Labour Market Prospects of Less Skilled Workers Over the Recovery

Unemployment among the less skilled has fallen sharply since 1993 but much of this has been because of rising inactivity rather than improved employment. Rising inactivity during a strong employment recovery is unusual and should be a major cause for concern. Less than half of all women without formal qualifications are in work and there has been no improvement relative to other women over the course of the recovery. Among less skilled men, only youths appear to have made any improvement in their relative labour market position over the recovery. One-third of men without formal qualifications are now inactive. Labour market prospects of less skilled workers did improve in the areas of Britain where demand was strongest. It appears that a local employment rate in excess of 75 per cent is needed before any improvement for the less skilled takes place. Whilst average real wages of the less skilled did rise over the recovery, real wages of other workers grew slightly faster, so the average pay of the less skilled fell further behind. Recovery and the National Minimum Wage appear to have been insufficient to generate an improvement in the relative pay prospects of less skilled workers.