Unemployment rises in Scotland, despite pay packets increasing by a record high

New ONS data prompts calls for zero hours contracts to be banned and for migration policies to be relaxed

Unemployment has risen in Scotland despite pay packets growing by a record high, according to new statistics.

Data from the Office of National Statistics (ONS) for April to June also found Scotland has the highest proportion of people on zero-hours contracts in the UK, prompting calls for employment law to be changed to get the use of these banned.

On the back of this rise in unemployment, Scottish ministers and industry leaders are now calling on the UK Government to look again at migration policy to help boost the number of people available for work.

Unemployment in Scotland has risen to four per cent. Image: Daniel Leal/AFP/Getty Images.

In the three months to June, Scotland’s unemployment rate rose by 0.9 per cent to reach 4 per cent. At the same time, the percentage of Scots over the age of 16 and in work fell by 1.1 per cent to 74.2 per cent – down 31,000 on the figures for January to March.

Although the unemployment rate is still lower than the rate for the UK as a whole (4.2 per cent), wages in Scotland grew by a record 7.8 per cent. Across the whole of the UK, annual pay growth in the private sector (8.2 per cent) continued to outpace growth in the public sector (6.2 per cent).

Darren Morgan, director of economic statistics at ONS, said this showed real pay growth was “recovering”, but was not yet outstripping the pace of price rises.

Inflation is running at 7.9 per cent, and new figures are due out on Wednesday.

Experts expect them to show price growth has slowed again during the month of July to between 6.7 per cent and 7 per cent – far higher than the Bank of England’s target to keep inflation at 2 per cent.

Ruth Gregory, deputy chief UK economist at Capital Economics, said: “The fall in employment in the three months to June and a further rise in the unemployment rate will be welcomed by the Bank of England as a sign labour market conditions are cooling.”

She said she now expected the Bank of England to increase its key interest rate again to 5.5 per cent.

The ONS data also shows vacancies fell by 66,000, but there were still more than a million vacancies across the UK. On top of this, the rate of those considered economically inactive (those between the ages of 16 and 64 who are not looking for work) fell to 20.9 per cent, after the number swelled during the coronavirus pandemic. The ONS said the number of people who are economically inactive due to long-term sickness has increased to a record high of 464,225.

The statistics published on Tuesday also showed a record 1.18 million UK workers are in insecure work, including 109,000 in Scotland (4.1 per cent), many of which are on zero-hours contracts.

Sasha Josette, director of Zero Hours Justice, said the use of these contracts was a “stain on the economy”. She said: “They cause anxiety and fear amongst workers, leaving them financially insecure and unable to plan their lives with any certainty.

“They are a key factor in the recruitment crisis in the social care, hospitality and service sectors. We acknowledge employment law is reserved, but there are steps that the Scottish Government can take using its procurement powers to end the use of these contracts. They are bad for workers and bad for business and should be banned.”

Scotland’s wellbeing economy secretary Neil Gray said these figures reflected the “challenges” falling the economy and the ongoing cost-of-living crisis. He said the Scottish Government was “committed” to getting more people into work and to improving flexible working arrangements.

Mr Gray said: “This commitment can be seen through the progress of recommendations from the new deal for business group on labour market participation, with a focus on supporting people facing barriers to employment.

“We have also set up the fair work oversight group – made up of leading figures from business, trade unions, equality groups and academia – to advise and support delivery of the fair work action plan, which focuses on driving forward fair work, including supporting more diverse and inclusive workplaces.”

However, Mr Gray said part of the reason for the rise in unemployment was Brexit. He said the UK Government needed to address its migration policies to help ease this pressure, adding: “With industries such as hospitality and agriculture still facing recruitment challenges, however, an urgent reassessment of UK Government immigration policy is necessary to increase access to the international labour and skills that Scotland needs for our economy and communities to prosper.

“With full powers over migration, Scotland could boost its workforce and tackle recruitment challenges, many of which have been caused by the end of free movement and the Brexit imposed on Scotland by the UK Government.”

This position was echoed by UKHospitality, as the figures showed there were 124,000 vacancies in accommodation and food service.

Chief executive Kate Nicholls said: “It’s positive that vacancies in hospitality have fallen for the fourth consecutive month, but it remains the case that levels are still significantly higher than pre-pandemic levels and that average hours worked were down on the previous three months.

“Significant investment to attract and develop our own talent continues, through apprenticeships and training, but we urge the government to open up new immigration routes, such as widening the youth mobility scheme and shortage occupation list, to help the sector reach its potential.”

These statistics were published as Guy Opperman, the UK’s employment minister, was in Scotland, where he also said his Government was “committed” to helping people get into work.

He said: “As I’ve seen in Aberdeen and Shetland this week, the Scottish jobs and market remains resilient with payroll employment levels at a record high.”