The latest labor market bulletin from the UK Office for National Statistics, released on Tuesday, shows that the number of citizens of other EU countries working in the UK has declined in the past year by the largest amount since the government began collecting comparable records two decades ago. Between April and June 2018, approximately 2.28 million EU nationals were employed in the country: 86,000 fewer than in the second quarter of 2017. In the same period, the number of employed UK nationals increased by 332,000 to 28.76 million, while the number of non-EU foreign workers increased by 74,000 to 1.27 million.
Gerwyn Davies, senior labour market analyst at the CIPD, comments on the report to Personnel Today:
“Today’s figures confirm that the UK labour market has suffered from a ‘supply shock’ of fewer EU-born workers coming to live and work in the UK during the past year, compared with previous years. This has contributed to labour supply failing to keep pace with the strong demand for workers; which is consistent with another welcome fall in unemployment.” …
“The tightening labour market is putting modest upward pressure on pay, but this still isn’t leading to more widespread pressure due to ongoing weak productivity,” said Davies.
New employer survey data released on Monday by the CIPD and the recruitment firm Adecco showed that UK employers were experiencing staff shortages due to the low-unemployment environment and a decline in migration from the EU. The survey found that the number of applicants per vacancy had dropped across all roles since last summer, while 66 percent of employers said at least some of their vacancies were proving difficult to fill.
Nonetheless, this tight labor market isn’t translating into higher wages for most UK employees.
In recent years, bachelor’s degrees have gone from giving young professionals a leg up in the job market to being a must-have credential for a wide range of careers, with college graduates taking the vast majority of new jobs created in the US since the end of the Great Recession nearly a decade ago. More recently, however, employers have begun to question whether these degrees are always necessary and dropping degree requirements for some roles.
A tight labor market and talent shortages in high-demand fields are driving this trend further. Last week, the Wall Street Journal highlighted an analysis of 15 million job ads by Burning Glass Technologies, which found that the share of job postings requiring a college degree had fallen from 32 percent to 30 percent between 2017 and the first half of 2018, down from 34 percent in 2012. Work experience requirements are also declining, with only 23 percent of entry-level jobs asking applicants for three years of experience or more, compared to 29 percent in 2012. That means there are an additional 1.2 million jobs accessible to candidates with little or no experience today than a few years ago.
With growing numbers of unfilled jobs, more companies are looking for ways to broaden their talent pool and speed up the rate at which they can fill a role. “Downskilling,” or requiring less work experience and education, is a strategy many companies have opted for to achieve this. One field in which many employers have “downskilled” to broaden their applicant pool is cybersecurity.
The latest migration figures from the UK’s Office of National Statistics, released last week, showed that the number of people emigrating to the UK from EU countries had fallen to its lowest level in four years, the Guardian reported:
Data from the Office for National Statistics released on Monday showed net long-term migration to the UK from the EU was 101,000 in 2017 – the lowest level since the year ending March 2013. Overall, the data showed that about 280,000 more people came to the UK than left in 2017.
While net migration continues to add to the UK population, the figure is down from record highs recorded in 2015 and early 2016. There has been a gradual increase in emigration since 2015 to approximately 350,000. Immigration has stayed stable at about 630,000, the report showed. Net migration from countries outside the EU rose to 227,000, the highest level since September 2010.
Concerned about the impact of immigration on wages and job opportunities in the domestic labor market, the UK government in 2010 set a goal of cutting net migration figures to below 100,000 a year. Curbing immigration from the EU was also one of the key objectives of Brexit. The British business community, however, has warned that reductions in immigration will make it harder for UK employers to fill jobs, slowing down hiring and hurting the economy.
In the context of a very tight labor market, these new figures are bad news for employers, Gerwyn Davies, senior labour market adviser at the CIPD, tells Jo Faragher at Personnel Today:
In a sign of just how proactive employers need to be in the current US labor market, Kohl’s announced last week that it was already taking applications for seasonal positions for the coming autumn and winter, CNN Money reported:
Kohl’s is filling jobs at 300 of its 1,100 US stores for the back-to-school and holiday seasons. Additional jobs at stores and fulfillment centers will come open later in the year. It’s the earliest Kohl’s has ever started hiring seasonal workers, said Ryan Festerling, the store’s executive vice president of human resources.
Seasonal hiring has been increasingly competitive in the US over the past few years, with retailers hiring seasonal help earlier and having a hard time finding the numbers of workers they need. These large employers are hiring store staff by the thousands, but also lots of warehouse and fulfillment roles: a sign of the growing impact of e-commerce. Last year, some companies opted for alternative strategies like giving more hours to existing employees or hiring work-from-home customer service representatives, as means mitigating their need for extra on-site staff in the tight market.
The rapid growth of e-commerce, a strengthening economy, and a rebounding in consumer spending habits have caused a spike in demand in the US trucking industry over the past few years. At the same time as the need for their services is growing, however, the country is facing a shortage of truck drivers, Kirsten Korosec reports at Fortune, with an aging population of drivers exiting the workforce and fewer young Americans willing to sign up for long, lonely hours on the road:
The pain point is specific. The industry calls them “full-truckload, over-the-road nonlocal drivers,” jargon for drivers who haul goods over long distances, often days, if not weeks, before returning home. That lifestyle just isn’t attracting millennials and the incoming Gen Z cohort who place a greater emphasis on work/life balance.
The long-haul sector, which employs around 500,000, was in need of nearly 51,000 truck drivers by the end of 2017, the worst shortage it had ever seen. The lack of qualified drivers—some trucking companies have complained only 1% to 2% of applicants meet their requirements—has businesses competing for the same pool of workers.
The shortage is creating a ripple effect. Companies vying for qualified workers are offering higher pay and signing bonuses. The median pay for drivers in this category is $59,000, according to the ATA. Experienced drivers who work for private fleets can make as much as $86,000 a year.
The truck driver shortage is not new: At CEB, now Gartner, our State of the Labor Market report for the US late last year showed that heavy and tractor-trailer truck drivers had the highest demand of all occupations, followed by registered nurses. Demand for trucking skills has been growing rapidly, but with experienced drivers retiring and not being replaced by new talent, the segment of the labor market with this skill is very small. (CEB Recruiting Leadership Council members can read the full report here.)
LinkedIn’s latest Workforce Report for the US spotlights a phenomenon that’s shaking up the labor market in and around Texas, the nerve center of the American oil industry, where hiring has spiked in tandem with oil prices. Energy industry hiring rose 5.2 percent in the year to May 2018, compared to an average of 4.5 percent across all industries nationwide, LinkedIn found. Job growth has closely tracked the price of oil, with a dip in 2015-2016 followed by a boom as prices have risen steadily over the past two years. Hiring in Houston, the energy industry’s home base, grew 12.4 percent year-over-year, contributing to a reduction in the surplus of petroleum engineering, energy, and geology skills.
The energy industry is particularly sensitive to boom-bust cycles, and, so are cities like Odessa and Midland in west Texas, where the local economy is dominated by a single industry (in this case, oil), the report notes. In the current boom cycle, the migration of workers to the Odessa-Midland area is further tightening labor markets in Houston and other Texas cities:
With oil prices on the rise, talent inflows to this oil boom-town have picked up, particularly from the three largest Texas cities—Houston, Dallas, and Austin. Net movements to Odessa-Midland from these cities have grown significantly since September 2017, to 0.34 per 10,000 from Dallas (750%), 1.05 per 10,000 from Houston (44%), and 1.03 from Austin (255%). This impact can also be felt in the housing market—a recent report found that Odessa-Midland had the highest national rent increase in 2017, up 35.7% year-over-year.
Driving this boom is the rapid expansion of shale oil extraction in the Permian Basin, west Texas’s oil and natural gas producing region. High oil prices combined with advances in extraction technology have made shale extraction increasingly profitable, meaning oil companies have the incentive and the resources to lure talent with high pay. That’s great news for anyone working on an oil rig, but ancillary workers like truck drivers are also seeing huge signing bonuses and pay hikes, the Wall Street Journal reports, with some truckers in the Permian Basin earning over $100,000 a year, double the national average for long-haul truckers.
In a recent column at BloombergView, Michael Strain, an economist at the American Enterprise Institute, asserted that US businesses, particularly manufacturers, protest too much about the skills gap. Their inability to source skilled employees could be solved, he argued, if they were simply willing to pay higher wages for the talent they need:
Wage growth is picking up, but it is lower than what many economists expect in light of overall economic conditions, and it is not soaring for specific industries.
Simply put, if businesses can’t find workers — or can’t find workers with the right skills — they should raise their wage offers. Basic supply-and-demand logic suggests that doing so will broaden the pool of workers interested in the job, and will make the job more desirable to applicants. In addition, raising wage offerings would likely draw in some of the millions of Americans who report they want a job but are out of the labor force. So unless wage growth picks up, the warnings about labor shortages will fall flat.
Strain is not the first economist to argue that the skills gap is a simple supply-and-demand problem that could be solved by raising the price of labor, or that the problem is on the demand side (not enough attractive jobs) as well as the supply side (not enough skilled workers). Stagnant wage growth may be a factor in US employers’ labor market woes, but in focusing exclusively on wages rather than training and hiring barriers, Strain’s claim oversimplifies the challenge employers are facing. Years of research consistently tell us that while competitive compensation is a large component of what attracts candidates to jobs, there’s no simple formula by which you can convince any given candidate to take a job simply by offering a high enough salary.
It’s easy to point to “basic supply-and-demand logic” to criticize manufacturing companies when you don’t actually understand their experiences in local labor markets, but who says manufacturers aren’t trying to raise wages already anyway? A 2015 study by the Manufacturing Institute and Deloitte showed that 80 percent of manufacturing companies were already willing to pay more than market rates to reduce the skills gap—especially for more skilled labor, such as machinists, craft workers, and industrial engineers. Yet according to our own research at CEB, now Gartner, only 23 percent of heads of HR in the manufacturing industry believe they can close critical skills gaps over the next 12 months.