JobStats - January 2003 - Happy New Year?: 25 Jan 2003
25 Jan 2003
Sorry
The more observant among you will have noticed that there was no December
newsletter. This was due to a month-long working binge which left no time
for writing words.
Market trends
This month has seen further job losses in the City with Barclays Capital
announcing a modest cut in staff. I don't expect that the job losses are
over but they will slow down; the fat is gone any cuts now will be into
the meat.
We saw the usual Christmas slump in advertising and now we are seeing the
'January bounce' but it hasn't been a strong recovery and I think we'll
have another bad year. Adverts now are at around half the level they were
at the same time last year. The manufacturing sector is in recession and
if finance is not in a recession then it certainly isn't growing. The
sector of the economy that is growing fastest is the public sector and
that doesn't pay well. There's really no good news on the horizon. The
forthcoming war with Iraq may be over quickly but if it drags on we can
expect to see oil prices going up and that is never good for the economy.
The evidence that annual rates are falling at all levels is even stronger
now. But there is definite growth in the hourly rates especially at the
bottom end of the market. This reflects the continuing growth in the demand
for contractors and the decline in the demand for permanent staff.
What's happened to the contractor premium?
Contractors have always been paid more than permanent employees.
This premium is partly a compensation for the extra risk the contractor
takes on and partly a reward for any extra skills that the contractor
has. In the past I've assumed that this premium was
equivalent to a factor of around two to one.
That is - you could expect to get twice as much as a contractor as you could in
an equivalent
permanent role. I've used this as a personal rule of thumb for years and that
was the premium I got on the
two occasions that I went from a permanent job into a contract.
This is an area where there have been some spectacular changes over the past
few years. Before giving the figures I'll just explain how I work out the premium. I
assume that there are 2000 billable hours in a contractor's year. That's on the
basis of four weeks holiday, 2 weeks of bank holidays, a five day week and an 8.5 hour day.
Then I take the median hourly rate and multiply by 2000 to get an annual rate. Finally I
compare the contractor annual rate with permanent annual rates.
In 1999 the contractor premium was about 1.9 times the permanent rate. At the
peak of the boom (autumn 2000) the premium was about 2.1 times the permanent rate.
Sis months ago after the worst couple of years any of us had ever seen there was
no premium at all. That's right, the annualised rate offered for the average
contract position was the same as the annual rate offered for the average permanent
position. Things have improved a bit since then and the premium stands at about 1.5.
This shift broadly reflects the changes in demand for contractors - as the proportion
of contract ads increases or declines so does the premium. The shift is magnified by
the higher volatility of the contract rate which tends to grow more quickly with
increased demand and shrink more quickly as demand reduces. Permanent salaries change
much more slowly. I guess that bonusses are used to fine-tune permanent packages and I
don't capture changes in bonus through the adverts.
That's all folks
There's not much more to say this month. Hopefully before the next newsletter there
will be a revamped version of the web site with some minor cosmetic improvements, some
new analysis pages and generally improved content. If you want to be informed automatically
when the new site comes out you can subscribe to the "What's New" page and you'll get
an email on the release weekend.
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