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Labour market volatility leading to hiring havoc

Welcome to the candidate driven market, writes Betsy Williamson In September 2021, the Office for National Statistics reported there were 1.2 million job vacancies in the UK. In conjunction with this, the average unemployment rate fell to 4.5% meaning the UK faces its tightest labour market in decades.  The latest Labour Market Outlook from the CIPD shows that one in four organisations expect the number of ‘hard to fill’ vacancies to increase over the next six months.

In September 2021, the Office for National Statistics reported there were 1.2 million job vacancies in the UK. In conjunction with this, the average unemployment rate fell to 4.5% meaning the UK faces its tightest labour market in decades.

The latest Labour Market Outlook from the CIPD shows that one in four organisations expect the number of ‘hard to fill’ vacancies to increase over the next six months.

This reduction in available labour is interconnected to the UK’s exit from the European Union and the exodus of overseas nationals returning to native soil.  More than 200,000 EU citizens left the UK during 2020.  In reverse there is also the challenge of fewer EU workers travelling to Britain given COVID-19 border controls and the government’s new post-Brexit immigration points-based Visa programme.

Additionally, thousands of workers placed on furlough at the height of the COVID pandemic also switched sectors leaving cavernous employment gaps. Job shortages across a wide range of critical industries that can no longer rely on skilled EU labour, while a decreased reliance on face-to-face work means that individuals are applying for jobs in different cities, regions and in some cases, countries – while still working from home.

After the earthquake of the pandemic the tsunami hit.  One of the waves – the residual hiring havoc of 2021 that continues into 2022.

While 2020’s turbulence saw employers wrestling with staff lay-offs, furloughs, hiring freezes and pay cuts. 2021 morphed into application shortages, restricted candidate availability and an escalation in the war for talent.

The rush to reopen industries after many of the pandemic restrictions eased led to an upsurge in demand for workers in multiple areas.

Scotland is not shielded from these numbers, Core-Asset reported a 36.14% increase on vacancies registered by clients, between the 1st of April 2021 to the 30th of September 2021 and the corresponding period in 2020.

For employers, the rapidly changing employment market means the balance of power is shifting. The tide has turned from the employer to the candidate, now the negotiating power sits firmly with the employee.

This is an unprecedented labour shortage and there is also no ‘one size fits all’ response to the recruitment challenges because they are impacting different sectors in different ways.

Obviously, there are labour shortages in sectors ravaged by the foreign short-term-visa worker drought – hospitality, agriculture and healthcare.  But competition for employees is also escalating in many executive and professional service sector jobs too. Those with technology skills, in particular are in hot demand, as companies scramble to transform their digital platforms. For tech companies, it’s the compound effect of the pandemic on already growing skills gap.

There is also residual uncertainty which prevented workers jumping ship during the actual pandemic.

Research is emerging from Harvard Business School and McKinsey & Company which suggest this “shelter in job” approach is giving way to what’s been dubbed “The Great Resignation” as those who retained their employment during 2020 – 2021 reassess what “really matters”, cushioned by increased savings. For some, this means a role or career change; for others, it’s taking a break after the exhausting demands of the past 24 months.

There are also those withdrawing from the labour market altogether, young people returning to education and more experienced people deciding to take early retirement with a “life is too short” mindset. Here personal situations and work life balance are key considerations.

The causes of the current labour shortages are so layered, it’s impossible to give a simple answer.

The “perfect storm” and hiring havoc COVID has created around labour shortages has thrown up unanticipated problems in supply chains which have been beset by blockages. We’ve also seen issues where companies have struggled with worker shortages due to spiking infection rates. These bottlenecks have pushed inflation and wage rates higher than expected.

The UK Government’s response has been to bill this as a skills issue, with policies focused on ‘building back better’ and more money pumped into vocational education and training incentives.

However, over the longer term, dealing with such a volatile labour market will require sharper strategic workforce planning skills than just re-training and apprentice programs.

People might be out of work due to long-term health issues or looking after families.  We need to reform Government Employment and Support Services so people who are out of work can access good quality support and re-enter the workforce. What about bringing people back into the labour market who are on the edge of retirement through better work-life balance options? We’ll also see the appetite work intensive as wages go up. Employers want to do more with fewer people. This could lead to issues of wellbeing. To do this successfully, organisations must first pay close attention to what candidates want.

Winning the race for talent requires a deep understanding of what employee’s value. Businesses need to be prepared to market to candidates just as they would to potential customers.  Research around the world shows what employees expect has changed considerably over the past two years. Flexibility is the name of the game, but as a basic benefit, not a nice to have.

If you talk to any business leader right now, whether that be in Investments, Pensions, Consultancy, Law, Accountancy or Recruitment, at the forefront of their minds is a skills and capability shortage. And we have no idea how we’re going to fill it.

This lack of available skills and talent has enormous ramifications.  Competition for top talent is tough and only getting tougher.  As the waves of the COVID Tsunami subside and economic growth returns this will renew consumer confidence, which in turn will stimulate recovery and expansion initiatives. All of this will lead to businesses increasing headcount.

And so the Hiring Havoc will continue.

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