The Annual Survey of Hours and Earnings - Case Study Example

Labor Market Analysis Report Introduction The Annual Survey of Hours and Earnings (ASHE) is the most comprehensive source of earnings information in UK. It provides information about the distribution, levels of earning, make-up of earning and the hours paid to the employees on the basis of their gender and or part time working. Survey is not limited to any industry or sector and is not generalized therefore many breakdown structures of the hours and earnings and their distribution are given as per different industries, occupations, geographical location and on basis of age group within UK (Service, 2013). It provides statistical reports showing fluctuations in working hours and earnings in the span of week, hour or year. ASHE basically collects the data on the wages, paid hours of work and pension arrangements of nearly one percent of the working population that take jobs from HMRC PAYE records however it does not cover self-employed nor cover the employees that are covered during the reference period. ASHE replaced NES (New Earnings Survey) that was established in 1970s and from 1997 to 2003 applied its methodologies over data of NES to maintain its datasets however in 2004 it finally replaced NES. ASHE has been quite appreciated not only due to its large sample size but also the responses regarding wages and hours are considered to be more accurate. It is due to the reason that the data is provided by the employers rather than employees and is collected by ASHE every year for the same individuals thus allowing them to construct panel set of dataset of responses for each individual that would date back to 1997 (Statistics, 2013). The issue exists that ASHE’s results cannot be directly compared to the data from the previous years as the methodological techniques applied had little changes in them that is the reason the results generated after 2006 are also discontinuous with the previous data. ASHE used SOC 2000 (Standard Occupational Classification 2000) that has been replaced by SOC 2010 (Department of enterprise, 2013). ASHE weights its data and forms estimates for NI (Northern Ireland) and SOC forms the part of the methodology used by ASHE however this positive changes the burden for ASHE and causes further discontinuity in its time series. Improvements in NES and Working of ASHE Ashe replaced NES in 2004 however that was not without the modifications and improvements in the structure and their operations. ASHE changed the questionnaire that was presented to employers as it allowed too much variations in their response that lead to wide variations in the data. The system prevalent in NES was somewhat biased therefore weighting were introduced in order to take account of the population size. Problem existed in the system of NES significant number of employees who changed jobs between the sample selection and survey reference dates were not included in the survey or the data however ASHE retained them in their system. Since 2007 ASHE has created dedicated personal identifier variable “piden” via national insurance numbers therefore for any data created piden would be consistent thus the panel of 1997-2007 could be used for any previous files of any individual and along with that additions in the data collected post 2007 can also be used and additions made using the same piden. The issue in the piden is that it would be different for the panel of 1997-2004 (nomis, 2013). The earnings information presented by the ASHE relates to the gross pay before tax, national insurance or other deductions and excludes payments in kind. The results of the syrvey are restricted to the earnings during the survey pay period and exclude any kind of arrears relating to other periods. ASHE’s most of the published analyses relate to employees on adult rates whose earnings for the survey pay period are not affected by the absence. Earnings of those who did not work full week or whose earnings were reduced for some other reason and those who do not work at adult pay rate (most of them are young people) are not included in ASHE’s survey. Criteria exists that defines employees that include people working more than 30 paid hours per week or those in the teaching profession working 25 paid hours or more per week. Headline statistics of the ASHE are based on based on the median rather mean being the value below which 50% of the employees fall. It is the preferred measure of ONS (Office for National Statistics) for the average earnings as it gives better indication of the earnings as compare to the mean being less affected by a relatively small number of very high earners. ASHE uses different measures to account for the differences or the variables that exist in levels of pay and earnings. In the case of gender overtimes are not accounted for as men relatively work more over time comparing to women thus inclusion of overtime would distort the data however still median doesn’t provide the differences in pay for the comparable jobs of both men and women. Major focus of the ASHE is on ensuring accuracy of the estimates or the analysis that it provides however it faces both sampling and non-sampling errors. Sampling error results from differences between the target population and sample of that population however this it varies according to the sample size of any particular domain or breakdown. Smaller the CV (Co-efficient of variation) the higher the quality of estimate while CV represents ratio of the standard error of an estimate to the estimate, expressed as a percentage. ASHE only covers the jobs that are registered under the PAYE leaving others out of the survey as they are different typically due to the low level of pay. This leads to upward bias on the part of ASHE in their estimates as they are unable to provide the actual average pay of the employee population. ASHE also faces non-response bias sometimes employers do not respond and the jobs from which the response is collected is different from them thus effecting the ASHE’s estimates. This is basically the downward bias on the earnings as non-response affects high paying occupations more than the low paying occupations. Analysis of the Recent Survey Department of Business innovation and skill (BIS) used the analyzed the recent survey of the ASHE that highlighted between April 2012 and 2013 pay positive changed more than the CPI (Consumer Price Index) inflation on average across the earnings distribution before deducting income tax and national insurance contribution for the bottom 60% of the pay distribution however this wasn’t the scenario for top 10%. While ASHE gave the actual figures that were reported of to be April 2013 average earnings (weekly) were £517 that has positive changed by 2.2% from £506 in 2012. However for men figure was £556 per week that is a positive change of 1.8% while that of women £459 that is a positive change of 2.2%. The pay gap on the basis of gender saw a positive change based on average earnings from 9.5% in 2012 to 10% (Statistics, Staistical Bulletin, 2013). Average earnings for the employees having the same job during the past 12 months were £ 27,000 that marks a positive change of 2.1% from £ 26500 in the last year however the median gross earnings annual for men were £ 29300 that is an positive change of 1.9% from 2012 and for women were £23,600 that is an positive change of 2.2%. The BIS’s analysis holds true in most of the industries or the regions that ASHE covers. Estimates of ASHE also reveal that in April 2013 10% of the employees earned less than £ 7.28 per hour (overtime excluded), that is an positive change of 1.5% however at the other end of distribution 10% of the employees earned more than £27.02 per hour which is also an positive change of 1.5% comparing to the last year. London marked the highest level of average earnings in April 2013 for the employees of £ 658 while Northern Ireland witnessed the lowest of £ 460. The analysis of the BIS holds true majorly in the case of part-time jobs taken up by the employees in the different sectors and industries. Part-time median weekly earnings were £ 160 that is an positive change of 3.1% from 2012 however for women it is £164 compared with £149 for men however average earnings (weekly) the employees whether or part-time was £417 that is a positive change of 2.6% from 2012 (Department of Business, 2013). ASHE gives different breakdowns of the earnings depending upon the nature of the job and in different time spans. Excluding overtime, median gross hourly earnings of employees were £13.03 per in April 2013 that is an positive change of 2% from 2012 however gender breakdown shows that hourly earnings of men witnessed an positive change of 2.5% comparing to women who experienced 1.9% positive change in their hourly earnings comparing to the pays in 2012. BIS explains that from the estimates of ASHE top and bottom percentiles are excluded from the analysis, as year-on-year changes in individual percentiles at the extremes of the distribution can be highly variable therefore estimates and distribution of income relating to them along with its analysis is given separately and does not account for in the stats given earlier regarding the employees. From April 2012 to 2013 hourly earnings for the employees at the 10th percentile grew by 1.5% which is same as seen for the 90th percentile in the same time period however in the case of part time employees the 90th percentile marked a positive change of 2.7% comparing to 10th percentile that showed a positive change of 1.8%. However over all part-timers were earning 36% less than the earnings of the employees in 2013. ASHE has accumulated the data that gives comparative data and allows the analysis since its inception that was actually from 1997. The trend from that period shows that from 1997-2013 median gross weekly earnings positive changed by 61%, from £321 to £517. The data estimated allow to make analysis of the different time limitations. Estimates show that until 2008 the annual positive change in the weekly earnings was very steady however the recession in that year and the economic downturn had a great impact on the earnings and slowed the growth. Estimates from 2009 to 2013 reveal that annual positive change in the weekly earnings have been around 2%. The effect of that recession has not completely gone its influence over the economy can still be witnessed as in April 2013 annual positive change in median full-time gross weekly earnings was 2.2% that was slightly lower than the growth marked in the Consumer Price Index which was of 2.4%. This shows the impact of recession in 2008 as it was the 5th consecutive year that witnessed lower growth in earnings as compare to the CPI it has been after 11 consecutive years that witnessed higher growth rate of earnings as compare to the CPI however the gap between growth in earnings and CPI has reduced a very close level in last year. ASHE also provides the statistical data relating to the volume of the employees breaking them down in terms of gender, industry and their regions. The stats show that 51% of the UK workforce is men and 49% is women. Conclusion ASHE provides important statistical data, estimates and analysis that it gathers continuously on year-on-year basis making data easily comparable and allowing the decision making easier for the government and the authorities responsible for assuring equity in pay and earnings for different employees. ASHE replaced NES due to the fact that organization showed hardly any change or contribution in the 30 years. ASHE made some modifications in the system that was prevailing however it still faces some limitations that restrict the accuracy of the estimates that it provides. One of the biggest areas of error is seen to be that they do not record the jobs that are not registered for PAYE.   References Department of Business, i. a. (2013). BIS ad hoc analysis on ‘take-home pay’ positive changes between 2012 and 2013. London: BIS. Department of enterprise, t. a. (2013). Statistics and Economic Research. Retrieved from Department of enterprise, trade and Investment: http://www.detini.gov.uk/deti-stats-index/stats-surveys/stats-hours-and-earnings.htm nomis. (2013). news. Retrieved from nomis official labor market statistics: http://www.nomisweb.co.uk/articles/793.aspx Service, U. D. (2013). Discover. Retrieved from UK Data Service: http://discover.ukdataservice.ac.uk/catalogue?sn=6689 Statistics, O. f. (2013). Guidance and Methodology. Retrieved from Office for National Statistics: http://www.ons.gov.uk/ons/guide-method/method-quality/specific/labour-market/annual-survey-of-hours-and-earnings/index.html Statistics, O. f. (2013). Staistical Bulletin. London: ASHE. Read More