CIPD call on Government to act on labour shortages

Gerwyn Davies reveals the latest research from the CIPD on the skills crisis and highlights the need for long-term reform of government skills policy

The re-emergence of rising labour shortages has become one of the most important, fast-moving and debatable issues in the UK economy. In a matter of months, media stories have switched from unsuccessful job applicants applying for hundreds of jobs to employers struggling to fill vacancies, especially in low-paying industries.

This phenomenon has been driven by a rapid increase in hiring which has coincided with a reduction in labour supply; most notably EU-born workers, older workers and students. To help support rising recruitment difficulties, the CIPD has sought to provide a more critical and comprehensive assessment of employers’ perception of skill and labour shortages. The research, based on a survey of employers and a series of industry and regional-specific groups, seeks to shine a light on government policy and employer practice.

While the pandemic and Brexit are commonly cited factors behind the shortages, the research findings suggest that the reasons are more complex and wide-ranging than the commentary suggests.

On the pandemic, one under-reported and related cause of recruitment difficulties currently is the disruption to apprenticeship and training activity. Official data reveals that there has been a sharp fall in apprenticeship completion rates since the pandemic in England, and the figures are worse for Scotland.

In terms of Brexit, some sectors confirm that the supply of EU workers has fallen among some employers in industries that are particularly reliant on EU workers, such as hospitality and transport. However, this observation does not feature in other low-paying sectors, such as retail.

Another under-reported factor is that too many firms are not adopting best HR practice to help improve recruitment and retention rate

Another under-reported factor is that too many firms are not adopting best HR practice to help improve recruitment and retention rates.

In terms of training, one of the striking features is the lack of any mention of leadership and management training as a response to rising shortages. This is disappointing and worrying given the association between poor management and poor retention rates.

Another underlying factor behind persistent hard-to-fill vacancies is that recruitment difficulties for some firms can be linked to a narrow, ad-hoc approach to hiring which means they are not reaching out to under-represented groups in the labour market. In addition, it is clear that some industries, most notably transport, are overly reliant on recruitment agencies and temporary workers. Indeed, one of the peculiar trends since the onset of the pandemic is that virtually all of the employment growth since then has come from temporary work against a backdrop of rising labour shortages.

On the upside, the research shows some positive signals employers are getting better at recruiting and retaining workers in response to rising labour shortages; most notably through a focus on upskilling, apprenticeships and in some instances raising wages. The increase in apprenticeship activity is particularly encouraging given the previous disruption. However, the tail of employers who are struggling to find solutions suggests that more government intervention is required to deal with this rising challenge that go beyond a temporary financial incentive of £3,000 to hire apprentices.

What do the Government need to do?

In response, the CIPD is proposing three key changes to Government policy that could help address these challenges. First, a temporary job mobility scheme for young EU nationals could help cushion the impact of a reduction in labour supply and rapid expansion in hiring. Under this scheme, young jobseekers could come to the UK to live and work for up to 2 years without a job offer. The attractions of this approach are that it is less costly, less administratively burdensome and helps overcome the low expertise and awareness of the new immigration system demonstrated by employers in this report. This is especially true of SMEs, for whom industry or occupation-specific schemes are difficult to navigate.

However, perhaps the most significant reforms lie in skills policy. In particular, the findings reinforce the case for the Apprenticeship Levy to be urgently reformed to create a more flexible training levy to support employer investment in a wider range of skills training and boost their engagement with further education colleges. For example, in transport the funding could be earmarked towards the cost of much needed HGV driver training or it could be earmarked for NVQs for support workers in social care.

Apprenticeship wage rates should also be raised to tackle the widespread perception among young unemployed jobseekers that it’s too low to make apprenticeships an attractive option. The disappointing apprenticeships statistics are not just down to employers after all, uptake is part of a two-way street.

And finally, the Government should invest £60m a year to provide a business improvement consultancy service through the Growth Hub network. This would provide SMEs with up to two-days of free business consultancy support on vital issues such as people management capability, workforce skills development and technology adoption to improve recruitment practice, help retention rates and boost productivity through better paid and quality jobs.

The Government’s ambition to transition the UK to a ‘high wage, high skill’ economy is laudable. However, the research findings suggest that the UK economy faces significant challenges in meeting this policy objective. Long-term reforms to skills policy and business support are therefore required to help employers see the workforce as a key value driver to invest in rather than a transient cost to be managed down.

The report this article is based on is the CIPD’s ‘Addressing skills and labour shortages post-Brexit’ report

Gerwyn Davies is senior policy adviser at the CIPD


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