As the cost of living crisis bites, it may be easy - and perhaps rather cynical - to assume there has never been an easier time to recruit workers. However, the situation is far more complicated and nuanced; in fact, there is growing evidence that the cost of living crisis has adversely impacted businesses as well as their staff, and recruitment is much more challenging than it may seem.
Cost of Living
In the aftermath of the Covid-19 pandemic, many workers were unwilling to return to work on the same terms as before. Many of us were forced to reconsider our priorities. Better hours, more flexibility and a better work-life balance were suddenly at the forefront of everyone’s mind. Salary, while always an important factor, was no longer the only consideration when navigating the job market and seeking new opportunities.
However, the pandemic was only one of several shocks to the system that led to a cost of living crisis that has few precedents in recent history. The pent-up demand for goods and services soon outstripped what suppliers - who had cut back production and jobs during the pandemic - were able to provide. Disruptions to the supply chain persisted worldwide and, in February 2022, the Russian attack on Ukraine had enormous global consequences.
The price of essential goods, including food, housing and energy, rose steeply. According to the Office for National Statistics, average domestic gas prices increased by 96%, with respective electricity prices rising by 54%, from July 2021 to July 2022. The rise of living expenses per household is much higher per week this year compared with the last thanks to red hot inflation. Residents in the South East are facing the biggest increase in their weekly costs, at almost £325 a week more while those living in the North East will be spending about £235 a week extra.
With households in dire need of money, people are also in dire need of well paid work to ease stretched budgets. As an employer, you might expect this to break in your favour with a plentiful supply of acceptable candidates to choose from. The reality is very different.
It is increasingly clear that the cost living crisis has dealt a real blow to recruitment. The crisis has negatively impacted businesses and placed strangling constraints on cash flow, with rising energy and materials costs coinciding with a fall in revenue due to lower consumer purchasing power. Calls for higher wages and interest rate hikes pushing up the cost of credit are squeezing the profit margins of companies everywhere.
Cost of Hiring
While the cost of living has soared, annual wage growth has failed to keep up. The wave of strikes across the UK’s public sector underlines just how happy the national workforce has become. Salary, which remained an important factor for workers to consider when choosing a new job, regained at least part of the centrality previously lost to more flexible hours and other benefits.
As we reported in our Market Report in April, 59% of workers said a pay rise was “essential” to them. If the current employer is unable or unwilling to offer an appropriate salary increase, that person has an excellent reason to seek work elsewhere. However, many are inclined to remain where they are in the difficult economic climate and seek a pay rise from their current employer.
These findings are hardly surprising: according to our April report, 90% of employees believe their work-related costs have risen since the beginning of 2022. While 58% of employers did increase salaries, not all were able to do so in line with inflation. When wages go up, it often is not by a sufficient margin, effectively leaving businesses in the unenviable position of being unable to afford their staff.
A perfect storm of challenges
With unemployment rates low and skilled workers in high demand, companies across the UK are struggling to offer competitive salaries that can keep pace with the cost of living. According to this summer’s Labour Market Outlook from the CIPD, the sectors with the most difficulties in filling roles are education (56%); transport and storage (55%); and the voluntary sector (53%). Many vacancies in other sectors also remain unfilled.
“The top response to hard-to-fill vacancies has been to upskill existing staff (47%), followed by raising pay (44%), which is up from 29% in the previous quarter,” reads the latest Outlook. “However, fewer employers can afford to raise wages in the future in response to hard-to-fill vacancies (24%).”
In many cases, companies are simply unable to raise wages enough to match inflation. A correct balance of all the above solutions - higher wages as well as flexibility and upskilling - may be the only way for companies to stave off the worst effects of the cost of living crisis on the UK’s jobs market. A good recruitment company can advise on the current situation and the best way to attract candidates to hard to fill vacancies.