The latest labour market statistics provide further signals that mounting recruitment difficulties rather than higher cost of living may now be the main driver of higher pay inflation; with vacancies rising to another record high in the vast majority of industries.
Responding to today’s ONS figures, Gerwyn Davies, senior labour market adviser for the CIPD, the professional body for HR and people development comments:
"The figures show a surge in job to job moves driven by employees taking advantage of the tight ‘job-seeker friendly’ labour market and perhaps also people re-thinking their career priorities after the pandemic. In response employers should focus on improving how they develop and retain their existing workforce to prevent or reduce skill and labour shortages. This means employers need to look at the factors that improve retention beyond simply a competitive salary which include the quality of line management, the availability of different types of flexible working arrangements and opportunities to develop new skills and progress.
"Substantial growth in the supply of labour over the past decade and more, due mainly to increased immigration and more older workers in employment, has helped the economy avoid any pay-price spiral caused by an increase in the cost of living. However, the supply of EU workers and older workers is now at best plateauing, which suggests that the recent surge in price inflation could combine with increased recruitment difficulties to devastating effect.
Davies adds: “This will pose many recruitment and retention challenges to employers. As CIPD research shows, raising wages has risen to become employers’ most popular response to hard-to-fill vacancies. Recruitment difficulties are thus becoming as big a concern to the Bank of England as any possible knock-on effects of recent higher inflation and look set to play a significant role in determining when and how much interest rates will rise.”
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