Low unemployment rates may sound like a good deal for the economy and people’s general quality of life; however, a smaller pool of available workers is not such great news for employers, with many struggling to fill vacancies that range from specialist roles that require highly-skilled workers to low-paid entry-level options.
The latest unemployment figures reveal that the number of people classified as being without work at an extremely low four per cent, a figure that was last recorded back in 1975. Naturally, this is good news for those who have secured jobs and can consequently boost their standard of living, often with the extra support of government benefits that supplement income gained from paid work; however, this economic uplift has less attractive consequences for some employers.
The issues employers face in a low-unemployment economy are:
Staff costs rise
As unemployment levels drop, pay rises increase, often at a greater level than inflation. This is inevitable in a situation where workers can use their relative scarcity as a negotiation tool.
Vacancies are harder to fill
This can affect employers in any sector, although it may seem to be more acute for those looking to fill skilled and specialised roles. In a buoyant job market, those looking to switch jobs have a lot more options; in turn, this can force employers to offer a more attractive salary and benefits package if they want to attract workers with the relevant background and experience.
The worst affected are employers in the service industries, particularly hotels, catering, and care and support. The impact of Brexit, regardless of the ultimate outcome, is also thought to have contributed to this situation, with many EU workers already having left the UK.
Productivity is reduced
This is an inevitable outcome if a business is either operating below optimum staff numbers or having to recruit inexperienced workers who need time to be trained and gradually improve their performance. Small businesses that have less staff and are therefore less able to cover shortages via the overtime route are most vulnerable to this side effect of low unemployment. The negative financial implications of being understaffed or fully staffed but not meeting expected targets due to inexperienced workers lowering the level of productivity can seriously threaten the future of a company.
The way forward
This may not be great news for employers but it is a good opportunity to review and perhaps revise their hiring processes. Some may decide to make use of headhunters or recruitment agencies to help them attract suitable candidates or to provide training opportunities on a regular basis. In the appropriate sectors, team members can widen their skill set and take on different tasks as and when required.
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