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The UK jobs market is “cooling” – according to the headlines.

Vacancies are falling.

The economy’s slowing down.

Some have been keen to blame Rachel Reeves and her increases to employer National Insurance Contributions, coupled with a big rise in the minimum wage.

But unemployment isn’t shooting up.

So what is happening, and why?

Let’s have a look.

The vacancy drop and what it actually means

The latest data from the Office for National Statistics shows UK job vacancies fell by 5.8 per cent between May and July, down to 718,000.

That’s the lowest since April 2021 — the tail end of the Covid shock — and, outside the pandemic, the lowest since early 2015.

Hospitality and retail took the biggest hits – confirming what Vox Political has been saying about the economy as a whole; people don’t have spare money to throw around, so they can’t afford to buy luxuries – and that includes going out.

Liz McKeown at the ONS confirmed vacancies have fallen in 10 of the last 12 months, with declines “concentrated” in those sectors.

But — and here’s the point you won’t hear in government talking points — the unemployment rate hasn’t risen. It’s still at 4.7 per cent. Redundancy notices are “relatively subdued.”

So if jobs are still there, why fewer openings? Here are a few possibilities that (also) haven’t been bandied around:

• Natural cooling: Vacancies peaked at 1.3 million in mid-2022. Some decline was inevitable as pandemic-driven labour shortages eased.

• Corporate restraint: Some firms are simply holding back — not replacing leavers or expanding — either to weather uncertainty or to protest policy changes.

• Impacts of government policies: April’s National Minimum Wage rise (up 77p/hour) and employer NIC hike (up from 13.5-15 per cent) increased per-employee costs. Some employers — especially in tight-margin sectors — may be cutting recruitment to avoid absorbing higher costs.

The truth is, it’s all three.

The current cooling is not catastrophic — it’s modest, it’s concentrated in certain sectors, and it does not signal an immediate jobs crisis.

Universal Credit as a corporate wage subsidy

That’s where the story should logically end – right?

It doesn’t – because amid the noise about recruitment slowing, some bright spark decided to complain that the number of people claiming Universal Credit is now eight million. They said that total is “unsustainable”.

The claim inspired This Writer to investigate – and here’s where the spin really starts to break down:

There are indeed around eight million people on Universal Credit. The rise is due to migration, into that system, of people on legacy benefits, meaning that the total benefit bill is not rising as a result of it. That is the first takeaway from this statistic, and it’s probably enough to shut up the bright spark who spouted off about it.

But we can go further – and should, because we are discussing the UK’s employment situation.

So: of the eight million people on Universal Credit, around 40 per cent — 3.2 million — are in work. That means the state is topping up wages paid by employers that aren’t enough to cover the cost of living for their employees.

This situation arises from a Labour policy under Tony Blair, whose government introduced Working Families Tax Credit (1999) and Working Tax Credit (2003). This was later expanded under UC (from 2013) under Coalition and Conservative governments.

The policy aim was to keep people in work and avoid unemployment spikes by making low-paid jobs financially viable. But in reality, it simply enabled employers to offer low wages, knowing the state would make up the shortfall. Blair either failed to consider – or was reckless of – unforeseen consequences.

In other words, the situation now is that the government pays a subsidy to employers who choose not to pay their workers enough to survive. Some of these employers (and the distinction will be explained below) are then able to claim more of their takings in profit – and pocket it.

How much public cash is being drained away? Well, using a conservative estimate of £7,500/year average in-work UC, that’s £24 billion annually in public money going directly into employers’ wage gaps.

This is not “taxpayers footing the bill” in the household-budget sense (that we pay more tax for it, meaning we have less money for our households) — that’s a political framing designed to shut down debate.

In reality, as Modern Monetary Theory (MMT) economists point out, because the UK issues its own currency, public spending comes from money created by the state; taxes serve mainly to manage inflation and rebalance wealth distribution. There is an implication for households, but it is different from what we’ve been told. I’ll explain below.

The important thing to remember is that, no matter how it is provided, this spending is not neutral. £24 billion per year is still £24 billion that is not available for housing, NHS funding, climate transition, or debt servicing.

Can employers afford to pay more? Yes — in many cases

A huge number of UK employers do not need to have their payrolls subsidised by the state. Their profits are large enough to cover the costs of full living-wage pay packets for everybody they employ.

Let’s take Tesco as the clearest case study.

• Annual UK profit: ~£4 billion

• UK workforce: ~310,000

• Nearly half of this workforce (~150,000) is on UC.

Even if those UC-receiving staff needed only a £3,750/year boost to reach UC-exit levels, Tesco could eliminate in-work UC dependence for its employees for ~£562.5 million/year — about 14 per cent of its annual profit.

If the firm covered the full £7,500 uplift, it would cost £1.125 billion/year — 28 per cent of profits. That still means billions of pounds would be left over in profits.

Remember this, also: higher pay often reduces employee churn — the rate at which workers leave a company and need to be replaced, lowers recruitment costs, and boosts productivity. It’s not pure loss — it’s long-term investment in labour stability.

Not all sectors are equal — so why treat them as if they are?

One of the dirtiest tricks in this debate is employers’ blanket excuse: “We can’t afford to pay more.”

That “we” hides a huge lie, because not all sectors — or even all firms within a sector — are in the same position.

• Low-margin industries like small independent hospitality, social care, or some manufacturing firms may genuinely struggle to raise wages without support.

• High-profit corporations — supermarkets, logistics giants, major energy suppliers — have the capacity to pay a real living wage today, but still claim poverty. They’re the liars.

The result of the lie is a one-size-fits-all Universal Credit wage subsidy that helps both the struggling corner café and the billion-pound supermarket chain in equal measure.

It’s the corporate equivalent of giving every household the same benefit payment whether they’re on the breadline or earning six figures. Ordinary citizens face means tests — and lose eligibility when their income rises.

Why not corporations?

How corporate means testing could work

• Step 1: Assess profit margins, market dominance, and executive pay against sector norms.

• Step 2: Determine which firms genuinely can’t pay a living wage without risking closure.

• Step 3: Offer targeted, time-limited wage support to those firms only — with conditions for improvement and regular review.

This flips the script.

Instead of a permanent state subsidy for low pay, you get a transition plan that moves sectors towards self-sufficiency, while freeing billions from the UC wage top-up budget.

Germany introduced sector-specific collective bargaining agreements to maintain wage standards without crippling struggling industries. France combines a strong statutory minimum wage with targeted state aid for small firms during downturns.

The post-war UK used “wage councils” in low-pay sectors like agriculture and retail to set fair pay without leaving small businesses to fend for themselves.

It is done elsewhere and has been done here before. Why not do it here, now?

Corporate means testing would expose the worst offenders — large, profitable companies lobbying against higher wages while drawing hidden state support.

It would re-frame the debate from “the government can’t afford to raise pay” to “why are we subsidising corporate greed?”

And it’s hard for free-market fundamentalists to counter without admitting they believe in state-backed low pay — which undermines their own rhetoric about “market efficiency”.

Genuine help for struggling sectors

If the state stopped using Universal Credit to subsidise wages at huge, profitable corporations, the savings wouldn’t vanish — they could be redirected to where they’re actually needed.

That might mean directly supporting genuinely struggling firms in low-margin sectors, giving them breathing room to pay fair wages.

Or it could mean cutting taxes for ordinary households, putting more disposable income into people’s pockets. That money, in turn, could circulate back into the economy — on restaurant meals, cinema tickets, retail purchases — directly benefiting the very sectors (hospitality and retail among them) now claiming they can’t survive without state-backed low pay.

In other words, freeing up the wage subsidy from big business doesn’t “cost” the economy; it creates the conditions for more demand, more growth, and more jobs where they’re most needed.

Strategic and political stakes

If the government tackled corporate underpayment of wages head-on — for example:

• Mandating sector-specific living wages,

• Capping shareholder dividends in firms with high UC-reliance, or

• Imposing a windfall tax on profitable low-wage employers —

…it could redirect tens of billions of pounds from UC into other priorities, easing the so-called “fiscal black hole” without raising general taxes or cutting services.

The risk?

• Market fundamentalists will cry “state interference,”

• Corporates may threaten price hikes or layoffs,

• Opposition and media allies of big business will frame it as “anti-growth.”

But history shows otherwise:

• 1970s France capped prices in essential sectors during inflationary spikes.

• Australia’s Fair Work Commission sets minimum pay rates per sector and occupation, maintaining both low unemployment and higher wage floors.

• Even post-war UK tied wages and price controls, to rebuild without runaway inflation.

What a resolution would require

Realistically:

• Data transparency: Force large employers to publish UC-reliance rates.

• Targeted wage policy: Identify sectors where profit margins allow full living wage coverage without collapse.

• Public narrative shift: Stop framing UC as “welfare” for the undeserving and start framing it as a corporate subsidy that can and should be reduced.

• Conditional corporate relief: Tax breaks or NIC relief tied directly to paying staff enough to avoid UC reliance.

The real story

So what’s the real story behind the headlines about falling job vacancies?

It is this: vacancies are down — but that doesn’t mean there’s a jobs crisis.

The real scandal is that millions of working people still need state support to survive while their employers are posting billion-pound profits.

The choice is political, not economic:

• Keep subsidising corporate low pay with public money, or

• Restructure wages so work pays for itself, freeing that public money for the public good.

Or, to put it bluntly:

The state should stop propping up the profit margins of companies that can afford to pay their staff properly.

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