Tara Sinclair, Chief Economist at jobsite Indeed & Associate Professor of Economics and International Affairs at the George Washington University. Wages and productivity; Tax breaks and increased minimum wage; Northern Powerhouse and jobs and Small businesses.
Wages and productivity
The continued economic recovery is breathing new life into the UK labour market. We are seeing a notable increase in the number of available job listings across the UK. The power is shifting away from the employer and into the hands of the employee for the first time in several years. Higher levels of employment and higher levels of vacancies should also flow through to wage growth in the coming months. Despite the strong growth in employment opportunities workers still need to regain the confidence to push for higher wages before we will see a significant shift in wage levels. We also need to be wary that any eventual wage rise is reflected in actual spending power, rather than simply rising in line with inflation.
There is also fear that increased wages will simply result in businesses raising product prices – thus sending inflation up and limiting purchasing power gains for workers. This is why it’s crucial for the government and employers to focus on productivity – which is an issue the UK has been battling with since the recession. For the UK to see more economic benefit from the energetic labour market, investments in infrastructure, training and flexible working must keep pace with the job opportunities.
Tax breaks for low-paid workers and the increased minimum wage
Tax breaks for low-paid workers and boosting the minimum wage are a great way to incentivise job seekers into the workplace, but there is a risk of encouraging workers into jobs with a flat career trajectory – further exaggerating the UK’s productivity problem. With job vacancies rising, the real focus for the economy needs to be on encouraging employers to consider candidates from alternative backgrounds and invest in their training and growth to develop the right skills. The 20% rise in apprenticeship wages could be a step in the right direction for encouraging people not just to get into work, but to build an ongoing career.
The Northern Powerhouse
Initiatives such as the Northern Powerhouse are a step in the right direction. Developing better infrastructure outside of London would open up immediate job opportunities in the Northern regions and develop regional employment hubs. Businesses would also benefit from harnessing the potential for remote working. Investing in technology and tools that enable remote working for employees in weaker labour markets than London would give national productivity a boost across the board. Flexible work is the most searched-for category in the UK on job site Indeed, demonstrating a strong appetite for alternative working arrangements.
On Small businesses
In the years since the recession we have seen an increase in the number of people breaking away from traditional employment into freelance and self-employed roles. Historically, this leads to the creation of small businesses, who become employers in their own right – thus continuing the healthy economic cycle. However, it remains to be seen whether this will be the case this time around. Government-backed apprenticeship schemes could provide a positive boost to self-employed workers looking to expand from a one-man-band into a small business.