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Dealing with the demographics of the workforce

Simon Rouse, Managing Director - PeoplePlus
soft skills

UK employment figures for February showed not only that there were nearly 33 million people in employment, but that average wages had risen by 3.9 percent, the fastest in a decade.

That is very good news. There is another key area of focus to which businesses must now turn, which is whether changes in the UK workforce demographics are storing up challenges for businesses in the future. The Chartered Institute for Professional Development (CIPD) has stated that not only are 30 percent of UK workers now aged over 50, but that insufficient numbers of young people are entering the labour market to replace them.

The changing demographics within the workforce present challenges businesses must consider and address, or otherwise risk skills gaps as valued colleagues reach the end of their careers without the trained people available to replace them. That will impact productivity in the long-run, requiring companies to take steps now to ‘future proof’ themselves against the consequences of changes in the labour market. The solutions to these challenges can be found in encouraging more young people to enter the workforce. This means promoting the opportunities vocational training presents and addressing the issues that make businesses less willing to take on apprentices. It also means ensuring the availability of skills development and lifelong learning for existing staff and that companies consider how they can develop their culture and people policies to retain talented personnel.

The CIPD’s observation is backed up by government data. A Department for Work and Pensions report (Fuller Working Lives) showed the number of people aged 50 or older within the workforce had grown to 9.8 million in 2016 – 2.2 million more than in 2006 and 4.1 million more than 20 years ago. The DWP has also surveyed businesses on the age of their workforces (Attitudes of employers to older workers) and found that 49 percent of respondents had a quarter of their staff aged over 50, with 12 percent having more than half their teams aged over 50-years.

This is maybe not that great a revelation. Ours is, after all, an ageing population and it stands to reason that the demographics of the workforce will evolve. These changes are of course not limited to age. The Institute for Fiscal Studies has reported the employment rate for women aged 25-54 increased from 57 percent in 1975 to 75 percent in 2017. There are more women in STEM occupations – 900,000 or 22 percent of the total workforce. But for these and other positive changes, the question remains whether businesses are vulnerable to longer term skills shortages because of both the average age of the workforce and companies’ approaches to managing demand for specific skills, experience and training.

The evidence suggests the CIPD is correct in its statement on the number of younger people entering the workforce. Data from the Office of National Statistics from August showed that 75.3 percent of 16-24-year olds were not in full-time employment, in contrast to 84.4 percent of 24-35-year olds being in full-time work. The lack of 16-24-year olds in the workforce indicates academia and higher education remain popular choices, but also can be seen as evidence that work is needed to promote vocational opportunities to support professional skills development and offset the shortages the CIPD has predicted.

The DWP’s Attitudes to older workers study also found that 20 percent of responding businesses considered workers aged over 50 to be more productive than younger employees, with 53 percent claiming older members of staff to be more reliable. The CBI has also concluded (Employers attitudes to graduates) that 44 percent of employers found young people leaving education to be unready for the world of work. This again points to the potential for skills shortages, which businesses need to address as the demographics of the workforce continue to change.

So how can businesses mitigate a workforce evolution? Arguably the solution can be split into three: encouraging more young people into the workplace; supporting the upskilling of existing staff to offset the loss of skills of those reaching the end of their careers; and ensuring staff retention through renewed focus on company culture and people policies and practices.

The first of these means ensuring young people (i.e. those aged 16-24) are aware of alternative career pathways available to them, including vocational training and apprenticeships. All stakeholders have a role to play in this. The number of apprenticeship placements has fallen in recent years, with the National Audit Office predicting the target of three million apprenticeships by 2020 will be missed. While the Government, employers and apprenticeship providers should not compromise quality for quantity, there is a need to better demonstrate the opportunities and value of apprenticeships to young people, and to assuage business concerns that make them less likely to offer placements.

The Apprenticeship Levy has been cited as a reason for the declining number of placements. Some businesses note that they have found it complicated to navigate and view the costs of the Levy as an unwelcome burden. The Government took welcome steps in 2018’s Budget to cut the Levy fees for SMEs, but more work is needed to better explain the system and how businesses benefit from it. This needs strong partnership right across the system between Government, employers and employer bodies and apprenticeship providers. The prize from this strong partnership will be more companies realising the full value of apprenticeships as a means of building and developing their teams and capabilities.

There is also a challenge to communicate better with young people.  The Youth Voice Census found that 69 percent of young people did not feel employers were supportive of hiring younger workers. There are some fantastic examples of businesses and bodies such as Movement to Work focusing on bridging this gap through active engagement with schools and creating more opportunities to experience work.  More of this is needed.

It is true though that managing changing workplace demographics demands more than bringing young people into employment. Businesses also need to be thinking about how they can upskill their existing teams to offset any loss of knowledge and experience from colleagues reaching the end of their careers, as the CIPD has warned. This is not necessarily the standard practice across all sectors at present. A 2018 study by Total Jobs of accounting and finance found that employers were less likely to focus on upskilling existing staff (42 percent) than they were to hire interim professionals to meet increases in workload (52 percent). Inevitably there is a need to meet short-term demand, but if businesses are to manage long-term demographic change, then it can’t be primarily through temporary personnel but rather through the promotion of skills development and lifelong learning of employees, so they are able and feel empowered to bridge any gaps.

And this brings us to the third means of mitigating demographic changes in the workforce, which is the effective retention of colleagues in our companies.

The availability of upskilling and lifelong learning is an often-overlooked means of investing in people, making them feel valued and making it more likely for an organisation to retain their skills. There is also increasing demand for flexibility in terms of working hours and schedules, the prioritisation of a healthy work-life balance, and greater stock being placed in company values and corporate social responsibility – the latter being particularly important to young people. To retain valued people and prevent a loss of skills in the way the CIPD has warned, businesses need to consider how they can offer flexibility to their teams and demonstrate investment in the workforce.

The evolution of the UK workforce is inevitable, and it is essential that businesses acknowledge and respond to these changes to maintain productivity and the availability of skilled personnel. We should welcome the high levels of employment currently in the workplace, but we must also look beyond the headlines into the changes underway below the surface. We must understand not just how many people are in work, but who they are and what they need and expect. Those businesses looking at the longer term will be best-placed to mitigate the changing demographics of the workforce – and the solutions to doing so effectively will be to provide more opportunities for training for young people, to ensure the upskilling of existing colleagues, and to demonstrate investment in teams to retain people.

It is those companies that look to the future now, that will be best placed to manage the challenges that come with the evolving demographics of the UK workforce.

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