Economy

Is the private sector driving growth in Welsh employment?

Article by Gareth Thomas, National Assembly for Wales Research Service

In Plenary on 22 April, Assembly Members will debate the role of the private sector in economic growth, job creation and sustaining public services.  Private sector employment across the UK has increased by over 2.3 million since the start of 2010 excluding the impact of reclassifications of jobs from the public to the private sector, and is now over 25.6 million.  So what is the situation in Wales, and how does the increase in private sector employment fit into the wider changes in employment across the UK over recent years?

How does private sector employment in Wales compare to the rest of the UK?

The latest figures from the Office for National Statistics (ONS) show that 1,033,000 people were employed in the private sector in Wales in the last quarter of 2014. This is an increase of 80,000 since the start of 2010.  These figures exclude the impact of recent reclassifications of jobs between the public and private sectors.  These include changes such as the privatisation of Royal Mail and the reclassification of some banks to the public sector following the 2008 recession, although figures for Northern Ireland are not currently available on this basis.  Also, as jobs are unfortunately lost as well as created, these figures are an indication of overall changes in the number of people employed rather than new jobs created.

Yet the 77% of all people in employment in Wales working in the private sector remains lower than in Scotland and any of the English regions.  The graph below shows this information for the quarter 4 of 2014.

Figure 1: Percentage of all people in employment working in the private sector in quarter 4, 2014

Private sector graph 1 eng

Source: Office for National Statistics, Public Sector Employment, Q4 2014

Do these figures reflect an overall increase in employment, or a rebalancing of the employment from the public to the private sector?

They actually show a bit of both these things!  Wales, Scotland and the English regions have seen an overall increase in employment over recent years, but they have also all seen a decrease in public sector employment to varying degrees.  Since the first quarter of 2010, the percentage of people employed in the Welsh private sector has increased from 73.8% to 77%, an increase of 3.2 percentage points.  Similarly, the percentage of people employed in the private sector across Great Britain has increased from 80.4% to 83.1%, a slightly lower increase of 2.7 percentage points.  This shows that the rebalancing of employment from the public to the private sector has been greater in Wales than the average across Great Britain over this period.

Looking at overall changes in employment over the same period (which is a couple of months behind the most recent data on overall employment levels published on 17 April showing that the UK has the highest working age employment rate since figures started to be collected in 1971), we can see that there has been a 3.9% increase in Wales.  This has been driven by an increase in employment in the private sector, where there has been an 8.4% increase in employment.

Making comparisons with England, Scotland and the three English regions with the lowest percentage share of people employed in the private sector, we can see that overall employment growth in Wales since the start of 2010 has been higher than the North East of England but lower than in the other areas compared.  Scotland has seen the highest percentage growth in both private sector employment and overall employment over this period.

Figure 2: Percentage changes in employment between quarter 1, 2010 and quarter 4, 2014

Private sector graph 2 eng

Source: Office for National Statistics, Public Sector Employment, Q4 2014

What conclusions can be drawn from these figures on employment in Wales and the UK?

We can see from the data that employment has grown in Wales and across the UK over recent years, and that this has been driven by increases in private sector employment levels.  These have outweighed the decrease in public sector employment over this period.  We can also see that the rebalancing of employment from the public to the private sector has been greater in Wales than the average across Great Britain over this period.

However, what these headline figures don’t show us is whether the additional people in employment are in full-time or part-time work, permanent or temporary positions, well paid or low paid jobs.  They also do not tell us the reasons for the differences in overall changes in employment, or in the public and private sectors.

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