Another conference, another year …

It’s been a busy week.  I’m writing this blog on a Saturday afternoon on a train returning from Dundee, where I gave a talk about Megatrends last night at CIPD’s mid Scotland branch centenary celebration. Last week was also our Annual Conference and Exhibition in Manchester.  It’s also an anniversary for me, as I started one year ago at the CIPD.  Then it was a bit of a blur – what was this “Ullrich model” everyone referred to?  Now, thanks greatly to engagement with our membership like the event in Dundee, it’s getting easier to see how changes in the economy and the labour market affect practitioners.

The Manchester conference closed with a session from Daniel Pink, largely about selling (which we all do, even if we think we don’t, and even if some of us made career choices that we thought would never involve us in selling in a million years).  It was good knockabout stuff.  It turns out I’m an ambivert - when I just thought I was a typical Libran (astrology has a chequered history in operational planning, let alone recruitment, but apparently it is no worse than graphology!).  Anyway, one of Dan’s final “takeaways” was about making it easy for people to do what you want them to do.  That includes providing them with the context – what’s happening out there, why it matters to them, and what they can do about it.  It’s central to the HR role.  So that got me thinking – how has the context within which HR operates changed over the past year?

First, economic conditions have improved.  Last year we were still worried about the possibility of a triple dip recession.  Now forecasters are upgrading their forecasts almost by the month (it’s a bit like the ratings agencies and Greece, but in reverse).  Of course, there are concerns about the sustainability of the current pace of growth, whether it is due to “frothy” asset markets or more widely based.  An important point will be when we see evidence of businesses investing more, including in their people.

Second, after a slight pause for breath earlier this year, the labour market is moving full steam ahead.  Indicators of recruitment intentions – including our own Labour Market Outlook – are going through the roof.  Recruitment consultancies were out in full force at our Exhibition.  This does not seem to have been accompanied by widespread shortages of suitable applicants – not yet, at least.  Evidently there is still some slack in the labour market.  Which might help to explain why…

Third, we see no clear evidence yet of wage growth picking up.  Despite inflation remaining at 2.7% or so, the growth rate of average earnings has more than halved in the last 12 months (the 3 month average growth rate of regular pay was 2% in August 2012 and 0.8% in August 2013).  The labour market is growing through quantity rather than price, with anticipated wage growth now at the bottom of a 1-3% corridor.  If employers are finding they have to pay a bit more to attract the right applicants, this has fed through to general pay levels.  We have even had the unusual, if not unprecedented, case of a Treasury Minister exhorting employers to pay their employers more if they can, when the standard script for at least half a century has been to encourage wage moderation for fear of the impact on costs, competitiveness, inflation and employment. Although the machinery that sustained the concept of the “going rate”, such as industry-level wage agreements, is in many cases long gone, maybe the psychology of the “going rate” still has some resonance?  Employers don’t like to pay over the odds, but they don’t want to low ball too much and risk discontent and departures.  Employees would prefer a higher wage, but if they’re getting the “going rate” they are not going to kick up too much of a fuss.  It’s why there’s a market for reward consultants and inter-quartile ranges.  On this line of argument, it might take a jolt to the system, such as a sharp rise in inflation, to shift wages significantly.

Fourth, there are still 2.5 million unemployed on the headline definition.  Because of population growth and rising activity, unemployment is currently falling quite gradually (although the claimant count has been falling dramatically in the last few months).  However, long-term unemployment is little different from last autumn (900,000 in July-August 2013, compared with 892,000 in September-November 2012).  To an extent, this may be a timing issue.  It always takes long-term unemployment longer to fall than the headline total.  In addition, the transition between the Flexible New Deal and the Work Programme meant that a cohort of those now in long-term unemployment received fewer support opportunities than their predecessors or successors.

Nor has youth unemployment fallen since last autumn.  Ever since mass unemployment first resurfaced as a general problem towards the end of the 1970s, in just about every OECD country, the youth unemployment rate has been higher than the general unemployment rate.  The chart below graphs the difference between the youth unemployment rate and the general unemployment rate for a variety of countries.

 

In terms of relative position, young people in the UK did not do too badly in relation to many of their peers.  In 1992 and 2002, the difference in unemployment rates for the UK was below the OECD average.  The vocational education and training system may not serve them as well as Germany’s does, but the UK does not have the rigid employment protection rules that have made it almost impossible at times for anyone under 25 to get a job in France, Spain or Italy except on a temporary basis.  But the last recession has affected young people in the UK especially badly and the youth unemployment rate in 2012 was about 12 percentage points higher than the total rate (well above the OECD average).  Unless we can make it easier and quicker for young people to move from education into employment, the risk is we slip further down this league table.

Dan’s last “takeaway” – it’s a good job the conference centre was close to Chinatown – was a good one to send us out into the cold, autumn weather.  The role of HR is to “make organisations more humane”.  Way to go, Dan.

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  • Anonymous
    Anonymous

    The usual incisive and witty comments from our ambivert Chief Economist. I unfortunately missed Dan Pink as I had to get off to an engagement in Galway. The people at Mid Scotland where wowed by the megatrends presentation. looking forward to welcoming  Mark at Scottish Conference in March. As it happens going through the lab maky and skills bits of the SNP's Independence blueprint.