UK Jobs Market Weakening as National Insurance Raid Bites, Warns Andrew Bailey

Strategic Insights -

The Bank of England Governor Andrew Bailey has warned that the UK jobs market is weakening due to the Chancellor's National Insurance tax changes, which took effect from April. The changes, which have increased employer National Insurance contributions (NICs) to 15% from 13.8%, are having a significant impact on businesses, with many firms making adjustments to both the quantity and price of labor.

Key Takeaways:

  • The National Insurance tax changes, which increased employer NICs to 15% from 13.8%, are causing businesses to make adjustments to both the quantity and price of labor.
  • The Bank of England Governor Andrew Bailey has warned that the UK jobs market is weakening as a result of these tax changes.
  • The changes have reduced the earnings threshold at which NICs are paid from £9,100 per year to £5,000, impacting those who employ many part-time staff.
  • The UK vacancies are shrinking, and pay rises are slowing down, with employers now having to pay a tax of 15% on their workers' wages.
  • The Office for National Statistics (ONS) has been working to improve the jobs market survey, but the response rate remains low, reaching only over one-fifth in recent months.
  • The patchy data has made it difficult for the Bank of England to accurately judge inflationary pressures in the economy and whether it is on track to hit its 2% inflation target.
  • The rise in youth worklessness is a concern, with one quarter of those aged between 18 and 34 never answering the phone, contributing to the cultural shift away from answering phones.

Statistics:

  • The National Insurance tax changes have increased employer NICs to 15% from 13.8%.
  • The earnings threshold at which NICs are paid has been reduced from £9,100 per year to £5,000.
  • The response rate to the ONS jobs market survey has dropped from almost 50% a decade ago to a low of 12.7% during the pandemic.
  • The response rate has recovered to just over one-fifth in recent months.
  • One quarter of those aged between 18 and 34 never answer the phone, according to a survey last year from Uswitch.

Sources:

  • "UK jobs market 'weakening' as National Insurance tax changes bite, warns Bank's Andrew Bailey" by Rachel Reeves on YouTube
  • "Andrew Bailey warns UK economy will struggle to hit inflation target amid National Insurance changes" by The Telegraph
  • "National Insurance changes 'causing uncertainty for business leaders' according to Bank of England Governor" by ITV News
  • "Why do so many young people never answer the phone?" by The Telegraph
  • "Uswitch survey finds one in four 18-34 year olds never answer the phone" by Uswitch