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Unemployment is rising – can employers stop worrying about offering an attractive wage?

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Summary

Official data has revealed that unemployment is on the rise, while pay growth has accelerated. The Prime Minister is urging employers to focus on rewarding productivity instead of raising wages in order to help curb inflation. Labour market economists are discussing whether pay can be decreased in the current skills problem in the UK could compound the issue further. They explain that as unemployment increases, people will moderate their wage demands due to receiving only government benefits. However, this assumes that the unemployed have the skills to be employed in the job mix that firms are providing. Some commentators argue that businesses should invest in training and explore skills-based hiring to fill talent gaps. Ultimately, pay will depend on whether the unemployed are a “good match” for jobs on offer.

Q&As

How has the labour market been affected by rising unemployment?
The labour market has been affected by rising unemployment as demand for workers has decreased and the supply of potential workers is increasing.

What have the Prime Minister and The Bank of England suggested employers do to curb inflation?
The Prime Minister and The Bank of England have suggested employers consider “sustainable” pay rises that focus on “rewarding productivity” in order to curb inflation.

What does standard economic theory suggest about wage demands when unemployment increases?
Standard economic theory suggests that as unemployment increases, the unemployed will moderate their wage demands and workers will moderate their wage demands as employers will look for cheaper labour among the unemployed.

What evidence is there to suggest that the unemployed may not have the desired skills to be employed?
Evidence suggests that many people are leaving economically inactive categories to look for work and the pool of unemployed workers in the UK may not currently have the desired skills. This was evidenced in previous People Management reporting of ManpowerGroup data, which found four fifths (80 per cent) of UK businesses had “persistent difficulty” filling jobs.

How can employers retain and attract candidates if they cannot offer attractive pay?
Employers can retain and attract candidates by considering the skills that they deem to be essential rather than just desirable, offering perks such as health insurance, investing in staff training, and considering skills-based hiring.

AI Comments

👍 This article provides a thorough and insightful look into the current state of the UK labour market and provides some sound advice for employers on how to navigate the current unemployment crisis.

👎 This article fails to provide any practical solutions to the current unemployment crisis and instead relies on economic theory that may not be relevant in the current situation.

AI Discussion

Me: It's discussing the implications of unemployment rising and whether employers need to keep offering attractive wages. Labour market economists are debating whether wages can be decreased and if the current skills problem in the UK could worsen the issue.

Friend: That's interesting. It makes sense that employers would want to decrease wages as unemployment increases, but it sounds like they may have to be careful about how much they decrease them if the unemployed pool doesn't have the desired skills.

Me: Exactly. That's one of the main points the article makes. It also mentions that employers could consider offering perks or investing in staff training instead of salary increases. This could help them retain and attract candidates without having to offer an attractive wage.

Action items

Research the skills gap in the UK labour market and consider how to address it in your organisation.
Consider ways to reward productivity in your organisation, such as offering incentives or bonuses.
Invest in staff training to help bridge the skills gap and increase productivity.

Technical terms

Unemployment: A situation in which people who are actively searching for employment are unable to find work.
Labour Market: The market in which workers compete for jobs and employers compete for workers.
Office for National Statistics (ONS): The UK government's official statistical agency.
Regular Pay: A type of pay that is paid on a regular basis, such as a salary or hourly wage.
Inflation: A sustained increase in the general level of prices for goods and services.
Economics 101: A basic introduction to economics.
Labour Market Frictions: The barriers that prevent workers from finding jobs or employers from finding workers.
Skills Mismatch: A situation in which the skills of the unemployed do not match the skills required for the available jobs.
Recession: A period of economic decline, typically defined as two consecutive quarters of negative economic growth.
Productivity: The amount of output produced per unit of input.
Talent Shortage: A situation in which there are not enough qualified workers to fill available jobs.
Skills-Based Hiring: A type of hiring process that focuses on the skills and abilities of the applicant rather than their qualifications or experience.
Pinch Point: A situation in which there is a shortage of something that is needed.
Sustainable: Able to be maintained at a certain rate or level.
Reward Productivity: To give a reward or incentive for increased productivity.
Curveball: An unexpected or difficult situation.
Complexity: The state of being complicated or difficult to understand.
Unambiguously: Without any doubt or ambiguity.
Knife-Edge: A situation in which a decision or outcome could go either way.