Rising employment costs in the UK look set to temper the positive mood around the latest unemployment figures in the country.
The number of people out of work in the UK fell by 60,000 for the period of October to December 2015, maintaining the decade-low unemployment rate of 5.1 per cent. However, wage growth in the same period was only 2 per cent, lower than its peak during 2015.
Although more than 31.4 million people are in work in the UK, the highest figure since 1971, this has not translated into expected wage rises, despite unemployment figures being their lowest since before the global financial crisis.
Governor of the Bank of England, Mark Carney, has previously said that inflation rates are likely to remain low until global economic growth has picked up, and other price pressures, such as wage levels, are alleviated.
A similar pattern in employment figures has also been reported around the world. In the US, unemployment figures decreased to 4.9 per cent, in spite of a sharp decline in the number of jobs being created during the period.
There was a similar story in the Eurozone, with unemployment levels dropping to their lowest level for four years. According to Eurostat, the unemployment rate across the 19 countries in the Eurozone decreased from 10.5 per cent to 10.4 per cent in November 2015.
However, the picture is not entirely rosy on the jobs front. Experts in the UK warned that new government policies coming into force in 2016 could raise employment costs for businesses. This, in turn, could have a major impact on the number of jobs being created.
The Institute of Directors said that the UK’s strong record on employment remained a “bright spot” in an otherwise turbulent global economy. However, they also argued that schemes such as pension auto-enrolment could raise employment costs, ultimately pricing low-skilled workers out of the jobs market.
James Sproule, Chief Economist at the IoD, said: “With pension auto-enrolment kicking in for many small firms this year, at the same time as the apprenticeship levy – essentially a payroll tax – and the National Living Wage, the cost of employing people is shooting up.
“How businesses will respond to these policies remains open to debate, but cumulatively, they are set to cost firms billions and could lead to low-skilled workers being priced out of the job market. The government must be aware of this, and resist any further moves which make it even more expensive to create jobs.”
The IoD’s warning about rising employment costs comes at a time when a number of organisations are already cutting jobs. Over the next few months, both the UK and Europe are set for tens of thousands of job losses across virtually every sector.
Some of the major firms include:
- Canadian aerospace giant Bombardier is cutting 7,000 jobs globally over the next two years.
- Virgin Media plans to cut 900 jobs from its UK workforce by 2017.
- Asda is cutting 200 jobs at its head office in Leeds.
- Lloyds Banking Group is cutting a net 1,585 jobs and closing 29 branches across Britain.
- BP is laying off 7,000 more people.
With the global economy already experiencing a slowdown, there is a high chance that these job losses will not be the last. What remains to be seen is how the new UK policies will impact the employment figures one way or the other.