As a keen watcher of the welter of comment on the employment scene, in recent months I have been particularly intrigued by the number of press releases and media reports signalling an increase in skills or talent shortages leading to mounting recruitment difficulties, and warning of the emergence of a so-called ‘two-speed’ jobs market in the UK.
This strikes me as most odd in an economy with an unemployment rate close to 8% and a slowing nominal rate of growth in average weekly earnings (now down to just 0.8%, and a paltry 0.4% including the effect of bonus payments). A poorly functioning jobs market with lots of structural problems might encounter a serious mismatch between the supply of and demand for skills even when unemployment is still very high, though it’s widely accepted that the UK’s flexible jobs market functions very well. But in any case, if the labour market was suffering a high rate of structural unemployment and experiencing widespread recruitment difficulties this would normally be expected to trigger an increase in wage pressure rather than the ongoing pay slump at present being experienced.
This casts considerable doubt on all the recent hype about recruitment difficulties which has doubtless been due to some employers facing some greater difficulty in hiring staff compared with the depth of the recession in 2008-09, the perception further exacerbated by the surprising jobs boom of 2012 which meant that businesses suddenly became excited about taking more workers on. I have tried in vain to pour cold water on the hype and was therefore encouraged by the sober analysis of the Bank of England’s latest quarterly Inflation Report, published yesterday, which concludes:
“Survey indicators of companies’ recruitment difficulties have risen, and are closer to, but still below, historical averages. The (Bank) Agents’ contacts, however, suggest that difficulties in recruiting suitable staff for available roles are limited to only a few niche sectors, and are rarely a significant constraint on capacity.”
This conclusion is far more in keeping with the broader labour market and macroeconomic indicators, albeit less likely to grab the headlines.
In a sense of course we always have a two speed, or perhaps more appropriately a multi-speed labour market, as evidenced by different unemployment rates for different groups and associated pay relativities. Similarly, there will be times when demand for certain types of occupational skills increases and vice versa. However, there is little to suggest any significant recent change in the structural make-up of the jobs market, whereas there is a lot of evidence that the jobs market as a whole is suffering from a serious shortfall in demand stemming from prolonged weakness in the macro economy.
Moreover, insofar as there are signs of greater two-speed activity in the jobs market this is due not to any generalised increased shortage of supply of skill or talent but instead to an increasing excess supply of less skilled people, driven in part by the government’s welfare to work measures which are pushing more lower productivity individuals into economic activity. No wonder therefore that the CIPD earlier this week were reporting that 45 people are currently competing for every available unskilled job which, as the pay slump further indicates, makes jobseekers reduce their wage demands and workers ever more fearful of asking for a raise in the knowledge that their employer is well aware that so many idle hands are waiting at the door.