Pay confidence in the UK is leaving employers facing a ‘perfect storm’ of worker optimism amid a worsening skills crisis.
According to the latest Jobs Confidence Index, an economic tracker produced by recruitment consultancy Robert Half with the Centre for Economics and Business Research (Cebr), pay confidence in the workforce increased 70.1 points to +33.5, returning to positive territory for the first time since Q2 2022.
This, say the report’s authors, has been driven by the growth in real wages, which have risen for the first time since Q1 2022, leading to 60% of employees reporting last month that they are confident about their job over the next six months.
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According to the report, positive consumer confidence and healthy business optimism in Q2 2023 have resulted in the latest jobs confidence reading of +47.2 – the highest recorded level since Q1 2022 when Covid restrictions were lifted.
This figure is also significantly above normal levels, with 30 considered a high reading in the Index, and represents a rise of 17.8 points on the previous quarter.
This level of optimism looks set to continue, with 41.9% of those surveyed in August revealing that they are confident about their future career prospects and Cebr upgrading its forecast for economic growth in 2023 from 0.2% to 0.4%.
Matt Weston, senior managing director at Robert Half, said: “The UK economy has demonstrated more resilience in 2023 so far. In what was expected to be a period of economic contraction verging on recession, the UK has seen growth, with the economy expanding by 0.2% in Q2. However, the country still faces systemic skills shortages, while worker confidence thrives as our data suggests.
“We are witnessing a perfect storm of unprecedented worker confidence in job security, pay and career progression that is placing significant pressure on the labour market. Employee mobility is high, as self-assured employees, aware of low unemployment rates, seek greater working environments or remuneration elsewhere. The affected businesses consequently need to deal with such talent loss in a tight market, fuelling the wage spiral we are seeing today.”
He added that with nominal wage growth recently outpacing inflation, business leaders might be less willing to accommodate higher pay expectations in future, but that high employee confidence could mean many will not hesitate to move to other employers if they feel they are not meeting their earning potential.
“To address this, non-financial and bottom-line friendly retention strategies could aid the prevention of further wage inflation, while helping businesses avoid the cycle of having to attract new talent,” he said.
“Despite the anticipated dip in job vacancies, the Index suggests that levels will remain above pre-pandemic norms for the remainder of the year and will likely stabilise at around 925,000. It seems a tight labour market defined by a war for talent is far from being over and the opportunities lying ahead are as abundant as the challenges. The war for talent may seem like a crisis, but it’s an opportunity for employers to seize – or squander.”
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