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Employment prospects for young people promising, but pay increases uncertain

This is according to the latest Labour Market Outlook from the CIPD, the professional body for HR and people development, which shows that the proportion of employers that say they plan to hire more apprentices and school-leavers has increased sharply in response to recruitment difficulties since spring 2014.

Up-skilling for all employees remains the most prevalent employer response to recruitment difficulties, cited by half of employers 50%) but a third (33%) of employers currently reporting hard-to-fill vacancies plan to hire more apprentices, a marked increase compared with just 22% in the spring 2014 report.  

Around a quarter (26%) predict recruiting graduates and twelve per cent plan to hire more school leavers, up by a third compared with the spring 2014 report (9%). 

The findings help explain the latest ONS data which shows that the employment rate for 16-24 year olds that aren’t in full-time education has risen to a level last seen in 2008 (74.3%). 

Gerwyn Davies, labour market analyst, for the CIPD, commented, “After a long, dark decade, the prospects for young people are finally looking brighter. The tightening labour market is undoubtedly encouraging more employers to turn to a wider range of younger recruits. However, it is also due to a recognition among a growing number of employers that they need to develop talent to limit the potential for future labour shortages and pay pressures. The increase in the number of high-quality apprenticeships and the ongoing recruitment pressures faced by employers should mean that the pathway to sustainable employment will be within the reach of more young people. 

“However, employers need to support this recruitment drive by ensuring that they have the people management practices in place to support the effective utilisation of skills, which is critical to job retention and productivity. The UK has the second highest level of over-qualification in the OECD and unless more employers get better at putting their people’s skills to good use, efforts to boost their and the UK’s productivity will be critically undermined. Looking further ahead, the introduction of the & lsquo;National Living Wage’ may boost the attractiveness of employing workers aged below 25 further, which could see young people reverse recent trends by becoming the new winners in a new era for the jobs market.”

Pay becomes polarised

While prospects for young people have improved, the CIPD’s report highlights an increasingly polarised picture for wages. It shows a continuation of the clear gap that exists between workers that have comfortably exceeded the current inflation rate in their pay packets, those who have received modest increases or none at all, and the majority of workers who exist in the middle.

Davies stated, “At one end of the spectrum, workers in occupations where there are skills or labour shortages and thriving sectors such as finance and construction seem likely to get pay increases well above current inflation.

"However, at the other end of the scale, many workers in areas such as manufacturing and public sector, are seeing only a very modest increase in living standards.  In-between, the bulk of workers will continue to see moderate growth in their pay packets but with inflation expected to stay low, they should still feel the benefit of any increases.”

The Labour Market Outlook finds that the level of median pay awards anticipated by employers for the next 12 months has edged up from 1.8% to 2%. Looking back over the last year the median basic pay award is also 2%.  The CIPD data and analysis suggests that the increase in average earnings in recent months highlighted in official statistics may be inflated by a number of factors.

 These include a disproportionately large increase in the number of people in full-time employment, a relatively large above inflation increase in the National Minimum Wage and perhaps most significantly, workers in thriving industries or key roles which are in demand where workers can earn a premium.

In the year to June 2015, almost a quarter of employers gave an increase of at least 3% while almost a fifth froze pay. Just 16% of employers raised wages in response to recruitment challenges. Looking ahead, a fifth of employers, mainly drawn from the private sector, say that their organisations will award a pay increase of 3% or more in the 12 months to June 2016.  Meanwhile, fourteen per cent plan to freeze pay.

Employer confidence continues

The Labour Market Outlook also suggests that employment confidence looks to remain strong over the next three months. This quarter’s net employment balance – which measures the difference between the proportion of employers who expect to increase and those that intend to decrease staff levels – has increased to 29, up from the 24 reported in Spring 2015.


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