THE BLOG

The Real Impact of Wage Stagnation

25/01/2016 17:33 GMT | Updated 25/01/2017 10:12 GMT

This week the Office for National Statistics announced that unemployment figures dropped to 5.1%, with 30.18million people in work in the UK - the lowest rate of unemployment in a decade. Of course, this is great news - finally, more and more people are finding security in employment and are now able to support themselves and their families financially, as well as aid the growth of the UK economy.

Employment is always a good sign, however wage growth stagnation isn't. Earnings have now slowed for four consecutive months. This means that although we have more people in work, there are also more people feeling unsatisfied, under paid, and that there's no room for progression because they're not being developed. In fact, one of the top reasons employees leave a job is because of a genuine lack of interest by their employers towards their career progression.

Is this a classic case of what goes up must come down? In my view, employers really need to think carefully about the negative impact of wage stagnation and why it's so important to ensure employees are being offered their market rate.

Of course I understand this is difficult, especially for the flock of new startup businesses who struggle to find the funds to employ staff, but who know investing in a team is the best route to success.

All businesses need a team of people who are passionate and productive in their roles - that should be a globally recognised truth.

Productivity has been at the forefront of George Osborne's plans for building a more prosperous nation, but how do we expect to put this into practise if wage growth continues to stagnate? Employees will not become more productive if we do not have the financial levers to encourage them to do so.

Instead, what we'll see is an increase of employees searching for pastures new elsewhere. London offers 23% higher salaries than anywhere else in the UK, however when you take into account rising levels of housing and living costs, these salaries seem unsubstantial compared to those offered by other countries in Europe and further abroad.

It was recently reported that the UK is the third best place to look for work in Europe but neglecting our employees financially could be a real worry for the UK economy, resulting in a shortage of top talent, meaning a decline in business scalability.

A mass exodus of talent will inevitably lead to skill shortages across the UK. Working in recruitment, it's always interesting to see the rise and falls of demand in different sectors. Finance and professional services continue to sustain a high demand for new talent but interestingly, we've also seen a surge in construction projects needing workers.

We are already seeing skills gaps in many sectors across the UK. For example, in London there are £95.7billion worth of construction projects requiring a 20% increase in skilled workers; with 90,000 workers in the industry looking to retire between now and 2020.

This is an issue on the back of every employers mind; 63% of which believe the biggest threat to the UK's competitiveness as a place to employ people is the abundance of low level skills which are prevalent in the market.

So, how do we combat this? We need to make our employees feel valued. If we do not have financial instruments such as market rate wage to motivate staff then that's when investing in their soft skills and offering effective training will ensure they are developing themselves professionally. In turn, this will increase productivity throughout your business.

I'm interested to see how this story will unfold in the coming months and how the introduction of the Living Wage in London could potentially shake things up.