Britain looks like a full employment economy. A bigger slice of the population is in work than at any time since modern records began. The unemployment rate is at its lowest since 1975. There are hundreds of thousands of job vacancies.

But Britain doesn’t feel like a full employment economy. When the jobless rate was this low in previous economic cycles, wages were rising because employers were competing for scarce labour. Firms were investing in new capital equipment because workers were becoming more expensive. Productivity was increasing.

Today none of that is happening. Wage growth is not picking up. Instead, it is stuck at the new normal of 2%. There are skill shortages but this is not translating into higher average earnings. Investment is weak and productivity is falling because the growth in the employed population is running ahead of the increase in national output.

UK faces pay squeeze as unemployment rate sinks to 42-year low Read more

John Philpott, an economist who specialises in employment, is right when he says the UK labour market looks better on paper than it feels in the pocket. It is unprecedented for record levels of employment to coincide with the workforce getting poorer.

One reason for the weakness of earnings growth is the ferocious squeeze on public sector pay, which – stripped of bonus payments – is rising at just 1.3% a year.

A second factor is that employers are able to buy in cheap labour from overseas. Migration from other EU countries has not fallen off a cliff despite the result of last summer’s referendum: according to the Office for National Statistics, the number of non-UK nationals from the EU working in the UK rose by 171,000 to 2.32 million between the first quarter of 2016 and the first quarter of 2017. This continues a trend, which has seen the number of workers from the other 27 EU countries double since the recession of 2008-09.

Finally, the nature of work seems to have changed. Work by David Blanchflower, Rui Costa and Stephen Machin has shown that earnings growth for the self-employed – who account for 15% of the workforce – has been particularly weak in recent years. People are working flat out in the gig economy but still struggling to make ends meet. The labour market has, for want of a better word, been Uberised.