National Statistical

Data from surveys and from ‘administrative’ sources – such as tax data – can both offer important insight. Recently the ONS has been advancing its work on ‘data linkage’, which allows the information from different data sources to be combined to create new economic indicators. In this post Christina Palmou writes about how the linking of ONS of business survey records with PAYE data from HMRC is helping to create a richer picture of the UK labour market.

What is LEED? 

The ONS has been working on a new project with our partners at the Economic Statistics Centre of Excellence (ESCoE) to develop new linked employer employee data (LEED) for the UK. This will allow us to compare information from HMRC’s tax data with information from the Inter-Departmental Business Register and data from our own surveys to create a richer picture of wages and employment in the UK. The publication of LEED will be a major milestone in making more use of administrative information in the UK. 

In 2016, the Bean Review of Economic Statistics recommended that the ONS explore the use of administrative datasets. This recommendation led the ONS to set up the Economic Microdata Transformation (EMT) team.   

Since 2016, EMT has developed important data assets and made these available to researchers via the Secure Research Service. These include the Longitudinal Business Database and the HMRC-IDBR Trade in Goods dataset.  

EMT is now investing in the creation of new linked employer employee data for the UK. As a first step, the project will link information on workers, such as pay, and limited demographic characteristics from payroll data (Pay As You Earn Real Time Information or PAYE RTI) to information held on firms in the Longitudinal Business Database.   

Linking data on workers’ pay to the firms they work for would bring about a step-change in our understanding of the UK’s labour market. The comprehensive set of worker-to-firm linkages that can be followed through time will allow us to understand the relationship between firm level productivity and the characteristics and outcomes for workers. We consider a UK LEED as being an important feature of our framework in how we measure the UK labour market. 

LEED will provide insight into the role of high productivity firms on promoting inclusive growth, enabling us to see which workers benefit from productivity growth, in which parts of the country, and under what economic conditions.  

LEED will serve as a bridge between the supply and demand of skills in the economy, answering questions on the role of skills and labour market conditions in enabling not only business performance but in fuelling the green transition and diffusion of innovation between firms.  

In addition, it will show how length of employment affects wage growth and highlight risk factors around job loss and inactivity and the effectiveness of different interventions.  

What’s next   

In the next 12 months, the ONS will explore the linking of de-identified information on workers to the business register. This means information on workers and firms is anonymised, maintaining confidentially and keeping data secure. A trial use of these new data will be to develop experimental aggregate statistics on employment dynamism, how workers flow between industries and regions, how their earnings evolve or how their movements between firms reveal relevant labour markets.   

A greater ambition for LEED in the UK  

Subject to the success of this pilot and future funding, our ambition is to develop this work into permanent outputs. As it evolves, these data have the potential to go beyond the linking of employee pay and demographic information to the firm, and bring together additional data, such as self-employment information or survey data that could more comprehensively capture employer-employee relationships.