Productivity remains a pressing concern for both businesses and the broader UK economy. Since the 2008 financial crisis, the UK has experienced a consistent decline in productivity. This trend has been exacerbated by periods of austerity, as well as significant disruptions such as Brexit and the COVID-19 pandemic. Projections indicate that the UK is on track to fall 24% below the pre-2008 productivity trend.
A recent study from the Centre for Economic Performance offers valuable insights and potential solutions to address this issue.
It is a superb read, that we will refer to in this post, specifically in relation to the job market. However, there are many exciting insights beyond what we will mention here and is worthy of a few minutes of your time. You will find the link at the bottom of the blog post.
The Role of the Job Market in Productivity
The study emphasizes the pivotal role of the job market in driving productivity improvements. At Senex Recruitment, we wholeheartedly support these findings, particularly given our experience in the ever-changing STEM job market.
The report’s analysis highlights a crucial productivity indicator: how companies respond to external pressures or market growth. This response, referred to as a reallocation of resources, typically involves either expanding or reducing staff numbers. Notably, since the 2008 financial crisis, the UK has experienced distinctive and persistent economic shocks, in contrast to the stability seen before that period. Company’s responses to these shocks have been surprising and unexpected.
Stagnation in Hiring Responses
The study reveals a significant issue: UK firms’ hiring responses have been 30% lower post-2008 compared to pre-crisis levels. This decline aligns with the overall productivity downturn. It appears that many companies are hesitant to adjust their staffing levels due to the ongoing sense of crisis in the UK. Could this hesitation stem from uncertainty about the future? making it challenging for companies to make informed decisions. If there is crisis after crisis it is hard for a business to forecast for the future. As is often mentioned business seeks stability, of which there has been very little in the last decade.
Additionally, the shrinking candidate pool has made it difficult for companies to recruit new talent, further limiting opportunities for growth. As more people enter the job market it creates other positions, which again stimulates change and drives reallocation.
This situation has a ripple effect, reducing opportunities for job seekers and hindering overall economic growth.
Boosting Productivity through Dynamic Resource Allocation
The study suggests that a more dynamic reallocation of resources within companies could boost average productivity in the UK by up to 4.5%. However, it’s essential to acknowledge that there are associated costs, including recruitment, training, and onboarding.
It is also highlighted that there is a bias in the UK economy to low-productivity, low-paying jobs and that there needs to be a drive to achieving change to this economic situation. It is important that investment be made to drive STEM related innovation. Where there is a higher productivity and higher paying jobs.
A Holistic Approach to Productivity Growth
In conclusion, the report underscores the importance of fostering a dynamic and robust job market as a cornerstone of a highly productive UK economy. This should be complemented by top-down policies that ensure access to top talent, quality education, and essential infrastructure, such as reliable transportation and internet connectivity. These elements together can stimulate growth and improve productivity in the UK.
We think that this is an important report for business leaders, HR professionals, recruitment specialists or anybody interested in economics to take a moment of their time to read.
We would value your comments, experiences, or thoughts on the subject. Do you think the solutions lie in this report? Can a more dynamic, fast moving job market help stimulate productivity? Certainly, the job market is very different and subdued to a decade ago and intervention could be a solution to return it to pre-2008 levels.
Want to be part of this productivity stimulus and drive the STEM job market? We invite you to explore our job postings. You can also register as a candidate. If you’re seeking to expand your team within your business, you can register a vacancy on our website.
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We are always ready to help and offer support and advice regarding the career in Science, Technology, Engineering and Manufacturing. Therefore, do not hesitate to call our consultants on 01424 211872.
Here is the link to the article we refer to published by the Centre for Economic Performance on 25th September 2023