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      The Great Resignation & The Great Wage Inflation

      Number of People Changing Jobs Hits Record High

      2021 was a historic year for the labour market in the UK, and this bumper year for job vacancies ended on a high despite Omicron fears and new workplace restrictions put in place pre-Christmas. The number of job vacancies in the United Kingdom hit record highs of almost 1.25 million in the three months to December, almost double the number of vacancies available in the same period of 2020. Meanwhile, the number of people changing jobs hit a record high of 988,000, it should come as no surprise that the period has been dubbed “The Great Resignation” with “The Great Wage Inflation” occurring as a result.

      The Market Continues to Boom

      When fears over the Omicron variant crept in at the end of November, followed by a work-from-home order in December, I doubt many expected this trend would continue. A month into 2022 however, the market has robustly continued its 2021 trajectory, and maintained its status as “candidate-driven”.

      The Market Continues to Boom

      As was the case towards the end of the year, candidates hold a lot of the power as vacancies rise and the supply of candidates continues to fall. Offers made to candidates continue to be more lucrative than before, and employers must now heed demands for hybrid working and increased flexibility.

      Hiring Increases & Worker Disengagement Push Salaries Higher, Despite Falling Confidence in the Economy

      Even though December saw the least aggressive drop in candidate supply since April, there can be little solace taken when considering that there are now hundreds of thousands fewer workers in the labour market compared to before the pandemic; the ONS recently reported that, between October and December 2021, 400,000 people had disengaged from work entirely. In recent times, most of the disengaged would be students. Now, however, the majority are part of the 50 year-old+ cohort seeking different lives in a post-pandemic world.

      This capacity constraint is likely to cause even greater competitiveness, and in turn the need for higher starting salaries – particularly if combined with a materialisation of current hiring signals…

      Capacity Constraint Likely to Cause Even Greater Competitiveness

      Even with the economic outlook looking less and less rosy, the confidence statistics signal little respite for Andrew Bailey and hirers around the country hoping for some form of slowdown; despite falling confidence in the economy, businesses’ confidence in hiring has continued to rise.

      According to the REC, employer confidence in the economy has, on average, dropped by 5 percentage points to -11% in December. In contrast, their confidence in hiring remained positive at +9%.

      A consequence of this unintuitive combination is a huge upturn in demand for temporary workers. In this period, hiring intentions for temps increased by 15% to net +30%, which makes sense given the circumstances; when faced with uncertainty, businesses might look to cover their needs without the long-term commitment of hiring someone on a permanent basis. There is, of course, the added benefit of temporary workers having shorter notice periods too, meaning they’re able to make immediate impacts on their respective businesses – particularly effective in a rapidly changing post-pandemic economy.

      Fist Bumps or Handshakes?

      In response to the ultra-competitive environment, there is one particular strategy that might well help hirers. Even better, this strategy doesn’t have to incur any extra financial burden, unlike hiking salaries and offering better packages.

      This strategy involves making the idea of working in your business more tangible for the candidate during the interview stage: through meeting candidates in person, instead of through Zoom or Microsoft teams.

      Fist Bumps or Hand Shakes?

      As I have written about before, there is certainly a need to simplify interview and application processes, and I don’t want to contradict myself. However, it’s important to do so without reducing the opportunity for candidates to get a tangible feeling for the business and the people they hope to be working for/with.

      Although the success of Simon Leviev, also known as the “Tinder Swindler“, may not suggest so, young people are all too aware that people are more likely to misrepresent themselves online than face-to-face (Zimbler & Feldman, 2011). Would you be fully confident in being hired by a business or a person you’ve never met beyond a screen – and vice versa?

      Even beyond the matter of trust, experiencing a future job through a Zoom meeting offers so little, both in terms of information and in terms of an opportunity to associate or connect with a business that they may work for in the future.

      By meeting future managers and co-workers in person and seeing the space that they will then (potentially) work in, candidates will more easily be able to visualise themselves in the respective role.

      Changing jobs is a big leap for most people, doing so “in the dark” is an even bigger leap. For this reason, in-person interviews will likely be even more effective for those candidates who like to play it safe or candidates considering staying in their current business/vying for promotions, who may see moving as a risk compared to their comfortable situations; visualisation is, after all, a technique used commonly in sport to bring about a state of relaxation and reduce doubts during the critical moments of action.

      What are your thoughts on the current labour market? Please share your thoughts on our LinkedIn discussion

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