Britain’s jobs market has changed permanently as a result of the financial crisis with more people destined to remain self-employed or in part-time work, according to the Bank of England governor.
Mark Carney told MPs on the House of Commons Treasury select committee that the rise of contract work in areas such as design and accountancy, which allow businesses to directly employ fewer people full-time, was probably here to stay.
He said: “My personal view is that there will be an increase in self-employment and part-time work relative to history, in part driven by the reality of technology. I think in the end, we won’t go back to historic levels, but that’s my personal assessment. There are some structural changes which are driven as much by technology as any particular policy.”
Carney added that increasing automation in the workplace was increasing the supply of lower-skilled workers and keeping wages down.
“The automation of a series of formerly white-collar tasks, the growth in computing power, has a consequence in adjusting the shift of types of jobs. If we’re not careful it will mean more people are competing for lower-skilled jobs as opposed to moving up.”
He said that while lower-skilled workers were not seeing wage growth, there was evidence that fixed pay was rising in the financial services sector at rates above profit growth, probably in a response to the cap on bankers’ bonuses.
When questioned on the economic impact of potential changes to the UK’s immigration policy – expected to be a key battleground in the runup to the general election next year – the governor said he did not want to be dragged into politics.
“These are intensely political issues. We don’t want to be in the middle of an election campaign in any way, shape or form.”
Net migration has increased since the UK’s economic recovery began, he said, and those people were finding jobs at the same rate as those already in the UK. “They are filling skills gaps, particularly in the manufacturing sector but more broadly in IT and other areas – and that is allowing companies to hire more people and invest more in the economy. That part of the internationalisation of the labour market is very positive.”
Reiterating the message from the Bank’s November inflation report, Carney said interest rates were likely to rise at a slower pace than the monetary policy committee had previously expected. The inflation report suggested the first increase in rates, on hold at 0.5% since March 2009, was likely to come in autumn 2015. Carney said the UK was “still an economy that requires monetary stimulus”.
Inflation, currently at 1.3%, is expected to fall further in the coming months, amid lower commodity prices and weak wage-growth.
“It’s more likely than not that inflation will fall below 1%, and more likely than not that I’ll have to write a letter to the chancellor,” Carney told the TSC.
The governor of the Bank is required to write to the chancellor giving an explanation if inflation rises to more than one percentage above the 2% target or less than one percentage below.
Carney said that although there were external risks to the UK economy, notably a sluggish eurozone recovery, business and household confidence was high. He conceded that wage growth was “only just starting to turn”, but added household incomes should be boosted by lower food and fuel prices.
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