UK faces labour shortage: what can employers do to manage?

The UK now has the lowest ratio of unemployed people to vacancies since records began in 1971.

The figure, now at 1.45, is significantly lower than at the height of the crisis, where there were 4.1 unemployed people per vacancy (April-June 2020.)

The change has been driven in part by an explosion in vacancies, which are at their highest in 20 years, at 1.1 million, an increase of 318,000 from pre-pandemic levels, according to the Office for National Statistics.

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Tony Wilson, director at the Institute for Employment Studies, said: “Labour shortages are now affecting the whole economy, with fewer unemployed people per vacancy than at any time in at least 40 years.

“We estimate that there are nearly one million fewer people in the labour market than on pre-crisis trends, with this being driven particularly by there being fewer older people in work and more young people in education.”

There are now 8.7 million economically inactive people in the UK (those, aged 16-64, who are neither working nor actively seeking employment). This represents a rise of 346,000 since the pandemic.

Gerwyn Davies, senior labour market adviser for the CIPD, told HR magazine that flexible working approaches could unlock the potential of this group.

“We’ve seen the uptake of flexible working arrangements fall, and they are often dominated by part-time and annualised hours. 

“Given that we have so many potential older workers, those with caring responsibilities, parent returners, etc, these are under-utilised groups that could be tapped into, with the offer of a wider selection of flexible working arrangements.”

Young people, Davies added, now have a more diverse series of expectations when looking for long-term employment.

“It’s about job quality. It’s about selling your organisation and the possibilities of promotion that exist within it. 

“We know that many young people are deterred from jobs in the low-paying sectors who are driving this employment increase. They are put off by low pay for high-effort work, and poor prospects of promotion.”

Remote working has changed the game, as companies outside of the capital now have to compete with London salaries.

Graham Trevor, group HR director of Randstad UK & Ireland, told HR magazine: “The first thing for employers to do is reevaluate their asking salaries. Are they realistic given the ratio or vacancies to candidates? Perhaps not.”

The other side of the coin, however, is that the talent pool has expanded.

“Employers who demand people work on-site are now missing out on candidates to a degree that didn't happen before the pandemic. 

“This should go hand in hand with re-examining your wider benefits package in line with your competitors. Top of the list for workers at the moment is more flexibility.

He added: “If you find the right person, move fast – much faster than you would have done two years ago. There are so many organisations looking to hire right now that, if you move slowly, you will miss out on the top talent.