Using UK Tax Records to Produce New Statistics on Labour Market Transitions

This paper explores how we might use earnings data collected by HM Revenue Customs (HMRC) under the Pay As You Earn (PAYE) Real Time Information (RTI) system to construct novel statistics on individuals' employment and earnings transitions. Such data have great potential and offer particular strengths that are complementary to those of survey data. Nevertheless, they are collected for administrative rather than research reasons and their use in this latter regard is relatively recent. A consequence of this is that the PAYE RTI data variables available do not necessarily map directly onto the economic concepts of underlying interest. In this paper, we document the approach to constructing a dataset that can be used for the production of statistics on labour market transitions. We apply business rules intended to reduce the extent of spurious job transitions suggested by the raw data and to arrive at a consistent measure of weekly pay. With the resulting dataset we present a number of novel statistics. These are of interest in their own right but also serve to showcase the potential to make greater use of the PAYE RTI data and thereby gain new insights into the labour market.