What’s Happening in the Labour Market?
Amidst a continuing ‘cost of living crisis’, there are growing concerns across the business community about a deterioration in our competitive position and at a rapidly increasing labour cost, which is also being impacted by significant political commitments on labour policy issues.
Everyone is acutely aware of the significant effects for citizens, workers and for businesses from the escalating price inflation (CPI) in Ireland, which rose to 9.1% annually in July, unchanged since June and which was the fastest increase since 1984. Helpfully, the latest Eurostat figures show that Ireland's inflation, as measured by the Harmonised Consumer Index of Prices (HICP), fell back in August to 8.9% from 9.6% in July. In response to the crisis, an additional range of responses is expected from Government this month in September and will be welcome, if long overdue.
Overview
With ESRI predictions of GDP growth of 6.8% in 2022 and 4.8% in 2023, and Central Bank predicting GDP growth of 9.1% in 2022 and 4.8% in 2023, practically every employer can bear witness to the tightness in our labour market. The rate of unemployment at 4.3% in August speaks to the pressures being felt to attract and retain staff. On the upside we now have some 2.55 million people in employment, which is almost 200,000 more than in 2019 and is a fantastic achievement.
So, whilst demand for new talent is evident across most sectors there are some signals that this is being negatively impacted by the burgeoning costs for businesses, with many SME’s being particularly vulnerable. This tends to be evidenced more strongly in sectors like retail and construction, amongst others. However, most analysts are predicting that the annual average unemployment rate will stay under 5% for the year as a whole, while job vacancy rates will remain high.
Amidst rising levels of pay settlements, it is notable that these are still well short of predicted inflation levels for 2023. An earlier analysis of private sector pay deals by IRN News over Q4, 2021 & Q1, 2022, showed that only about 25% were in excess of 3% p.a. Importantly, while settlements are creeping upwards, they are still well short of the current inflation rate. However, some employers have had to increase rates beyond current ‘run rates’ for pay adjustments to attract and retain staff, particularly if they are operating marginally above the Minimum Wage or even the national Living Wage.
An Unprecedented Number of People have Moved Job and Between Sectors
A recent analysis by Ibec (2022, Q2, Quarterly Economic Outlook) has shown that key skills remain in high demand. Of about 186,800 people on the Live Register they assess, “only 11% formerly held roles in professional, technical or managerial positions, all areas of high demand in the current labour market. An additional 34% have no recently held occupation…”. The business organisation assesses that of the unemployed “just under two-thirds have been unemployed for under a year…leaving just over a third as long-term unemployed, having been on the Live Register for more than a year.”
In looking at key cohorts, the numbers show continuing improvements in youth employment, female employment and indeed older workers remaining employed:
The female unemployment rate in July was unchanged at 4.3% from June 2022, and is down from 5.7% in July 2021.
In looking at youth unemployment, there is good news, as for persons aged 15-24 years the rate is 10.9% from a revised rate of 10.8 % in June 2022.
Finally, for those aged 25-74 years of age the rate is down to 3.1% from 3.3% in June 2022.
Research by the Irish Government Economic Evaluation Service (IGEES) — ‘Trends in Post-PUP Employment: April 2022′ as analysed by the Irish Times[1], shows the extent of the shake-up in the jobs market, post the pandemic and the extent to which people have been switching jobs or sectors. One striking feature is that due to the increased demand for labour by many consumer-facing businesses in the domestic economy there continues to be a high level of demand for skills and labour in the high-tech, multinational / FDI sectors. The research shows:
Of the 74% or 571,000 who had been on PUP (774,200 claimants moved off PUP in November 2021) and returned to employment, 55% were working with their former employer, but 45% were working for a new employer.
Of those working for a new employer, over two-thirds moved to a different sector, with the balance staying in the same sector but with a different employer. In terms of sectoral patterns, this rose to 62% in ICT, and in food and accommodation, about 50% who returned to work did so with a new employer.
Construction and health were most likely to hold on to employees.
Two-thirds of those who moved jobs in accommodation and food moved to a new sector. Accommodation and food lost c. 26,000 employees, or about 20% of its workforce
Almost 10% of people in employment moved job and the bulk of these moved to a different sector which is unprecedented in such a short period.
Critically, Ireland has done extremely well, post the pandemic and while over-55s have been the slowest to return to employment with some having chosen early retirement these have been more than offset by new entrants. This surge in employment levels has also been hugely enabled by rapid and significant progress being made at enterprise level with employers and workers adapting well in response to worker demand for remote working and to the introduction of various forms of hybrid/flexible working despite its challenges.
Apart from decisions about early retirement by some older workers, the tightening of the labour market has been compounded too by the departure of non-Irish nationals during Covid. Our ability to attract these to return, or to rely on new inward migration, will be severely impacted by cost of living, housing and, for some, childcare costs
What’s ahead?
It seems that a lack of labour availability will be with us for some time and is reflective of the experience of many other countries as they emerged from the pandemic. The evidence can be seen in our daily lives, from the cafes or restaurants unable to open early in the week to other ‘opportunity cost’ issues for other businesses who are seriously re-evaluating their plans for investment or expansion as a result. Organisations are having to either look to technology, new talent pools or creative new ways to better align to changing employee expectations to attract talent. Ireland’s skilled and agile workforce has been a pivotal component of our economic development, both in supporting the growth of our domestic businesses and attracting multinational investment.
Employers are having to think more creatively and inclusively about their talent development. This might include addressing the needs of returners to the workforce, career changers, remote workers, experienced retirees, or those seeking part-time or contract work, and other non-traditional workers. As our age demographic continues to increase, businesses find they are now regularly working with five generations of employees under one roof. This brings with it a new set of challenges and opportunities which businesses must learn to navigate. As a country, and for each business, strategic investment in re-skilling and up-skilling is the best pathway to both protecting jobs, expanding opportunities for our people, enhancing social mobility and maximising growth.
Finally, for now, there is little evidence that businesses have put the break on recruitment, but over Q4, 2022 and into 2023, if international fears of economic contraction or even recession bear fruit, that could all change, and quickly.
If you would like to talk to us about any of the above issues, please get in touch with me at brendan.mcginty@stratis.ie or any one of our Partners.
Brendan McGinty | Managing Partner
Stratis Consulting
‘Strategic Employment Relations’
T: +353 (0) 1 2166302
M: +353 (0) 87 2433038
W: www.stratis.ie Twitter: @Stratisconsult LinkedIn: Follow us here
Disclaimer: The information in this article is for practical guidance only and does not constitute legal or case specific advice. The answers to specific situations will vary depending on the circumstances of each case. This is not a substitute for specific professional advice relevant to individual circumstances facing your business.
[1] See “There are loads of job vacancies in Ireland, but where are the workers?” Cliff Taylor, Irish Times 02.06.22
