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How Dynamic is the Private Sector? Job Creation and Insights from Workplace-Level Data

Published online by Cambridge University Press:  26 March 2020

Bob Butcher  and
Matt Bursnall
Bob Butcher*
Affiliation:
National Institute of Economic and Social Research and BIS
Matt Bursnall
Affiliation:
BIS
*
E-mail: b.butcher@niesr.ac.uk
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Abstract

Private sector employment rose by over a million in the past three years. Commentators often interpret this number – which is a net figure – as ‘job creation’. But how many jobs really are created each year, and conversely how many are lost? How has this changed with the downturn and what does it imply for the recovery?

This article uses findings from business and workplace-level data to map i) job creation and destruction over recent years, ii) its components in accounting terms, iii) the relative contribution by firms of different size and age, and iv) the reallocation of resource between firms and to workplaces within firms. There are four main points:

  1. a) Job churn far outweighs net change. Before the downturn, an average of 4.0 million jobs were created each year and a slightly smaller number lost (3.7m), resulting in a net increase of about 300,000 per year.

  2. b) Most job creation (over 70 per cent) is within existing firms; but within that, over a third comes from the creation of new workplaces set up within those firms.

  3. c) The net reduction in jobs in 2008–11 was not, in contrast to earlier recessions, due to higher rates of job loss; instead it reflects a sustained period of lower job creation in new workplaces, especially in SMEs (figure 1). This is consistent with ongoing credit constraints hitting SMEs particularly hard, as discussed in Armstrong et al. (2013), or could simply be in line with lack of confidence to invest at this time.

  4. d) Looking at the years 2008–11 individually, the downturn begins with reduced levels of entry, followed by a peak of job destruction in 2009 in line with reduced aggregate demand, and then a continuation of low levels of entry of new SMEs, and lower levels of destruction too (figure 2).

Keywords

job creationrecessionfirms and workplacesE32G21J63L22
Type
Commentary
Information
National Institute Economic Review , Volume 225 , August 2013 , pp. F4 - F14
Copyright
Copyright © 2013 National Institute of Economic and Social Research

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Footnotes

We thank Jonathan Portes for his advice and support, Alex Bryson, Simon Kirby, Rebecca Riley, Max Nathan and Geoff Mason for helpful comment, numerous researchers for leading the way, especially Jonathan Haskel and Michael Anyadike-Danes in the UK, and to Steven Davis and John Haltiwanger in the United States, and to ONS and their data managers for making the data available and helpful advice in interpreting them. This work was supported by the Economic and Social Research Council grant number ES/K007416/1; and by the department for Business Innovation and Skills. This work contains statistical data from ONS which is Crown Copyright. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates.

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