Ernst & Young (EY) human capital partner Stuart Steele said the demand for highly experienced, skilled talent had “never been fiercer”, after the company’s Independent Treasury Economic Model (ITEM) Club published data suggesting UK unemployment would reach the Monetary Policy Committee’s (MPC) threshold two years earlier than expected.
Despite forecasting that an improving economy would result in a surge in demand for labour, EY suggested wages would not grow in line with job growth.
It called on the MPC to urgently supplement the forward guidance threshold to include positive growth in real wages alongside a lower threshold for unemployment.
Steele warned that HR directors needed to build talent strategies to accommodate an increasingly flexible workforce.
“The labour market is far more mobile than it was even 10 years ago, with employees more willing to change careers and location. A job for life has become, for many, a thing of the past,” Steele said.
“We are seeing some companies building talent strategies that factor in high levels of staff tenure, with the expectation that employees may only stay for three to five years.
“The challenge for the HR director is to ensure that the organisation gets the best out of their people within their relatively short tenure. In these cases, the quality of the development experiences on offer can become more important, or at least equally important, as the remuneration packages on offer."
Unemployment to fall
The EY ITEM Club’s winter forecast suggested unemployment would fall below 7% in the first half of 2014.
However, it warned the workforce was likely to suffer weak growth in earnings, with wages set to grow by 1.8% this year, 2.7% in 2015 and 3.5% in 2016.
EY ITEM Club chief economic advisor Peter Spencer described the weakness of real earnings as “the Government’s Achilles heel” and warned it could “prove to be the weak spot in the recovery”.
“Consumers have reduced the amount they save to fund their spending sprees. But they cannot continue to drive growth for much longer without an accompanying recovery in real wages or a rise in their debt to income ratio,” he said.
The ITEM Club forecasts are based on the HM Treasury’s model of the UK economy.