Results of the Annual Survey of Hours and Earnings 1998 to 2004

Patterns of pay: results of the Annual Survey of Hours and Earnings 1998 to 2004

Dobbs, Clive

Key points

* The Annual Survey of Hours and Earnings (ASHE) is a new survey developed to replace the New Earnings Survey (NES). The ASHE includes improvements to the coverage of employees and to the weighting of earnings estimates.

* Between April 2003 and April 2004 the median gross weekly pay of full-time United Kingdom employees on adult rate increased by 4.7 per cent to £423.

* For the 2003/04 tax year median gross annual earnings for fulltime UK employees on adult rates, who had been in the same job for at least 12 months, was £22,001. For males the median gross annual earnings was £24,137 and for females it stood at £18,500.

* The gender pay gap narrowed by 1.2 per cent between April 2003 and April 2004. Mean hourly earnings, excluding overtime, of full-time women on adult rates was 81.8 per cent of the equivalent mean for men.

Introduction

The Annual Survey of Hours and Earnings (ASHE) is a new survey developed to replace the New Earnings Survey (NES). It is the most detailed and comprehensive source of national information on:

* levels of earnings (separately for type of worker and for gender);

* make-up of total earnings (split between basic pay and other components);

* distribution of earnings of individual employees (the extent to which they are dispersed around the median); and

* it focuses on medians rather than averages and on distributions of hours worked (in total and on overtime).

For more details on the methodology for the survey see pp457-64, Labour Market Trends, November 2004.

The ASHE includes improvements to the coverage of employees and to the weighting of earnings estimates. The data variables collected remain broadly the same, although an improved questionnaire will be introduced for the 2005 survey. To improve coverage and make the survey more representative, supplementary information was collected for the 2004 ASHE survey on businesses not registered for VAT and for people who changed or started new jobs between sample selection and the survey reference period.

Both the change in methodology and the inclusion of supplementary information means that statistics on pay and hours published from the ASHE are discontinuous with previous NES results. For 2004 two sets of results are available: the headline results that include supplementary information and results that exclude this information. For continuity with a back series generated by imputation and weighting of the 1998 to 2003 NES results using the new methodology, this article uses the 2004 ASHE results excluding supplementary information. Both sets of 2004 results are included in the tables accompanying (and referenced within) this article. These tables are only available on the National Statistics website at www.statistics.gov. uk/ statbase/product.asp?vlnk-14123.

The results presented in this article are mainly for the median. The median is preferred to the mean for earnings as it is less affected by extreme values and the skewed distribution of earnings data. The median is the value below which 50 per cent of employees fall. However, the means are still available in the annual published results.

The first few sections of this article present summary results of the 2004 ASHE (and, where relevant, the 1998 to 2003 back series) that look at overall medians, make-up and distribution of earnings. While these figures are of interest, they can hide wide variations between different industries, occupations, regions and age groups. The concluding sections of the article give summary analyses of each of these factors.

This article presents results for the United Kingdom. Past articles only covered Great Britain.

Summary results for full-time employees

Median gross weekly earnings for fulltime employees on adult rates working a full week in April 2004 was £423 (see Figure 1 and Table 1(1))-At £361, the median gross weekly earnings of fulltime women increased by 5.1 per cent compared with a 4.3 per cent rise for men (to £464).

Median gross annual earnings of all full-time employees on adult rates who had been in the same job for at least a year were £22,001 for the 2003/04 tax year. Mean gross annual pay for full-time women was £18,500 compared with £24,137 for men.

Median gross hourly earnings of all full-time employees were £10.56 in April 2004; this represented an increase of 4.9 per cent since April 2003. Full-time female employees saw an increase in median hourly earnings of 0.8 percentage points more than that for men (5.3 per cent compared with 4.5 per cent respectively).

There has been little change since 1998 in the median total hours worked per week by those in full-time employment and for whom weekly hours were reported. Women worked 37.0 hours per week, down from 37.1 in 1998, while the number of hours men worked remained unchanged during this period, at 39.0.

Pay differences between men and women

Various methods can be used to measure the earnings of women relative to men. ONS prefers to use hourly earnings excluding overtime for full-time employees. Including overtime can skew the results because men work relatively more overtime than women; including part-time employees could have a similar effect because women make up a much bigger proportion of part-time employees than men. The current European standard measure is based on the mean hourly rate so this is the statistic reported in this section, although the median is also reported.

Mean hourly earnings, excluding overtime, for full-time women on adult rates at £11.27 (see Table 1),1 was 81.8 per cent of those for men (£13.78). The gender pay gap was 21.2 per cent in 1998, it narrowed to 20.2 in 2000, remained almost unchanged until 2002 and has fallen steadily since (see Figure 2). A similar pattern can be observed for median hourly earnings excluding overtime, although the gender pay gap is smaller for medians than for means.

Although mean hourly pay excluding overtime provides a useful comparison of men’s and women’s earnings, it does not reveal differences in rates of pay for comparable jobs. This is because such averages do not highlight the different employment characteristics of men and women, such as the proportion of each gender in different occupations and their length of time in jobs.

A regional analysis of the pay difference between the sexes is included later in the article.

Summary results for part-time employees

Part-time employees earned a median hourly rate, excluding overtime, of £6.27 in April 2004, an increase of 3.4 per cent over the year (see Table 2).’ Median hourly earnings of part-time men increased by 0.8 per cent over the year to £6.05, while those of part-time women rose by 4.0 per cent to £6.32. From 1998 to 2004, female employee hourly rates remained above the levels for male employees (see Figure 3), however there has been no change to the pay gap during this period.

Median gross hourly earnings of all part-time employees increased by 3.4 per cent between April 2003 and April 2004 to £6.32. This represents a smaller increase for the year than that for full-time employees.

Median hourly earnings, excluding overtime, of part-time workers was approximately 60 per cent of those for full-time workers and is largely unchanged since 1998. The differential was more for part-time men (54.5 per cent of full-time male earnings) than for women (66.4 per cent) (see Figure 4).

The proportion of part-time male employees in the total workforce rose from 3.8 per cent to 4.5 per cent between 1998 and 2004, but is still well below the proportion of part-time female employees, which rose from 19.6 to 20.3 over the same period.

Part-time female hourly pay is higher than part-time male hourly pay. This is partly due to a higher proportion of females working parttime throughout their careers, whereas the occurrences of male part-time workers are concentrated in the youngest and oldest age groups (see Figure 5).

The make-up of earnings

The ASHE splits gross weekly earnings into four components: overtime; payments by results/incentive payments; premium payments for shift work; and the residual – which can be summed up as ‘basic pay’. The first three elements vary quite considerably by type of worker. Overall, additional payments as a proportion of the mean gross weekly pay for full-time employees fell between 2000 and 2004. Overtime payment was down, from 4.6 per cent to 3.7 per cent, results/incentive bonus payment was up slightly, from 3.0 per cent to 3.4 per cent and shift pay was almost unchanged, at 1.2 per cent (see Table 3).1

The proportion of additional payments for full-time male employees was higher than that of their female counterparts over the period 1998 to 2004.

The distribution of earnings

Figure 6 displays the distribution of gross weekly earnings among fulltime employees for the years 1998 to 2004. The median level of gross fulltime weekly earnings was £423 per week. This is lower than the mean (£507), since the latter is boosted by the number of people at the top end of the distribution, with extremely high earnings. For 2004 at the bottom of the distribution, a tenth of full-time employees earned less than £232 per week, whereas at the other end of the scale a tenth earned more than £829 per week (see Table 4).1 The ratio of the highest to the lowest decile for gross weekly earnings (3.6 in April 2004) gives a measure of the dispersion of weekly pay. This measure has been almost unchanged since 1998.

In the year to April 2004, weekly earnings of full-time employees in the top 10 per cent of the distribution grew marginally faster than for those in the bottom 10 per cent (4.3 per cent against 4.1 per cent respectively). This has been true for four of the past six years. During this period, which coincides with the introduction of the National Minimum Wage, the top decile has increased by 30.3 per cent against a bottom decile increase of 28.4 per cent. Figure 7 shows the pattern of growth in the top and bottom deciles of gross weekly earnings for full-time employees and for the Retail Prices Index (RPI) since 1998. Median gross weekly earnings of full-time employees at both the top and bottom end of the distribution increased above the RPI over this period.

Results by industry

Median gross weekly earnings for full-time employees in April 2004 were highest in the electricity, gas and water supply sector at £554 (see Table 5).’ This was £42 per week higher than the second highest, financial intermediation. Over the period 1998 to 2004 financial intermediation, and mining and quarrying have also featured as the highest median gross weekly earning sector. The weekly earnings for the electricity, gas and water supply sector, and also the mining and quarrying sector are boosted by longer hours worked by employees in these sectors relative to the financial intermediation sector.

The median gross annual earnings of £29,015 for the electricity, gas and water supply sector was above that of financial intermediation at £28,066 and more than double that of the hotels and restaurants sector which, for the years 1998 to 2004, was the lowest paid sector.

The financial intermediation sector had the highest median hourly earnings excluding overtime for fulltime employees (£13.98) followed by the electricity, gas and water supply sector (£13.28). Education (£13.12) features more prominently in the hourly earnings than it does in the annual and weekly earnings because teachers only report the hours spent in the classroom and not the total hours worked.

Contrary to the findings above, the mean gross weekly, mean gross annual and mean hourly earnings for the financial intermediation sector are significantly higher than that of any other sector because of the skewed effect of extremely high earners on the earnings distribution.

The hotels and restaurants sector has the lowest median gross weekly earnings. At £268, full-time employees’ earnings were some £46 per week lower than the median for agriculture, hunting and forestry (the second lowest paid). Median hourly earnings excluding overtime for the hotels and restaurant sector was £6.29, lower than the agricultural, hunting and forestry sector (£6.60).

Median weekly earnings in manufacturing (£428) were higher than in services (£421).

The broad industrial groupings described above can hide substantial variation within the sectors. The ASHE, however, allows more detailed industrial analyses. For example, it is possible to identify the highest and lowest paid industry groups (two-digit Standard Industrial Classification 2003). Such analyses reveal that, in addition to those employees noted earlier within the electricity, gas and water supply sector, and the financial intermediation sector, full-time employees involved in extraction of crude petroleum and natural gas, and computer and related activities were among the highest paid per week in April 2004 (see Table 6).1

Various branches of the manufacturing, hotel and restaurant, and agriculture and fisheries sectors make up much of the ten lowest paid industries. Private households with employed persons were the lowest paid of all.

Public and private sector earnings

The gap between private and public sector median earnings for full-time employees narrowed in April 2004. Private sector median gross weekly earnings were £411 compared with public sector earnings of £453 (see Table 7).1 Previous comparisons between private and public sector, which were based on mean earnings, have shown the private sector (at £512) to be higher than the public sector (at £499). This was because of the effect of the skewed distribution of high earners in the private sector. As with gender pay, the difference in gross weekly earnings does not reveal differences in rates of pay for comparable jobs. This is due to the types of occupations in the public and private sector being quite different.

Results by occupation

The ASHE 2004 data for occupation is coded to Standard Occupational Classification (SOC) 2000 which was introduced in 2002. Before this SOC 1990 was used.

With median gross weekly earnings of £615, the occupational major group (as defined within SOC 2000) with the highest median gross weekly earnings for full-time employees was managers and senior officials, closely followed by professional occupations (£607 per week) (see Table 8).1 Managers and senior officials also had the highest median gross annual salary (£32,436) which was £1,192 higher than that for professional occupations. However, those in professional occupations had the highest median hourly earnings excluding overtime (£17.10). This was £1.21 higher than the median for managers and senior officials (£15.89), the second most highly paid major group.

Managers and senior officials have had the highest median gross weekly and also the highest median annual earnings while those in professional occupations had the highest median hourly earnings, excluding overtime, since SOC 2000 was introduced in 2002. It can be explained because the managers and senior officials group receive higher annual incentives and also work longer hours per week than full-time employees in the professional occupations group.

Sales and customer service occupations were, for the years since the introduction of SOC 2000, the lowest paid median gross weekly major group, at £257 per week for full-time employees. This major group includes occupations that are generally acknowledged to be low-paid such as retail cashiers and check-out operators, and market and street traders and assistants.

In April 2004 the increase in median gross weekly earnings was highest for skilled trade occupations (4.9 per cent) and lowest for associate professional and technical occupations (2.8 per cent).

In the 2004 survey, directors and chief executives of major organisations were the highest paid full-time employees with median gross weekly earnings of £1,791. The next highest paid occupation was medical practitioners with median gross weekly earnings of £1,193 per week. With median gross weekly earnings of £193, leisure and theme park attendants were the lowest paid of all full-time adult employees (see Table 9).1

Results by region

Median gross weekly earnings for United Kingdom full-time employees was £423. Employees in the North East received the largest increase in median gross weekly earnings (7.1 per cent) to £373 while employees in the East Midlands received the smallest increase (2.8 per cent) to £390.

London tops the regional list in terms of median full-time gross weekly earnings, with £545 in April 2004. This was £94 higher than the next highest, the South East, where median gross weekly earnings were £451. London’s high levels of pay are largely due to the fact that a high proportion of London’s labour force is employed in higher-paying industries and occupations, and also because many employees are entitled to allowances for working in the capital. The North East (with median full-time gross weekly earnings of £373) was at the bottom of the regional list with Northern Ireland (at £375) a close second (see Table 10).1

During the period 1998 to 2004 similar patterns were observed for median gross annual pay and median hourly pay excluding overtime, with London topping the list followed by the South East. The North East and Northern Ireland had the lowest pay levels across the regions.

It should be noted that earnings comparisons take no account of different price levels between regions and therefore do not indicate differences in the standard of living. Neither do they take account of the different mix of occupations and therefore cannot be used to claim that pay for like work is different. A region could have a lower level of median earnings than another if it has a higher proportion of employees in industries or occupations with relatively lower earnings.

In the United Kingdom, the mean hourly earnings, excluding overtime, for women in full-time employment were 81.8 per cent of those for men. The largest pay gap for women was 76.4 per cent in the London region; the smallest was in Northern Ireland where women’s mean hourly earnings, excluding overtime, were 90.6 per cent of those of men. Over the period 1998 to 2004 the largest narrowing of the gender pay gap was in Northern Ireland (17.0 to 9.4), whereas in the East the gender pay gap increased (18.0 to 21.1). After Northern Ireland, the next largest narrowing of the gender pay gap was in the North East (20.1 to 12.6) and in Scotland (20.8 to 14.4). Figure 8 illustrates the gender pay gap for mean hourly earnings, excluding overtime, for the four home countries.

Results by age group

In 2004 median gross weekly earnings for full-time employees climbed steadily with age to reach a maximum for those aged 40 to 49 and declined thereafter. However, if the median earnings of men and women are considered separately, then women’s earnings peaked earlier than those of men; this pattern is repeated over the period 1998 to 2004. Median gross weekly earnings of full-time women climbed with age to reach a maximum of £412 for those aged 30 to 39. Full-time men’s median gross weekly earnings reach their maximum for those aged 40 to 49.

The largest increase in median gross weekly wage between April 2003 and April 2004 was recorded among full-time employees aged 40 to 49, whose weekly earnings increased by 5.4 per cent to £480 (see Figure 9).

Comparisons with the Average Earnings Index

Each month ONS also collects information on earnings from the survey used to construct the Average Earnings Index (AEI). This survey asks 8,500 employers to provide information about total pay and numbers of employees, but does not ask more detailed questions about, for example, the gender and occupations of their staff. The AEI itself is used to provide an estimate of the growth in earnings per head, and is not used to produce estimates of levels of pay. It is therefore not possible to make detailed comparisons of growth in earnings between the AEI and the ASHE. Furthermore, because of the definition used to calculate the estimate of median gross weekly pay for the ASHE (that is, including elements of bonus/incentive pay which relate to the ASHE survey period but which were paid outside of the period) it is not possible to compare growth in gross earnings between the two surveys.

The closest measure that can be derived from both surveys is for gross pay excluding bonus payments. In the year to April 2004 the ASHE estimate of the growth in mean gross weekly pay excluding bonus payments was 3.9 per cent. The comparable figure from the AEI was 4.3 per cent. For the public sector the comparable growth rates were 5.3 per cent (ASHE) and 4.2 per cent (AEI), and for the private sector 3.5 per cent (ASHE) and 4.4 per cent (AEI).

Low pay jobs

The number of jobs paid below the National Minimum Wage in the UK was 272,000 in spring 2004, amounting to 1.1 per cent of all jobs in the labour market (see Table 11).1 The estimate was produced using a new methodology based solely on the ASHE, as opposed to the previous methodology which also used the Labour Force Survey.

There are two rates for the National Minimum Wage: one for those aged between 18 and 21 (£3.80 per hour) and one for those aged 22 and over (£4.50 per hour). In spring 2004 45,000 jobs (2.4 per cent) held by those aged 18 to 21 were paid below £3.80 per hour. Among those aged 22 and over, 227,000 jobs (1.0 per cent) were paid below £4.50 per hour. People in part-time work were over three times as likely as people in full-time work to be paid less than the minimum wage, with 2.3 per cent of part-time jobs and 0.7 per cent of full-time jobs falling below the minimum wage. Jobs held by women were almost twice as likely to fall below the minimum wage as jobs held by men (1.4 per cent compared with 0.8 per cent). This was entirely due to the greater number of women in part-time jobs.

It is important to note that these estimates do not measure noncompliance with the National Minimum Wage legislation. The survey used to provide these estimates does not indicate whether individuals fall into a category that is exempt from the legislation, such as apprentices or new trainees.

Technical note

Survey details

The Annual Survey of Hours and Earnings is based on a 1 per cent sample of employees in employment in the United Kingdom, information on whose earnings and hours is obtained in confidence from employers (a similar survey is carried out in Northern Ireland by the Department of Enterprise, Trade and Investment).

The ASHE replaces the New Earnings Survey (NES) as ONS’ main source of information on the distribution of earnings. Articles describing the ASHE methodology and the impact for 1998 to 2003 are available on the National Statistics website. The difference between ASHE and NES are:

* ASHE results are weighted to the number of jobs given by the Labour Force Survey;

* ASHE imputes for item non-response;

* From 2004 onwards the coverage of employees for ASHE extends that of NES;

* The median replaces the mean as the headline statistic. The median is the value below which 50 per cent of employees fall. It is preferred over the mean for earnings data as it is less influenced by extreme values and because of the skewed distribution of earnings.

Two broadly equivalent methods are used to identify the employees in the survey sample and their current employers. Around 90 per cent of the sample is identified from lists supplied by the Inland Revenue containing selected NI numbers. Details of the remaining 10 per cent are obtained directly from the large organisations that employ them.

The survey does not cover the self-employed. In 2004, the information related to the pay period that included 21 April.

To improve coverage, and hence make the survey more representative, supplementary information was collected for the 2004 ASHE survey on businesses not registered for VAT and for people who changed or started new jobs between sample selection and the survey reference period. The 2004 ASHE results are therefore discontinuous with results for 2003 and earlier, for which no supplementary information was collected. However, for 2004 two sets of results are available: the headline results that include supplementary information and results that exclude this information. For continuity with a back series generated by imputation and weighting of the 1998 to 2003 NES data using the new methodology, this article uses the 2004 ASHE results excluding supplementary information. Both sets of 2004 results are included in the tables referenced within this article. These tables can be found on the National Statistics website at www.statistics.gov. uk/statbase/product.asp?vlnk= 14123.

The earnings information collected relates to gross pay before tax, National Insurance or other deductions, and generally excludes payments in kind. It is restricted to earnings relating to the survey pay period, and so excludes payments of arrears from another period made during the survey period. Any payments due as a result of a pay settlement but not yet paid at the time of the survey will also be excluded.

Most of the ASHE analyses relate to full-time employees on adult rates whose earnings for the survey pay period were not affected by absence. They do not include the earnings of those who did not work a full week, and those whose earnings were reduced because of sickness, short-time working, etc. Neither do they include the earnings of employees not on adult rates of pay, most of whom will be young people.

Factors contributing to earnings growth

The increase in average earnings from one year to the next reflects several factors: pay settlements implemented between the April survey dates; changes in the amount of overtime and other payments relative to basic pay; and the structural effects of changes in the composition of the ASHE sample and the employed labour force.

Revisions to 2003 results

In line with normal practice this article contains revised estimates from the 2003 survey results published on 16 October 2003. These take account of a small number of corrections to the original 2003 data which were identified during the validation of the results for 2004. As these estimates are now weighted according to the new ASHE methodology, the results are not comparable to figures given in previous NES releases.

Other earnings information

The monthly Average Earnings Index, based on the Wages and Salaries Survey of 8,500 employers, provides information on changes in mean earnings for broad industrial sectors. No information is available on occupation, hours worked, and other characteristics of the workforce.

The Labour Force Survey collects information on the earnings and hours of about 50,000 households over each quarter. In addition it collects data on a wide range of personal characteristics, including education level and origin. This enables the preparation of statistics on levels and dispersion of earnings similar to ASHE but with lower precision due to the much smaller sample size.

Publication arrangements

National averages of earnings hide wide variations between different collective agreements, industries, occupations, regions and age groups. The tables containing the detailed ASHE results for the United Kingdom, include analyses of each of these, and are now available on the National Statistics website at www.statistics. gov. uk/statbase/product. asp ?vlnk= 13101.

Low pay estimates show the number of jobs paid below the National Minimum Wage in the United Kingdom. The estimate was produced using a new methodology based solely on ASHE. Further information on the low pay methodology and detailed results are now available on the National Statistics website at www.statistics.gov.uk/ statbase/product. asp ?vlnk=5837.

Publication of the results for the 2005 ASHE will be on 10 November 2005.

Note

1 Tables accompanying (and referenced in) this article are available at www.statistics.gov.uk/statbase/ productasp?vlnk=14123

By Clive Dobbs, Employment, Earnings and Productivity Division, Office for National Statistics

Further information

For further information, contact:

Clive Dobbs,

Room 2001,

Office for National Statistics,

Cardiff Road,

Newport NP10 8XG,

E-mail: earnings@ons.gov.uk

Tel: 01633 812475.

Copyright The Controller of Her Majesty’s Stationery Office Sep 2005

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