2000 to 2005 period. Underlying these growth rates is a significant shift in the composition of employment. In 1995 building accounted for 6.7 per cent of total employment, by 2005 it is estimated that this share has risen to 12.6 per cent. Over the same period the share of manufacturing in total employment has fallen from 20.3 per cent to 15 per cent. This very rapid growth in the importance of construction in the labour market raises concerns about the sustainability of such a level of employment over the medium term.
The details of our forecast for the labour market in the medium term under the High Growth scenario are shown in Table 5.8. Around 56 per cent of the increase in employment between now and 2010 will be in the market services sector. A further 36 per cent of this growth is forecast to come from the non- market services sector while the numbers employed in manufacturing are forecast to show only a small increase. Employment in the building sector is forecast to continue to rise further by 25,000 or just over 10 per cent of the total between now and 2010.
35 Throughout the Review we use the PES definition of employment rather than the ILO
definition, as only consistent series of the former are available back to the 1970s. When referring to the unemployment rate we use ILO definitions.
Table 5.8: Employment and the Labour Force, Percentage Change, Mid-April 2004 2005 2006 2007 2008 2009 2010 2011 2012 1995-00 2000-05 2005-10 2010-15 Agriculture 3.5 -3.1 -1.5 -2.9 -2.8 -2.8 -2.8 -2.7 -2.7 -2.7 -2.4 -2.6 -2.7 Industry 2.2 4.3 0.9 -0.2 1.1 1.4 2.7 1.4 0.7 6.0 2.3 1.2 0.3 Manufacturing: Traditional -2.4 0.0 0.0 -0.8 -0.7 -0.9 -1.0 -2.2 -2.7 0.0 -0.9 -0.7 -3.2 Food Processing -1.8 0.1 -0.1 -1.7 -1.7 -1.4 -2.0 -3.6 -4.3 1.1 0.8 -1.4 -4.5 High-technology -1.6 -5.9 -2.1 1.5 2.6 3.4 3.8 1.2 0.2 6.1 -1.7 1.8 -0.4 Manufacturing -1.9 -2.9 -1.1 0.1 0.7 1.1 1.2 -0.7 -1.4 2.9 -1.0 0.4 -1.9 Utilities 6.6 0.1 0.7 1.1 0.1 0.6 1.5 -0.7 -6.9 -2.5 3.2 0.8 -2.4 Building 8.2 14.7 3.3 -0.7 1.6 1.7 4.4 3.9 3.3 14.6 7.4 2.0 2.7 Market Services 4.7 6.3 3.0 2.9 3.0 3.0 3.3 3.1 3.0 6.4 3.8 3.1 2.5 Distribution 4.6 6.5 3.6 1.2 1.2 1.1 1.6 1.1 0.5 4.4 3.6 1.8 0.3
Transport & Comm 1.3 0.1 -0.3 1.7 2.2 2.4 2.4 1.3 -0.1 5.6 2.3 1.7 -0.8
Other Market Services 5.8 8.0 3.5 4.3 4.4 4.5 4.6 4.8 5.1 8.3 4.4 4.2 4.3
Non-Market Services 3.0 3.2 3.4 3.9 3.9 3.9 3.9 3.5 3.5 4.3 4.6 3.8 2.6
Health & Education 4.0 3.4 3.0 4.0 4.0 4.0 4.0 4.0 4.0 5.1 4.8 3.8 2.8
Public Administration 0.0 2.9 4.8 3.5 3.5 3.5 3.5 2.0 2.0 2.1 3.9 3.8 2.0
Total Employment 3.5 4.5 2.3 1.9 2.4 2.5 3.0 2.5 2.3 5.0 3.1 2.4 1.7
Unemployment -6.6 -3.9 4.9 12.7 1.3 -2.4 -12.7 -5.6 -13.5 -10.6 -0.7 0.4 -2.2
Labour Force 2.9 4.0 2.4 2.5 2.3 2.2 2.1 2.1 1.6 3.4 2.9 2.3 1.5
For end year 2000 2005 2010 2015
Unemployment Rate
(ILO) 4.4 4.2 4.2 4.8 4.7 4.4 3.6 3.2 2.6 4.3 4.2 3.6 2.7
Net Immigration,
Thousands 32 53 30 27 27 29 31 34 37 26 53 31 44
Within manufacturing there will be some further growth in employment in the high-technology sector. Employment in both the traditional and food sectors is in secular decline as these sectors face strong competitive pressures. Beyond 2010 employment in manufacturing is expected to decline gradually. By contrast employment in the building sector under this scenario continues to grow over the forecast horizon.
The main engine of growth in the labour market is the services sector, in particular in other market services, health and education and public administration. Employment growth in market services has consistently remained above the average for the economy as a whole and this trend is expected to continue over the forecast horizon. Within this sector employment growth in other market services is expected to dominate. Employment growth in non-market services is expected to exceed that of market services in percentage terms out to 2010. Annual average employment growth in non- market services is estimated to be 4.6 per cent between 2000 and 2005 before slowing to a still very high 3.8 per cent rate out to 2010. Beyond 2010 the growth in employment in non-market services is forecast to slow to 2.6 per cent per annum.
Sluggish employment growth is forecast for the remaining sectors of the economy with numbers employed in agriculture, traditional manufacturing, food processing and utilities expected to fall over the forecast horizon. The fall is most marked in the agricultural sector. This is the continuation of a trend that has long been evident in the sector. Numbers employed in agriculture are expected to decline by 17,000, from 109,000 in 2006 to 97,000 in 2010.
The majority of the forecast increase in employment will be in “high skilled” areas such as the other market services sector (which includes professional services such as banking, insurance as well as internationally traded services) and also in the non-market services sector. These activities, being human capital intensive, require a skilled labour force. These two sectors alone will account for 50 per cent of total employment in 2012. The decline in the numbers employed in agriculture, food processing and traditional
68 MEDIUM-TERM REVIEW 2005-2012
manufacturing will have a disproportionate effect on unskilled labour, although some of this will be offset by continued employment growth in the building sector.
This profile of the labour market is based on a continuation of modest wage increases out to 2009, beyond that point wage inflation begins to rise (see Table 5.3). The continuation of strong employment growth with modest wage demands will be enabled by continued growth in the labour force. Over the period 2005 to 2010 labour force growth can be attributed in almost equal measure to the natural increase in the population, rising female participation rates and immigration. Beyond that date there is limited scope for further contributions from female participation or the natural increase (see Chapter 2) so that net inward migration flows have to provide all the additional workers necessary to clear the market. Beyond 2010 the migration inflows rise steadily from an average of just under 29,000 per annum in the period 2006-2010 to reach 44,000 by 2015. These very high and rising rates of immigration inflows are driven by the strong growth in employment.