Is a new labour market emerging?

Is a new labour market emerging from the ASHEs of the Covid-19 pandemic?

Keith Carter, Principal of Keith Carter & Associates, has more than 40 years’ experience in providing reports for the Court. Together with his team, he looks at labour market changes over the last 12 months and considers how they may impact on profiling lost career earnings

A review of changes in the Scottish labour market throughout 2023 includes some surprises, as well as some trends that were more predictable. How lawyers wish to apply these changes when producing a schedule of possible loss “but for” an index event and “but with” restrictions may, however, require some rethinking.

To take the tourist industry as an initial example, we can see that it recovered throughout 2023, although conversely this brought problems of its own in terms of finding staff as many of the industry’s workers left Scotland following Brexit.

The Highlands and Islands have seen 45% of tourism businesses report staff shortages, creating a knock-on effect where established firms are forced to limit their opening hours. The media described one Highlands hotel as being short by 70 staff members during the summer season when hotels are typically most busy. July 2022 saw 40,000 hospitality vacancies in Scotland, according to UK Hospitality. Notably, the sector is excluded from the UK Government’s Seasonal Worker scheme.

While pay increases driven by the National Living Wage, formerly the National Minimum Wage (increasing the National Living Wage from April 2024 to £11.44 per hour, reflecting for a 40-hour week £23,795 per annum gross), may attract more applicants, the question is: where will these workers come from? The answer may be that they are stolen, borrowed or attracted from other sectors, especially since the pandemic.

Wage rates

When considering wages in the UK, one of the most authoritative documents (including somewhere in the order of 300,000 respondents) is the Office for National Statistics (ONS) publication Annual Survey of Hours and Earnings (ASHE). Many lawyers preparing loss of earnings schedules will be familiar with ASHE, if not by reviewing the source documents themselves, then by reading them in a vocational report they have instructed.

As background, ASHE data is collected by way of a questionnaire every April based on a 1% sample of waged employees, with the questionnaire asking employers information on their employees such as gross basic salary, overtime, pension contributions, start date, job title, short description of the employee’s role, etc. Weekly earnings are calculated and represent the year of the ASHE edition (i.e. the weekly earnings in the 2023 edition of ASHE represent 2023/24). However, annual earnings for employees are taken from the previous tax year, meaning that annual earnings in the ASHE publication are for the previous year, i.e. 2023 ASHE annual earnings represent the 2022/23 tax year.

To create a database that is as reliable as possible, ASHE monitors the coefficient to ensure that the average is not distorted by a few high earners; for instance, should Elon Musk be included in a small sample then everyone, on average, would be a millionaire. If the figures are distorted, then the average would not be printed in national statistics. ASHE also splits its survey into four categories of reliability in order to provide transparency and accuracy, which presents itself in safe data, a dataset that is in addition to the main study and can be obtained by request to the ONS. Safe data is that which is not included in the main survey and is not published in the public domain as the quality is considered unacceptable. While it can be provided to customers upon request, it is not used or published as a national statistic.

One of the anomalies in the 2023 ASHE release against 2022 was the increase of all female average earnings, which compared with last year’s edition had surpassed that of all males. All male mean earnings increased by 5% (median by 5.8%), yet all female mean earnings increased by 6.8% (median by 8.4%). All full-time earnings also saw women’s earnings grow the most.

It is necessary to stress that the above does not indicate an eradication of the gender pay gap, with average earnings for males versus females still showing a significant difference in favour of men. It does, however, raise questions as to the shift in annual pay awards. When one drills down into the 2023 figures against the 2022 figures, some further interesting facts emerge.

Labour market review of some of the major employment sectors in Scotland

It is important in any labour market review not to merely focus on hourly rates or annual earnings, but to also consider the wider market and industrial sector. Changes in just some of the sectors are considered below.

Oil and gas

In March 2023, Scotland reportedly received 79% of its total energy from oil and gas production. Analysis conducted by the Scottish Government highlighted an expected increase in Scotland’s emissions, at-risk jobs and an overall poorer nation if the accelerated decline of Scotland’s oil and gas production continued. To “minimise any negative impacts of the energy transition on society and the economy”, the report emphasised the importance of Scotland supporting its oil and gas industry while also managing the emerging low-carbon sector’s growth.

Perhaps unknown to the layperson, traditional oil and gas heritage companies have been instrumental in the development of the UK’s offshore wind capacity, investing research and development efforts and scale into important innovations. For example, the Seagreen project’s majority owner is TotalEnergies; with its resources and investment, the project has grown to become Scotland’s largest offshore wind farm, with the world’s deepest fixed-bottom turbine foundations. Furthermore, Equinor manages the Dudgeon and Sheringham Shoal wind farms, both off the coast of Norfolk, as well as Hywind Scotland, the world’s first floating wind farm. Equinor is now focused on the Dogger Bank project as the lead operator for what will be the world’s largest wind farm when complete. Other investors involved are supply chain companies supporting these projects to branch out from their main lines of business. As the diversification of oil and gas companies increases at an exponential rate, these corporate supporters will prove to be vital in installing and establishing future capacity.

The Energy Transition Institute, in its 2023 report titled Powering up the Workforce: The Future of the UK Offshore Energy Workforce:

1. Almost one in 30 of Scotland’s working population is currently employed in or supports the offshore energy sector.
2. Approximately one in five of those working in the North East of Scotland is currently employed in the offshore energy sector. If induced jobs are included, then one in three people are either working or supporting the offshore energy sector.

• For the Scottish offshore workforce, a potential 25% increase (from 79,000 to almost 100,000) may be on the cards if the energy transition is successful.

Typical oil industry rates for some of the job titles through 2023 have been as follows.:

Tourism

The travel and tourism sector has also seen impressive earnings growth between 2022 and 2023, with a staggering average annual increase of 21.4% for all travel agents, a 27.8% increase for all full-time leisure and theme park attendants, a 23.5% increase for all full-time travel agency managers and proprietors, 30% for male full-time leisure and theme park attendants and, flying highest, a 44% increase in earnings for female full-time travel assistants. Now, two to three years on from the pandemic, which affected the travel and tourism industry well into 2021/22, the effects of the relaxing of travel restrictions and dusting off of suitcases have created a n optimal time for workers in tourism.

Air travel assistants showed an increase in earnings of a massive 44% (the highest when compared to all other categories). With countries across the world opening their borders again and easing Covid-19 travel restrictions, the aviation sector saw a huge uptick, with cabin crew jobs, particularly for female cabin crew members, on the rise.

As for pilots, while one could argue they have not quite felt the full force of the earnings surge, they still received on average a rise of 7.48%, above the average across all industries, and an 8.54% increase for those working full-time. Nonetheless, a notable increase across the travel industry from top to bottom shows that, now released from the shackles of Covid and lockdowns, the industry has well and truly taken off.

Fishing

In 2022, Scotland’s total volume of fishing catch fell to around 408,000 tons, a reduction of 11,400 tons from the previous year.

Seafish, the public body of the seafood industry for the UK, recorded 3,325 people in full-time equivalent roles in the Scottish industry for 2022, an 181-person drop from 2021 and almost 50% of the UK total.

Moving into 2023, a report produced for the Scottish Fishermen’s Federation and the National Federation of Fishermen’s Organisations warned that the growth of offshore renewable energy projects (including wind and hydrogen/tidal power systems) limits where fishing boats can work. The Spatial Squeeze in Fisheries report suggests a “worst-case scenario” where 56% of Scottish sea territory may be off-limits to fishermen. As efforts to conserve marine bio-hotspots continue, the areas where fishing boats are allowed will also become increasingly limited by newly cornered-off marine protected areas, also known as Highly Protected Marine Areas.

ASHE figures for waged fishermen (ASHE only records those in waged employment, so the figures below will not necessarily include share fishermen) highlight an interesting shift in earnings when comparing female and male fishers, with full-time females overtaking males in 2022/23 from the previous year. Whether this is an anomaly or an emerging trend may be clearer in the coming years.

Small businesses

The Scottish Government reported in December 2023 that there has been a 5.6% decrease in the estimated number of businesses between March 2022 and March 2023 (https://www.gov.scot/publications/businesses-in-scotland-2023/). Steered by a drop in the number of small businesses (up to 49 employees), the total decrease between 2022 and 2023 stands at around 20,235. In contrast, the number of medium-sized and large-sized businesses between 2022 and 2023 has increased, as well as the number of businesses owned abroad but operated in Scotland.

As of March 2023, Scotland was home to 338,385 small to medium-sized enterprises (SMEs), providing an estimated 1.2 million jobs to the labour market; 55.9% of these jobs were in the private sector. SMEs also made up 99.3% of all private-sector businesses and contributed 42.4% of private-sector turnover.

Conclusion

From a vocational perspective, when preparing a schedule for possible future loss in earnings, it is important to review wider socioeconomic factors and not necessarily assume that what has happened in the past can be used as a model to predict what will happen in the future.

The labour market is not static by nature and will see demand – and earnings – rise and fall, as well as new sectors emerge. Market rates today may therefore not be market rates tomorrow, which means when one undertakes either a profile of past earnings or looks to project possible earnings for the future, it requires a very industry-focused and indeed, in most cases, individual-focused analysis.

Written by Keith Allen