A change in total hours worked can come about through a change in number in employment or a change in average hours worked. A change in average hours could be the result of: (a) a shift in the balance between part-time and full-time employment; (b) varying hours worked by full-time workers; or (c) varying hours worked by part time workers. In 2001, total hours worked increased by 4.1 per cent and everything played a part here. There was: - a 2.0 per cent rise in employment; and
- a 2.1 per cent rise in average hours.
The increase in average hours was the result of a shift to full-time employment, full-timers working more hours, and increases in average hours for part-time workers. The results suggest a high degree of labour market flexibility where employers are able to respond to changing demand in various ways. In 2002, although employment continued to grow by 0.3 per cent, total hours worked fell by 1.6 per cent. This was a consequence of a reduction in average hours (down 1.9 per cent). We can see in this macroeconomic data some reflection of microeconomic behaviour. At the level of the firm, increases in output will initially be met by an increase in the average number of hours worked. In other words, overtime is the short-term premium which firms incur when demand rises given that employee numbers are fixed in the short term. However, if the increase in demand is thought to be temporary this process is less costly than taking on an extra worker. If the increase in output is sustained, firms will increase employment and consequently reduce average hours worked. Conversely, if a reduction in demand is temporary they will reduce hours. As a result, average hours worked by full time workers has fluctuated considerably but it shows no sing of departing significantly from around 39 hours per week. The reduction of hours worked in 2002 involved a 3 per cent fall in the number of people working paid overtime, and a 2 per cent fall in the number of hours of paid overtime. Overall, average hours worked in Scotland was marginally lower in 2002 than in 1993 (33.3 against 33.7). Trends in productivity Chart 3.14 showed that the increase in total hours worked has been considerably below the growth in GDP over the seven year period. The widening of the gap illustrates an increase in productivity (GDP/hour worked). The narrowing of the gap, as in 2001, indicates a fall in productivity. Output increased by 14.3 per cent between 1995 and 2002 whilst output per worker increased by 8.9 per cent. Over the same period growth of only 2.6 per cent in total hours was recorded. This translates into a 10.7 per cent increase in output per hour worked. Chart 3.15 shows the annual change in GDP per hour worked and GDP per worker for Scotland (using data in Chart 3.14). Over the period, the average annual growth in GDP per hour worked was 1.6 per cent. In 1999 & 2000 as GDP increased there was a fall in average hours resulting in a rise in GDP per hour worked. In 2001 total hours worked increased faster than GDP. Consequently productivity per hour fell. In 2002 GDP increased by 1.6 per cent, employment grew by 0.3 per cent but total hours worked fell by 1.6 per cent. Growth in productivity per hour was therefore considerably above the growth recorded in productivity per worker (3.2 per cent compared to 1.2 per cent). Clearly output per hour has been more volatile than output per worker. |