(ons) Review of Employment and Jobs Statistics. National Statistics Quality Review Series. Report No. 44. Published by: Office for National Statistics

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1 (ons) National Statistics Quality Review Series Report No. 44 Review of Employment and Jobs Statistics Published by: Office for National Statistics Theme: Labour Market

2 Office for National Statistics 1 Drummond Gate London SW1V 2QQ Tel: Website: National Statistics Customer Enquiry Centre Government Buildings Cardiff Road Newport South Wales Tel: (minicom ) Fax: info@statistics.gov.uk Website: Crown Copyright 2006 Copyright in the typographical arrangement rests with the Crown. This publication, excluding logos, may be reproduced free of charge in any format or medium for research, private study or for internal circulation within an organisation. This is subject to it being reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown Copyright and the title of the publication specified. This is a value added publication which falls outside the scope of the HMSO Class Licence. For any other use of this material, please write to HMSO, The Copyright Unit, St Clements House, 2-16 Colegate, Norwich NR3 1BQ. Fax: or copyright@hmso.gov.uk Contact points: For enquiries about this review publication: Vivienne Avery Labour Market Division, ONS Tel: vivienne.avery@ons.gsi.gov.uk For enquiries on the review programme: The Review Programme Management Team, ONS Tel: / National.Statistics@ons.gsi.gov.uk National Statistics are produced to high professional standards set out in the National Statistics Code of Practice. They undergo regular quality assurance reviews to ensure that they meet customer needs. They are produced free from any political interference.

3 Review of Employment and Jobs Statistics The Quality Review of Employment and Jobs Statistics has addressed a very wide range of issues relating to the reliability and coherence of employment and jobs statistics and has presented some detailed analysis of the differences in the estimated levels of jobs obtained respectively from the Labour Force Survey (LFS) and from business surveys. The scope of the statistical instruments involved is huge, ranging from the Population Census which is the base source of the population estimates used to weight the LFS sample to the Interdepartmental Business Register which has a similar function relating to business survey estimation. This final report incorporates the most significant elements of the emerging findings report published by ONS in March The present report, however, moves on to include the results of further analytical work carried out by the review team, and to reflect a number of statistical developments which have taken place since the emerging findings report was published. National Statistics Quality Reviews In 1999 the Government issued the Building Trust in Statistics White Paper, which set out the framework for quality assuring National Statistics outputs. This was confirmed in 2000 with the launch of National Statistics and publication of the Framework for National Statistics. A key component of the Framework is: a programme of thorough reviews of key outputs, at least every five years, with the involvement of methodologists and outside expertise, as appropriate. This programme of quality reviews is an important way of ensuring that National Statistics and other official statistical outputs are fit for purpose and that we are continuing to improve the quality and value of these outputs. The Quality Review of Employment and Jobs Statistics is the fourth review to be completed under the National Statistics Labour Market theme. All four reviews have had a major strategic focus. In date order of completion they are as follows. Review of the Framework for Labour Market Statistics - Report No.11, 2002 Review of the Labour Force Survey Report No.12, 2002 Review of Distribution of Earnings Statistics Report No.14, 2002 Review of Employment and Jobs Statistics Report No. 44, 2006

4 2 Contents Executive summary of the Review Report Overview of the review report How employment and jobs are measured How comparisons of jobs statistics from the LFS and business surveys have changed over time Comparing the LFS and business survey sources to an estimate of all jobs contributing to the UK economy Measures of precision of LFS and business survey estimates of employment and jobs Comparing the LFS and business survey sources sub-nationally Progress on the review since the Emerging Findings report Promoting coherence between household and business survey estimates Summary of key recommendations Objectives and background Objectives How statistics of employment and jobs are used The new framework for labour market statistics Comparison of LFS and WFJ UK comparison Country and Regional Comparison Industry Comparison Summary of User Consultation User practice and perception Desirable improvements Methodological work Other background considerations Coverage of sources Gaps in the availability of data by industry and public/private sector Data accessibility and timeliness Accuracy and precision Long time-series Small area statistics Benefits statistics Matching LFS with administrative data Consistency between Labour Market Statistics and National Accounts European requirement for estimates of persons employed by industry Progress and Issues arising Reconciliation of national LFS and WFJ series (UK) Major reconciliation issues Employment not covered by the LFS Armed forces not in private accommodation Workers living in communal establishments Third and subsequent jobs Temporary foreign workers Major reconciliation issues Employment not covered by the IDBR / ABI / WFJ Jobs in private households Home workers on piece rates Workers in small businesses not registered for VAT/PAYE Major reconciliation issues Completion and response...48

5 Self-employment/Employee boundary LFS proxy response LFS Non-response ABI/STES response issues Other possible differences Revisions to the Population Estimates HM Revenue and Customs data on taxpayers Progress and Issues arising Development of Employment Statistics from the Labour Force Survey Improving industrial classification on the Labour Force Survey The feasibility of linking LFS and IDBR employer records Identifying the right employer Classification of employers as public or private sector Better identification of workplace location The LFS as a source for identifying units not listed on the IDBR Plans for an integrated ONS household survey Definition of self-employment in LFS Extending the LFS sample to communal establishments Population base for 2011 Census LFS coverage of local areas Progress and Issues arising Development of Employment Statistics from Business Surveys Introduction General ABI issues Timing of the survey Industry detail Impact of homeworking Agriculture Local authority input to validation of the data BRES project to merge ABI and BRS Issues Relating to Northern Ireland Methodological issues Quarterly WFJ estimates from employer-based surveys Annual estimates from employer-based surveys Consistency of monthly/quarterly and annual series Approximate measures of accuracy for employment series Improving the estimate of change in employment from the ABI Possible new procedure for producing Work-Force Jobs Series The existing WFJ system A proposed new WFJ system Advantages of the suggested new WFJ system IDBR issues Structural information Other issues relating to collecting local unit data Agriculture Public sector Births and Deaths The effect of take-overs/mergers Progress and Issues arising Development of Public Sector Employment Statistics...102

6 4 6.1 Improvements made to Public Sector Employment Statistics Further improvements needed Integrating Public Sector Employment Statistics into the wider Employment and Jobs statistical system Producing sub-national estimates of Public Sector Employment Current situation Feasibility of producing sub-national PSE estimates Producing employment statistics for a broader measure of the Public Sector Progress and issues arising Improving the Quality of Hours of Work Statistics Introduction Coherence between the LFS and ASHE hours of work statistics Coherence between the published LFS and ASHE series Comparison between LFS and ASHE results for basic weekly hours and paid overtime hours Improving the quality of LFS hours of work statistics Do the LFS hours worked statistics meet users needs? Can the LFS statistics be used to monitor the EU Working Time Directive? How accurate is the information collected in the interview? How accurate is the information collected from proxy respondents? How precise are the LFS hours worked estimates? How accessible and clear are the LFS hours worked statistics? Are the LFS hours worked statistics comparable over time? Improving statistics on full-time and part-time employment Comparison between the LFS, Employee Jobs and ASHE estimates of part-time employees Comparison between the LFS self-classified measure of full-time/parttime work and hours-based measures Progress and issues arising References: Annex 1 Assessment of employment, hours of work and earnings data sources Annex 2 Summary of User Consultation Annex 3 Further Reconciliation Issues Annex 4: Overview of hours of work statistics Annex 5 Concepts and definitions Glossary of terms and abbreviations...199

7 5 Executive summary of the Review Report The Quality Review of Employment and Jobs Statistics has addressed a very wide range of issues relating to the reliability and coherence of employment and jobs statistics and has presented some detailed analysis of the differences in the estimated levels of jobs obtained respectively from the Labour Force Survey (LFS) and from business surveys. The scope of the statistical instruments involved is huge, ranging from the Population Census which is the base source of the population estimates used to weight the LFS sample to the Interdepartmental Business Register which has a similar function relating to business survey estimation. This final report incorporates the most significant elements of the emerging findings report published by ONS in March The present report, however, moves on to include the results of further analytical work carried out by the review team, and to reflect a number of statistical developments which have taken place since the emerging findings report was published. Among these developments, the most significant have been: (a) the progress made with ONS s statistical modernisation work, in particular the planning that has been carried out to prepare for the integration of the annual business surveys in which employment data are collected; (b) the development work that has been carried out to develop means of routinely linking information about employers from ONS s Interdepartmental Business Register (IDBR) into Labour Force Survey (LFS) unit records; and (c) the programme of improvements to public sector employment statistics, announced by ONS in March 2005 (Ref. 1.1). There is a wide range of users of UK, regional and local area level employment and jobs statistics. These users include: central government departments; the devolved administrations in Scotland and Wales; local government; and the general analytical and user communities. The statistics are used for many purposes, among them: formulation of the labour market elements of macroeconomic models; assessment of the impact of labour market conditions on inflationary pressures; analysis of the economic and social impact of labour market policies; and investigation of the condition of local area labour markets. Recognising the present difficulties for users presented by the discrepancies between the LFS and business survey sources, the first recommendation of the report takes the form of guidance for users about the preferred source to be used for each of a number of particular purposes for which employment statistics are needed. Again bearing in mind these difficulties for users, the final recommendation of the report is that ONS should investigate the feasibility of developing, and in the longer term of publishing routinely, a single best estimate of all jobs contributing to the UK economy. The review has made significant progress towards this goal by identifying and describing around 30 contributory causes of the present differences between the LFS and business survey estimates of jobs. In chapter 3, a detailed numerical analysis is presented of the differences by relating each data source to a hypothetical single target estimate of all jobs that contribute to UK output.

8 6 Making further progress towards the greater coherence of employment and jobs statistics, and hence towards the creation of a single jobs series, will not be successful without addressing the underlying incoherence of the data sources. The review report has therefore put forward a number of recommendations for how this might be done. One of the key developments, which ONS is taking forward as resources permit, is the integration of the present elements of the Annual Business Inquiry and Business Register Survey in which jobs data are collected. The combined survey is to be entitled the Business Register and Employment Survey (BRES). The BRES project will include investigation of how PAYE data, supplied to ONS by HMRC, can be used to best effect to improve the quality of local area employment estimates. Another recommendation, which if successfully followed, could make a major impact on the coherence of LFS and business survey sources, is that indicators relating to the location, industry and public/private sector of people s employers should be linked from the IDBR to the unit records of details obtained from LFS respondents. In addition to promoting coherence, this linkage could significantly enhance the analytical value of the LFS. Linked LFS records could be used to produce analyses of employment by industry and public/private sector in line with the National Accounts concepts recorded on the IDBR. Moreover the quality of LFS analyses of employment by workplace location would be significantly improved. Inevitably, a programme of work to address all the recommendations made in the report would be large and costly. ONS will assess the affordability of the different elements of work recommended and will compare their priority with other elements of its statistical programme. An action plan will then be published setting out a description of the work arising from the review that can be taken forward within the scope of the resources available.

9 7 1 Overview of the review report 1.1 How employment and jobs are measured The number of people in employment differs from the number of jobs since some people may hold more than one job and some jobs may be shared by more than one person. Employment is measured from the Labour Force Survey (LFS), which is based on a sample of UK households selected, in Great Britain, from the Postcode Address File (PAF). To produce estimates of employment, the LFS sample is weighted to annual population estimates for separate categories of people defined by age, sex and area of residence. These population estimates are calibrated to the latest Population Census, currently that held in April Adjustments are made to the population estimates used for LFS weighting to reflect the incomplete coverage of the LFS sample, principally the exclusion of most people resident in institutions rather than in households. Jobs estimates may be derived from the LFS by adding together people in employment (equal to first jobs) and numbers of people with second jobs. Third or higher order jobs are, however, not covered by the LFS. The principal way of measuring jobs, however, is by using data collected from enterprises in the Annual Business Inquiry (ABI) and in a number of monthly and quarterly surveys, covering different industries, which contribute to the quarterly workforce jobs series (WFJ). The ABI and short-term surveys which contribute to the WFJ are based on samples, stratified by industry and size of employer, which are selected from the Interdepartmental Business Register (IDBR). All large companies with more than 250 employees are surveyed annually in the ABI, and estimation procedures are needed only to allow for non-response. Jobs estimates are obtained from the ABI by adding the jobs figures for large companies to weighted estimates of jobs based on the ABI sample of small and medium size businesses. For weighting purposes, totals of businesses are obtained from the IDBR for the different sample strata. In order to provide reliable estimates, the effective maintenance and update of the IDBR in terms of births and deaths of companies (and to a lesser extent the sizes of organisations which impact on sample stratification) is most important. The quarterly WFJ series draws upon a wide range of separate inputs: business surveys; administrative data; and the LFS. The series is benchmarked to the annual ABI, a process which, in recent years, has consistently led to upward revisions. 1.2 How comparisons of jobs statistics from the LFS and business surveys have changed over time A key aim of the review has been to investigate the reasons for the significant difference which currently exists between the numbers of jobs estimated from the two series. Following the re-weighting of the LFS to population estimates based on the 2001 Census, the average difference between the UK workforce jobs and LFS jobs over the period 1992 to 2004 is 750 thousand, with the WFJ higher than the LFS figure at all time periods.

10 8 Prior to 1998, the difference based on published data was in the opposite direction. LFS jobs exceeded the WFJ, then benchmarked to the old Annual Employment Survey (AES), by about the same amount. The ABI was developed and introduced in 1998 to replace the AES. It incorporated a number of changes, both in its design and estimation methodology which, for a few years, resulted in the LFS and WFJ jobs series being fairly close. However, when the LFS was re-weighted to up-dated and revised population estimates taking into account the new information from the 2001 Census, a gap re-opened between the two series. These developments are illustrated in the following three charts 1.1 to 1.3 and are discussed further in chapter 2 of this report. Figure 1.1 UK Employee jobs : Comparison of LFS (pre 2001 Census) and WFJ (AES, pre ABI). 26 UK - seasonally adjusted Levels (millions) Jun-92 Dec-92 Jun-93 Dec-93 Jun-94 Dec-94 Jun-95 Dec-95 Jun-96 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun difference (rhs) WFJ/ABI (lhs) LFS post Census (lhs)

11 9 Figure 1.2 UK Employee jobs : Comparison of LFS (pre 2001Census) and WFJ (post ABI) 28 UK - seasonally adjusted Levels (millions) Jun-92 Dec-92 Jun-93 Dec-93 Jun-94 Dec-94 Jun-95 Dec-95 Jun-96 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 difference (rhs) WFJ/ABI (lhs) LFS post Census (lhs) Figure 1.3 UK Employee jobs : Comparison of LFS (post 2001 Census) and WFJ (post ABI) UK - seasonally adjusted Levels (millions) Jun-92 Mar-93 Dec-93 Sep-94 Jun-95 Mar-96 Dec-96 Sep-97 Jun-98 Mar-99 Dec-99 Sep-00 Jun-01 Mar-02 Dec-02 Sep-03 Jun-04 Mar difference (rhs) WFJ/ABI (lhs) LFS post Census (lhs)

12 Comparing the LFS and business survey sources to an estimate of all jobs contributing to the UK economy The published WFJ and LFS jobs series are not entirely consistent in terms of coverage. Chapter 3 describes how adjustments can be made to the estimates from the LFS and ABI so that the data can be compared on a more consistent basis. For example, allowance is made for the exclusion from the LFS of third and subsequent jobs and of people resident in communal establishments. Table 1.1 shows this reconciliation between existing LFS and WFJ data and the estimate of the total jobs contributing to UK output. This reveals that although the WFJ estimate is around 1 million higher than the LFS, after reconciliation this difference is reversed and the LFS has a jobs estimate of about 400,000 higher than the WFJ. 1.4 Measures of precision of LFS and business survey estimates of employment and jobs The difference between the LFS and WFJ estimates which can least be quantified with any degree of precision is the number of temporary foreign workers (see Chapter 3 for details of how the estimate above was derived). These are excluded from both the LFS sample and from the population estimates used to weight the LFS sample (excluded until they have been resident in the UK for 6 months), but may be filling jobs included in business survey returns. A second group whose quantification is difficult is people in employment who are self-classified as self-employed in the LFS, and hence excluded from LFS employee estimates, but who may be filling jobs returned as employee jobs in business surveys. Leaving aside for a moment these differences between the coverage of the LFS and WFJ employment series, it is helpful for assessing which series users should prefer for assessing whole economy employment, to consider the extent to which the two series are affected by sampling variability. This is conventionally done by using a measure of sampling variability defined as a 95% confidence interval (viz. the range around survey estimates which in 95% of cases will include the true value of employment). For quarterly LFS estimates of employment, the 95 per cent confidence interval is about ±130 thousand (this is a figure published in each month s LMS First Release). In comparison, for the quarterly WFJ series, the 95% confidence interval ranges between ±300 and ±400 thousand. For macroeconomic analysis, it is just as important to have good estimates of the changes in employment over time as it is to have good estimates of the level of employment for a particular period. Comparisons of the changes over time in the LFS and WFJ series are set out in section

13 11 Table 1.1 Reconciliation of existing data sources to estimate of total jobs contributing to UK output, June 2005 UK (thousands), seasonally adjusted Source specific estimates LFS 1 Difference WFJ Employee 1st jobs 24,922 n/a n/a Employee 2nd jobs n/a n/a Employee jobs 25, ,650 Self-employment 1st jobs 3,621 n/a n/a Self employment 2nd jobs n/a n/a Self-employment jobs 3, ,855 HM Forces n/a n/a 209 Government trainees Unpaid family workers 99 n/a n/a Total jobs 29, ,810 Adjustments to reflect source coverage and response Employment not covered by the LFS Armed forces not in private accommodation n/a n/a Workers living in communal establishments 4 80 n/a n/a Employees 3rd and subsequent jobs 5 80 n/a n/a Temporary foreign workers n/a n/a Employment not covered by the IDBR/ABI/WFJ Jobs in private households 7 n/a n/a 70 Completion and response issues Self-employment/employee boundary issues 7 n/a n/a -350 ABI issues 8 n/a n/a -100 LFS proxy respondents (first jobs) n/a n/a LFS proxy respondents (second jobs) 9 90 n/a n/a Non-response bias n/a n/a Estimate of total jobs contributing to UK output 30, ,430 1 Labour Force Survey May-July The headline published LFS figure of 28,755,000 for May to July 2005 comprises: employee and self-employed 1 st jobs plus government trainees and unpaid family workers 2 Based on non-seasonally adjusted data pro-rated to seasonally adjusted total second jobs 3 Workforce Jobs estimate of armed forces minus LFS estimate of those in private accommodation (section 3.1.1) 4 Quarterly estimate from pilot survey of communal establishments, GB, autumn 2000 (section 3.1.2) 5 Annual estimate, Family Resources Survey 2003/4 (section 3.1.3) 6 Estimate made from ONS and Home Office migration statistics (section 3.1.4) 7 LFS microdata June-August 2005 (not seasonally adjusted) (sections 3.2.1, 3.3.1) 8 ABI follow-up survey 2004 (see section 3.3.4) 9 Estimate made from Dawe and Knight and LFS proxy response data (section 3.3.2) 10 Estimate taken from Freeth, Greenwood and Lound, 2005 (section 3.3.3)

14 12 For LFS estimates, the 95% confidence interval of the change in employment between successive 3 month periods (published in each month s LMS First Release) ranges between ±90 to ±100 thousand. Equivalent confidence intervals for quarterly changes in the WFJ series are not available but, in view of the much wider confidence intervals for WFJ levels than for LFS levels, it is probable that the confidence intervals for WFJ changes are substantially greater than those for LFS changes. The levels of WFJ estimates, and hence changes in the series over time, are also subject to upward revision following successive ABI benchmarking exercises, as a result of the present matched pairs estimation method. The foregoing discussion has led to the conclusion of this review that the LFS should be regarded as the most reliable source of estimates of both the level and change in whole economy employment. The LFS should also be regarded as the most reliable source of the levels and changes in age 16 plus and working age whole economy employment rates. It should be borne in mind, however, that LFS estimates of employment as currently constructed exclude the following elements that contribute to UK output: employment among people resident in communal establishments; and employment of temporary foreign workers. 1.5 Comparing the LFS and business survey sources sub-nationally The difference between the LFS and WFJ jobs estimates is not evenly distributed when compared by region and industry. On a regional basis the largest differences occur in London and the South East. This may be partly linked to a headquarters effect with respondents in the business surveys incorrectly reporting the location of jobs to be at the reporting unit level rather than for local units. On an industry basis, by far the largest differences, even allowing for the relatively larger number of jobs in the sector, occurs in services. This may be partly due to people, who are working for companies on contract work for public sector organisations, incorrectly classifying themselves in the LFS as public sector workers. Detailed comparisons by region and industry are given in chapter Progress on the review since the Emerging Findings report This final review report has taken into account the most significant elements of the emerging findings published in March 2004, but also includes the results of a substantial amount of relevant additional analysis which has been carried out since then. It has also moved on to reflect the programmes of work in ONS relating to employment statistics which have been taken forward during 2004 and Among these, two particularly important areas are: first, ONS s programme of work to improve public sector employment statistics; and, second, ONS s work to plan for the integration of household surveys and of business surveys as part of its modernisation programme for official statistics. Chapters 2 to 7 of this report describe the work undertaken by the review team in each of the following areas and present lists of actions taken and planned in response to issues raised in the course of the review. The analysis, description and, as far as possible, explanation of differences between the between the LFS and WFJ jobs series including the results of new

15 13 work to compare jobs levels in terms of industry and region and of changes in levels of jobs over time; The work being undertaken to investigate the feasibility of improving the industry classification, place of work and public/private split in the LFS by linking information from the Inter Departmental Business Register (IDBR) to the LFS records for employees using location of workplace (or location of employer when the employee does not work at the employer s premises) as a way of identifying LFS respondents employers; The work being taken forward to replace the existing ABI/1 annual survey of jobs with an integrated Business Register and Employment Survey (BRES). This would replace both the present Business Register Survey (BRS), used to update the IDBR, and the existing ABI/1 survey. The primary aim of this would be to improve sub-national estimates by, in particular, compiling data directly for Local Units (LUs) rather than apportioning Reporting Unit (RU) data to LUs as at present ; The issue of how the longer term aim of generating a single series of jobs data - might be taken into account in the context of the BRES and Integrated Household Survey (IHS) projects, which respectively are seeking to integrate business survey and household survey data collections. The development and publication of improved and coherent public sector employment statistics, with the eventual aim of integrating these into the BRES and WFJ series. The quality and uses of hours of work statistics and the ongoing development of a draft ILO resolution relating to working hours. 1.7 Promoting coherence between household and business survey estimates The LFS provides national, regional and local area estimates of the economic activity of all adults aged 16 and over. A comprehensive range of detailed characteristics are available including age, sex, ethnicity, qualifications, long term disability, working patterns, hours of work, occupation and industry. Key outputs are published on a monthly basis with quarterly and annual datasets being released to allow users to undertake more extensive analyses. As part of its programme of modernising statistical work in the UK, ONS is developing an Integrated Household Survey (IHS) in which the LFS would be combined with other continuous surveys such as the Expenditure and Food Survey and the General Household Survey. This project provides an opportunity to review the methodology for producing household survey based estimates of employment. A key user consideration is that, should such changes in methodology be made, they should be accompanied by the publication of consistent historical time series for key variables spanning a lengthy period. For example, in the case of the key LFS variables, including employment levels and rates, the consistent, modelled series now available from 1971 would need to be maintained.

16 14 ONS is also planning a series of projects designed to integrate existing business surveys. The project relevant for jobs statistics is to develop a new integrated Business Register and Employment Survey (BRES), which would replace the existing Business Register Survey (BRS) and ABI/1 survey. Again the BRES project provides an opportunity to review the methodology used to produce business survey based estimates of jobs. In particular, the benefits for regional and local area statistics are to be assessed of compiling data directly for Local Units (LUs), rather than apportioning Reporting Unit (RU) data to LUs as at present. While the priority is to develop the BRES as a new annual structural survey, discussion in chapter 5 of this report goes on to discuss how inter-bres estimates of jobs by industry might be produced with greater economy than currently. The ideas put forward rest upon the hope that linkage of IDBR details to the LFS would much enhance the value of the LFS for monthly or quarterly updating of the industry specific jobs data provided by the BRES. A number of ideas have been put forward in this report about how the idea might be taken forward of using all the existing data sources both LFS and business surveys to produce a single integrated set of jobs statistics. It is envisaged that a first step towards this aim must be to improve the coherence of the separate household and business survey sources of jobs statistics. This leads to recommendations relating to the promotion of greater coherence in the coverage of the sources and to the need to consider the benefits of introducing greater alignment between the weighting systems of the business and household surveys. An important area of employment statistics that needs to be explored further, as part of the development of more coherent sources, is the distinction between employment as an employee and self-employment. Only the LFS covers both these types of employment, and business surveys are limited to the measurement of employee jobs. In the LFS, however, following international convention, respondents classify themselves as either an employee or self-employed. Some LFS respondents may classify themselves as self-employed while, in business surveys, they are classified by responding enterprises as employees. As mentioned above, this may be one of the important sources of discrepancy between LFS and business survey employee jobs estimates. Following these developments, and the consequent availability of more coherent source based jobs data, the analytical production of a single series of jobs statistics could become more feasible than it is now. The review recommends that, at that time, the feasibility of generating such a series should be investigated. However, the review makes clear that it would not be appropriate to consider the issue of a single jobs series in isolation. The LFS is already an integrated source of information across the domain of employment, unemployment and inactivity in its own right, and users see it as important that this element of integration should not be lost. In addition, the business survey jobs data interact with productivity and National Accounts estimates, which would need to be taken into account explicitly if a single jobs series were to be produced.

17 Summary of key recommendations The following key recommendations are drawn from the analysis and discussion set out in the individual chapters of the review report. For reference purposes, each element of each recommendation is followed by a list of the relevant sections of the report. It should be recognised that to follow up this list of recommendations would constitute a considerable agenda of work. There are many other statistical priorities that ONS has already, and almost certainly ONS will not have the resource capacity to take forward all the items on the list in the shorter term. Following publication of this report, ONS will publish an action plan indicating which recommendations can be scheduled for attention. Recommendation 1: preferred sources The improvements to the existing statistical sources of employment and jobs statistics should lead, in the future, to improved data consistency and coherence. In the meantime, the following recommendations are made regarding the best source to use for different purposes. (a) Whole economy levels and changes in employment and employment rates at national and regional level. Labour Force Survey (LFS), available monthly on the basis of 3 month rolling averages (note, however, that LFS employment estimates as currently constructed exclude employment among people in communal establishments and the employment of temporary foreign workers); (b) Detailed structural information, for example about jobs according to industry. Annual Business Inquiry (ABI/1), available annually. (c) Inter-ABI changes in all jobs by industry. Workforce Jobs (WFJ) series, available quarterly, and manufacturing jobs series, available monthly; (d) Public sector employment levels and changes. Public sector employment First Release figures - based on quarterly public sector employment survey (QPSES) and other administrative sources, available quarterly. (e) Local area whole economy employment by area of residence Annual Population Survey (APS), available quarterly on the basis of 12 month rolling averages. (f) Local area employee jobs by industry and workplace ABI/1 available annually.

18 16 Recommendation 2: improving household survey coverage and classification In order to increase the consistency and coherence of estimates of employment and jobs from household and business survey sources, improvements to the coverage and classification of the underlying sources should be investigated. In the case of the LFS, the following recommendations are made: (a) Linking IDBR information to LFS records should be recognised as essential for improving the quality of LFS statistics of workplace, industry and sector and, as a result, of improving the coherence not only of different sources of employment statistics but also the coherence between labour market statistics and the National accounts. In the light of this recognition, ONS should prioritise work to build on the considerable progress made so far in devising practical means of achieving this LFS/IDBR linkage; (b) Means should be investigated for improving the quality of the classification of employment as employee/self-employed in the LFS by testing different questions designed to refine the existing self-classification by respondents; (c) The feasibility should be studied of making the LFS coverage of employment more comprehensive by extending the survey sample to include communal establishments; (d) The feasibility should be studied of making the LFS coverage of employment more comprehensive by extending the survey sample to include temporary foreign workers; (e) The feasibility should be studied of extending the coverage of the 2011 Population Census, and of subsequent mid-year population estimates, to include temporary foreign workers in order to provide population controls to which a potential LFS sample of temporary foreign workers could be weighted. Recommendation 3: improving business survey coverage and methodology In the case of the business survey sources, the following recommendations for improving coverage are made: (a) The feasibility, benefits and cost should be investigated of extending business surveys to include estimates for small businesses which are not covered by the IDBR. (b) Some investigation should be carried out of the methodology for incorporating estimates of self-employed jobs and of government trainees into the WFJ series. (c) There should be a further investigation of the coverage of the ABI with a view to using the lessons learned in the BRES development. For example, the

19 17 issue should be probed further of whether vacant jobs are being erroneously included in ABI returns and hence in ABI and WFJ jobs estimates. (d) The BRES project should address the issues of improving the quality of regional and local area jobs estimates by using surveying local units rather than reporting units, and of improving the quality and consistency of measures of annual change by industry (e) The BRES project should include an investigation of how PAYE data received by ONS from HMRC can be used most effectively to improve the quality of local area jobs estimates. Recommendation 4: developing public sector employment statistics A programme of improvements to public sector employment (PSE) statistics is being taken forward by ONS in collaboration with government departments. In the context of this programme, the following key improvements are recommended. (a) The newly improved UK level PSE statistics should be integrated into the WFJ statistics as published in ONS s LMS First Release and elsewhere. (b) Further work should be undertaken to improve the public sector information contained on the IDBR. As part of this, the feasibility should be investigated of collecting information about the structure of public sector organisations, including local unit details, and of incorporating this into the IDBR with a view to improving regional and industry breakdowns. (c) Improved LFS PSE statistics should be developed through the means of the linkage of public/private sector information to the LFS from the IDBR. (d) PSE statistics at regional level should be developed and published; (e) The feasibility should be investigated of complementing the official PSE statistics, defined on the National Accounts basis, with wider measures including, for example, General Practitioners, University staff and others who are officially classified to the private sector but are of interest for analysis of public sector activity. Recommendation 5: developing hours of work statistics A programme of improvements to the quality of hours of work statistics is being developed, taking into account the work of the international Paris Group which is developing a draft International Labour Organisation (ILO) resolution on the measurement of working time for submission to the International Conference of Labour Statisticians (ICLS) in In the context of this work, the following key improvements are recommended:

20 18 (a) The metadata for the published hours of work series should be improved so that the distinction between the LFS actual and usual hours worked measures and the ASHE paid hours measure is more obvious to users. (b) Cognitive testing of the LFS hours of work questions, and the self-classified fulltime/part-time question, should be carried out, in order to enhance users understanding of the published statistics and to identify possible improvements to the LFS questionnaire. (c) Further work should be carried out to assess whether factors such as coverage errors, unit non-response, question non-response, forward imputation, attrition, and proxy responses cause bias in the key LFS hours of work estimates. (d) The limitations of using a simple full-time/part-time split to measure employment should be drawn to users attention. (e) More detailed statistics of hours of work should be routinely published to address the needs of users. Recommendation 6: improving the consistency of the weighting methods used to produce employment and jobs estimates from household and business surveys As well as improving the consistency of the coverage and classification of employment in household and business survey sources, some greater alignment of the methodologies used for weighting the samples from the two types of survey would be desirable in order to help generate better coherence between the different estimates. The following recommendations therefore relate to the work that could be done in the context of the development of integrated business surveys - the Business Register and Employment Survey (BRES) in the case of jobs data - and integrated household surveys - the Integrated Household Survey (IHS): a) The feasibility, benefits and cost should be assessed of incorporating information from the Population Census, through the medium of population estimates converted into an estimate of total jobs based on the LFS sample, into the estimation and weighting process to be developed for the new BRES, as well as into that for the IHS. (b) The feasibility, benefits and cost should be assessed of incorporating information from the IDBR and the Quarterly Survey of Public sector Employment (QSPSE) into the estimation and weighting process for the LFS element of the new IHS, as well as into that for the BRES. As part of this investigation, the implications, if any, for mid year population estimates should be considered.

21 19 Recommendation 7: improving the comparison and reconciliation of jobs series It is to be hoped that the implementation of the foregoing recommendations will introduce a greater degree of coherence than there is now between household and business employment and jobs estimates. However, it is inevitable that differences will still remain. The scale of these differences can be demonstrated by the publication, as now, of a comparison of the levels and changes in estimates of jobs derived from the LFS (adding first and second jobs) and from the WFJ series. However, further insights into the reasons for any remaining discrepancies could only be provided by in depth analysis such as that set out in this report. The following recommendations are therefore made: (a) Summary comparisons of jobs estimates from household and business surveys should continue to be published each quarter; (b) An improved, more informative, structure should be developed for the presentation of these regular comparisons which, drawing upon the findings set out in this Review report, identifies the definitional reasons why each source deviates from the ideal measure of total UK jobs (viz. all jobs contributing to UK output) alongside the figures showing the latest difference in estimated jobs from the two sources; (b) A detailed comparison and reconciliation of the LFS and business survey jobs series should be undertaken, to up-date the information set out in this review, when new developments such as the LFS/IDBR linkage and BRES projects have been completed Recommendation 8: investigating the feasibility of a single series of jobs data A further step beyond analysing and explaining any residual differences between the jobs estimates provided by improved business and survey sources of jobs data would be to use all the available sources to generate a single "best estimate" jobs series. The feasibility of such an approach is not clear since its publication could have potential implications for other labour market series, such as unemployment, for population estimates and for estimates of output. But an approach which seeks to build upon the enhanced presentation, envisaged in recommendation 7(b) above should be investigated. Towards this goal, the following recommendations are made. (a) When more coherent and consistent employment and jobs data are available as a result of the business and household survey improvements recommended above, the feasibility should be investigated of developing a single "best estimate" jobs series, drawing upon all of the available information, which measures the total of jobs which contribute to the UK economy; (b) Even if such a single jobs series could be developed and published, the underlying separate source data should continue to be published also.

22 20 2 Objectives and background 2.1 Objectives The key issues that the Review has set out to address are as follows. a) The causes of the lack of coherence of the different sources of jobs and hours of work data. b) The quality, frequency and timeliness of jobs statistics for industry groups and for the public / private sector. c) The quality of the jobs statistics for countries and regions within the UK and for local areas. d) The feasibility of developing a more coherent and better quality set of jobs statistics that meets user needs more effectively than the current statistics. The review has focussed on data derived from the two main sources of employment data, the Labour Force Survey (LFS) and Annual Business Inquiry (ABI) to which the quarterly Workforce Jobs Series (WFJ) is benchmarked. Other sources of employment data are available and some of these are used in the compilation of the overall quarterly WFJ series, for example administrative sources for Armed Forces and Government-supported Trainees. A discussion of the perceived strengths and weaknesses of the main data sources of employment, hours of work, and earnings data is given in Annex 1. The aim of the review is to meet the user need for data for both macro-economic purposes, and for data for structural, micro-economic and social analysis, including at a regional and sub-regional level. All Quality Reviews are required to take account of user needs. However, for labour market statistics, these had already been substantially explored in three major Reviews reported during The present Review, therefore, while including a user consultation element which is summarised in Annex 2, had a greater emphasis upon an analytical and evidence based assessment of the issues. Its main objective was to take a radical look at how the overall body of the UK s official statistics in this important area might be compiled more effectively and increased in quality. 2.2 How statistics of employment and jobs are used Statistics on employment and jobs are important indicators of the social and economic conditions in a country. They are used for a variety of purposes by a range of users. The following paragraphs set out the main uses. The most prominent use driving the need for employment and jobs data, as well as other labour market statistics, is the monthly assessment of the factors affecting inflationary pressures in the economy - by the Bank of England's Monetary Policy Committee - in order to set the Bank's repo rate of interest. The Bank uses labour market data in their main quarterly economic model. Moreover, labour market data are discussed at the monthly meetings of the MPC, alongside other economic data,