+1-646-6882318
nicki@theglasshammer.com

The Real Cost of the Recession to UK Employers

By Melissa J. Anderson

According to a new report by the Chartered Institute of Personnel and Development, the recession has cost UK employers £28.6 billion. That comes from lost productivity, the cost of firing someone, and other factors.

Additionally, the report says, the recession has cost the UK “a cumulative output loss of £87 billion, or 6% of GDP.”

John Philpott, chief economic adviser at the CIPD, said: “It has been four years since the labour market began to be hit by the aftershock of the global financial crisis. The impact on the extra one million people unemployed is plain to see, but the financial pain of the jobs recession has been felt by employers and people in work as well as the jobless.”

He continued, “The cumulative cost of high unemployment and extensive underemployment has been massive and without a more robust economic recovery will continue to rise. This further underlines the need for the Chancellor to set out a convincing strategy for growth and jobs in next week’s Budget.”

The effects of the jobs recession on employers is likely to be felt for some time moving forward as development of new talent is stalling.

The Report

The study, “Counting the cost of the jobs recession,” amounts to an overview of the economic factors that have arisen as the result of the recession. For example, it reveals, one in ten people employed in spring of 2008 have lost a job, with 64% of layoffs accounted for by men and 36% going to women.

The report also discusses how employees who do manage to find work after losing their jobs generally make less money – much less in fact, with their salaries cut by about a third.

Additionally, people are now bringing home less, in real terms, than before the recession.

Although weekly earnings in both the private and public sectors were higher at the end of 2011 than at the start of the jobs recession, they have fallen in real terms and are considerably lower in cash terms than if the pre-recession rate of increase of around 4.5% per annum had been maintained.

And in cash terms, the average worker is around £3,000 a year worse off than if pay had increased at the pre-recession rate.

All in all, a grim picture for the workforce and for employers managing talent.

Next Generation of Workers

The study also revealed an unexpected trend. In 2009, the Economist predicted that employees new to the workforce would bear the brunt of job losses. The UK government prepared with a program to aid younger workers who had been laid off for over a year:

“The limited gains from flexibility suggest that there is still much pain to come. The main casualties are already apparent. Even in good times youngsters struggle to get a foothold in the labour market. That makes them especially vulnerable now that employers are shedding staff.

“Since April [2009] employers have been eligible for a subsidy of £1,000 if they recruit someone who has been out of work for at least six months. And from January 2010 any young person who has been jobless for a year or more will be guaranteed a job or training assignment.”

But, in fact, that hasn’t been the case, according to the CIPD study. “The share of redundancies borne by older people is generally higher than that for people aged under 35.”

Rather than cutting more junior staff, UK companies have responded to the recession by laying off more experienced employees and hiring part time and temporary staffers to take their place.

In the short term, this cost-cutting strategy may be workable. But what does it mean for the future of the UK’s workforce? Valuable experience and leadership has been let go in favor of the bottom line, thereby leaving inexperienced junior and part time talent in line to leadership – without guidance from above. Could this harm productivity and strategic growth in the long term?

Leave a Reply