Three messages for employers from the latest labour market figures

Published on
3 min read

The latest official figures, published in mid-January, reveal a record level of vacancies, combined with a modest rise in the labour market participation rate, which however remains well below pre-pandemic levels. In other words, the labour market is continuing to tighten.

In that context one would expect average wages to be on the rise, but they have fallen in real terms when compared with the comparable period last year, against a background of rising inflation. Digging deeper into the figures, it is clear that some sectors of the economy – particularly financial services – have shown stronger than average wages growth while in others – for example entertainment – there has been minimal growth even in nominal terms.

These are the first set of official figures since the start of the pandemic which are largely unaffected by the impact of the furlough scheme on average earnings and employment levels. The scheme ended on 30 September last year, and the latest figures demonstrate how successful it has been in preserving jobs. Employers in general have the opposite problem to what they might have expected at the start of the pandemic: how to fill vacancies, rather than how to reduce their headcount.

There are significant sectoral and regional variations, but three points emerge from delving more deeply into the figures which may be worth noting as employers continue to adjust their recruitment and retention strategies.

More older workers opting out of labour market

In its latest release, the Office for National Statistics states that the increase in economic inactivity compared with the previous three-month period was being “driven” by those aged 50 to 64 years. 

Employers struggling to fill vacancies should therefore consider whether more could be done to woo this age group back into employment, or to persuade them not to leave in the first place.

Youth unemployment still high

Although unemployment has been falling in all age groups over the past year, it remains at much higher levels among workers aged 16 to 24. There have been a number of Government incentives launched since the start of the pandemic which have been targeted at this age group, notably Kickstart. These schemes are now winding down, but there remains scope for employers to target this age group for some roles, particularly where they have the capability to offer suitable training to support new starters.

The importance of job design

The law of supply and demand when applied to the labour market might suggest that in the long run vacancies can always be filled if wages are high enough. Leaving aside the obvious point that there is a limit to how much an employer can afford to pay, it is apparent that job design can be as important a factor as wages when it comes to filling vacancies. Perhaps too often some negative features of a job are regarded as unavoidable, rather than being capable of amelioration. Excessive hours worked by some workers in the financial sector spring to mind, or the uncomfortable facilities at service stations that HGV drivers have been expected to put up with for years.

It is much harder to measure the qualitative aspects of a job in official figures, but if labour market participation rates are to be restored to pre-pandemic levels, more must be done to make a greater variety of jobs more appealing.

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