By Joe Mongon, Head of Recruitment Delivery
I’ve tried to hide from the inevitable and deeply wanted to write about anything other than the ONS’s recent UK Labour Market overview for fear of adding to the pervading gloom of economic news. But as a recruitment professional, and as a worker, the findings are too stark and too significant to ignore.
The main impact is for employees, not employers, with a grim picture of pay in real terms falling at its fastest rate in over a decade as the cost-of-living crisis bites. This might lead to churn as those in work seek higher paying opportunities to maintain, not improve, their lifestyles. And they might well have choice—a record number of job vacancies have been recorded (again) in the UK. It is certainly a challenge to businesses that, while “pay is growing strongly as companies seek to attract people to work for them,” salaries are still falling well behind rates of inflation, putting ever more pressure on investment.
Higher Salaries Won’t Fix the UK’s Talent Shortages
It will be very difficult to use salaries alone to mitigate against the lack of supply the UK jobs market is seeing. The current position is indeed incredibly tight and exacerbated by ever increasing levels of economic inactivity: a “missing million” from the workforce. I’ve been guilty of viewing this as being driven by a positive choice to work less for lifestyle reasons (which does happen), so the view here of (rising, long term) ill-health keeping people from work was especially sobering.
This all adds up to something no one in my network will be surprised to hear—recruitment is harder now than in 2019.
Talent Acquisition in an Economic Slowdown
What’s next? Follow the long-term graphs, and you’ll see repeatedly that economic slowdown = reduction in job vacancies.
It seems obvious that we can expect that again—an overall cooling of the job market as businesses reduce spend towards the end of the year. Does that mean recruitment will get easier? In some cases, yes: but the longer-term picture also shows critical talent shortages sticking around, driven by economic and demographic factors. Without an emphasis on connecting more people with work through education, training, and flexible support, recruitment efforts (and economic growth) will fall short.
This is what Peter Bendor-Samuel of Everest Group calls, “the cow behind the pig”: the bigger long-term challenge that can’t be ignored while digesting the smaller, short term one (for this analogy to work you have to imagine you are a python—or just read Peter’s blog it’s very good).
White knuckling the short-term in the hope that fewer people will be needed is a complacent talent strategy, where a winning one means a continued focus and investment in finding and keeping outstanding talent. Smart organisations must hold that course as much as possible in the face of slowdown, recession, stagflation and other economic headwinds.