What Affects the Labour Market?
The labour market is constantly changing, and knowing what drives those changes can be useful when planning your next step.
Wages rise and fall, industries expand or shrink and government policies can influence recruitment and pay. Once you understand the factors behind these changes, it becomes much easier to see where opportunities may be heading.
Below are some of the main factors influencing the UK labour market. We explore what they could mean when you are deciding which career or course to pursue.
Economic regeneration and investment programmes
Investment in local, regional or national projects can have a significant effect on the labour market by creating new jobs and increasing demand for particular skills. Greater Manchester is a good example. The Greater Manchester Combined Authority is supporting innovation and skills programmes designed to help local businesses grow and create employment opportunities.
The impact of investment goes beyond the jobs created by an individual project. It can also influence the types of skills employers need. This is why colleges such as The Manchester College work closely with employers and local industries when developing courses.
Construction and infrastructure projects are a clear example. New homes, transport networks and commercial developments require people with the skills to design, build and maintain them. They can also create demand for skilled workers long after the original project has been completed.
Education and training policy
Government decisions around education and training influence the skills people bring into the workforce. These decisions also influence the financial support available to employers that invest in training.
The apprenticeship system is a good example. From August 2026, changes to apprenticeship funding introduced the Growth and Skills Levy. These reforms affect how employers use funding for training and which apprenticeship standards receive government support.
Changes to funding can influence employers’ decisions about whether and how they recruit apprentices. In turn, this can affect the number and types of opportunities available to school leavers, existing employees and people looking to change careers.
Technology and automation
Technology continues to change how businesses operate, and this has a direct impact on the skills employers need. Some tasks can be automated. New roles are created to support emerging technologies, and existing jobs can change as new software, systems and equipment become part of everyday working life.
Automation is not a new development, but the pace of technological change means its impact is becoming increasingly important across many sectors. Understanding how automation affects the labour market can help explain why demand for workers is increasing in some industries while certain roles become less common in others.
For anyone choosing a career, this makes it important to consider not only which jobs are available today, but how technology could change those roles in the future.
Minimum wage and National Living Wage legislation
Minimum wage legislation determines the minimum amount employers must pay eligible workers, with rates generally reviewed and updated each year. Since April 2026, the National Living Wage for workers aged 21 and over has been £12.71 an hour. Workers aged 18 to 20 are entitled to at least £10.85 an hour, while apprentices and workers under 18 have a separate minimum rate of £8.00.
Changes to minimum wage rates can have an impact across the wider labour market, not just on individual pay. When employment costs increase, businesses may respond in different ways depending on their circumstances. Some may invest more heavily in technology or automation, while others may adjust recruitment plans or workforce needs.
This makes wage legislation an important factor to consider when looking at employment trends and the prospects for different industries.
The size and shape of the working population
The size of the working population affects both the number of people available to fill jobs and the level of competition for vacancies. The working-age population includes people who are employed, unemployed and looking for work, as well as those who are economically inactive.
According to the Office for National Statistics, the UK employment rate was around 75% in the three months to June 2026, while unemployment was close to 4.9%. Around 21% of working-age people were economically inactive. This included people who were studying, caring for others, unable to work because of ill health or in retirement.
These figures change over time. The number of young people entering employment, people reaching retirement age, migration, participation in education and changes in economic activity can all affect the supply of workers.
When fewer people are available to fill vacancies, employers may face greater competition for talent. This can encourage businesses to increase wages, improve benefits or invest more in training people who do not yet have all the skills they need. When more people are competing for jobs, entry-level positions can become more competitive.
Why this is worth keeping an eye on
The labour market will continue to evolve, so keeping up with changes can help you make more informed decisions about your future. Following developments in the industries that interest you gives you a better idea of where demand for skills is increasing and where opportunities could emerge.
The important thing is knowing how to turn Labour Market Information into decisions you can actually act on. Looking at Greater Manchester's key industries can help you understand which sectors are particularly important to the region and where skills are in demand.
If you are still considering your options, deciding on the right career for you means thinking about more than current vacancies. Your interests, strengths, ambitions and the opportunities available in your chosen sector can all play a part.
Whatever stage you are at, our Careers and Welfare team can help you explore your options. You can speak to a careers and welfare adviser at your campus or use our course finder to explore courses.