‘Jobs light/pay tight recovery’

Posted on 5 Jan 2010 by The Manufacturer

The Chartered Institute of Personnel and Development has called for a series of actions to stimulate recovery in Britain’s employment market.

The CIPD has released a manifesto called Platform 2010 – A Recovery That Works. It includes a National Minimum Wage freeze for younger workers, removing the default retirement age, and abandoning the increase in employers’ NICs planned for 2011.

“We strongly welcome the steps the Government has taken to avoid the creation of a ‘lost generation’ in the UK,” said John Philpott, CIPD chief economic adviser. “But freezing the National Minimum Wage for younger workers is necessary to ensure that all this good work is not fatally undermined just as the economy begins to recover. Pay restraint is likely to be a feature of the year ahead as employers and employees continue to work together to minimise job losses. It is right that younger workers lucky enough to have jobs should play their collective part in helping maximise the chances for those who do not.”

Other measures touted in the report include:

• Delaying fiscal deficit reduction measures, but freeze public sector pay bill and conduct efficiency review of all quangos
• Extending the right to request flexible working to all employees from 2013
• Extending the job guarantee scheme to the long-term unemployed aged over 50
• Leading a national awareness campaign on the importance of good people management skills among line managers.

The report is available to download as a PDF by clicking here.

Late last year, CIPD announced its expectation that unemployment will peak at 2.8m in the summer of this year – a marked improvement on the 3.2m it predicted in mid 2009. Pay increases, however, are likely to suffer.

Describing a ‘jobs light/pay tight recovery’ in its annual employment Barometer Report for 2010, the Institute forecasts a further 250,000 redundancies by the end of quarter two and below inflation pay increases for most people in work.

But while the unemployment predictions are better than formerly feared, part of this improvement will be offset if other parts of the economy do not improve as expected.

Dr Philpott adds: “Given the likelihood of a rise in price inflation to at least 3% in 2010 on the RPI measure, our forecast implies a squeeze on real pay next year. This could be difficult to deliver following a recession during which many private sector employees have experienced pay freezes or pay cuts. A slower than expected recovery or stronger earnings growth would threaten to raise peak unemployment to at least 3 million.

“The impact on jobs of planned cuts in public spending and tax increases – especially the 1% hike in employers’ National Insurance Contributions (NICs) from April 2011 – is expected to be felt after the peak in unemployment. However, if employers were to anticipate the rise in NICs when making staffing decisions and/or there was a more immediate cut in public spending – which could be the case if the Conservatives gain power at the General Election due in the first half of 2010 – unemployment might peak at a higher rate than we currently forecast.”