· 2 min read · Features

The labour market in 2012: some HR implications


The UK labour market is stuck in the doldrums. Demand is subdued, with the number of vacancies sitting below half a million for the last two and a half years, while unemployment has been at or above two and a half million for a similar period and is now drifting upwards.

Young people newly entering the labour market and lacking the competitive edge of work experience are, and will continue to be, the worst affected. This particularly applies to youngsters with few or no qualifications, but not only to them. For many graduates, having a degree will still turn out to be a good long-term investment. But there is a growing cohort of young people, with average degrees in non-vocational subjects from second or third tier universities, now discovering that they were misled into believing that they had a passport to a well-paid, interesting, 'graduate level' career. This is their loss, but also a real loss to the economy.

Other groups who will be increasingly badly affected by unemployment in the year ahead include many of those in local areas heavily dependent on the public sector. Women too, are disproportionately concentrated in public sector jobs, and while the early phase of the current downturn affected men particularly, the balance of pain is likely to shift towards women as the public sector cuts bite.

What does all this mean for the HR world and recruitment? It's worth noting that the early stage of the current recession was marked by 'labour hoarding' to a much greater extent than previous recessions. Having been caught out in the past by having shed too many of the wrong staff, many employers were careful this time to retain talent despite the downturn, often negotiating or imposing hours reductions, pay freezes or cuts, to make the retention financially viable. This is a key reason why unemployment didn't rise as much in 2008/2009 as most experts expected. The other side of this coin, however, is that many businesses now have the capacity to expand output with little recourse to hiring new talent, and this (together with the weakness of the private sector recovery) is why the private sector is so far failing to replace the jobs lost by the public sector. For businesses that do need to recruit, however, it will remain a 'buyer's market' for some time. Even if demand recovers in 2012, we can expect fewer concerns about broad-based skill shortages, and less emphasis on the 'war for talent' than before. Committing itself to a target of net migration was arguably one of the biggest policy mistakes of the current government (driven, like many such mistakes, by knee-jerk populism rather than economic logic). Net migration flows are largely outside the government's control, being driven by internal EU movements, as well as (increasingly) by British workers returning to the UK (or leaving in smaller numbers).

There will, of course, be many ex-public sector workers entering the labour market in 2012. Surveys repeatedly report an aversion among private sector managers to recruiting such people, based on assumptions about their skills, attitudes and work motivation. Such evidence as does exist, however, suggests that the skills and qualifications base in the public sector is, if anything, higher than in many parts of the private sector. There is, therefore, for those businesses with a growing labour need in the year ahead, a strong case for reconsidering views of this kind and accessing the talented and experienced workers, many of them women, who they will be shedding in 2012.

Nigel Meager, director, Institute for Employment Studies