CIPD response to Autumn Statement and Growth Review: OBR projecting 710,000 public sector job cuts by 2017 as Chancellor sticks to fiscal Plan A
On the outlook for employment and the labour market, Dr John Philpott, Chief Economic Adviser to the CIPD, comments:
“The OBR forecasts have moved in line with those made by the CIPD during the past 18 months. The OBR now expects the public sector to shed 710,000 jobs by 2017, a very sharp increase on the previous projection but very close to CIPD estimates drawn from surveying public sector employers.
"As a result, and in combination with a weaker outlook for private sector job creation, the OBR now expects unemployment to peak at 2.8 million by the end of 2012. The Chancellor will have to acknowledge that this is the price of sticking with his fiscal Plan A, and things could yet turn out to be worse if the situation in the eurozone deteriorates further.
“Encouragingly, and also in keeping with the CIPD’s view, the OBR concludes that there is little evidence of a permanent structural deterioration in the labour market and that the structural unemployment rate is around 5.35%.
"This is good news in that it suggests that unemployment can fall quite rapidly once the economy returns to a strong rate of growth, which incidentally implicitly undermines the Chancellor’s argument that the UK needs a major dose of employment deregulation to stimulate job creation.
"The bad news, however, is that with economic growth remaining sluggish for some time to come the OBR expects unemployment to remain above 2 million until the middle of the decade, which will put downward pressure on earnings growth across all sectors of the economy for several years to come.”
On proposals regarding employment legislation, Mike Emmott, employee relations adviser at CIPD, comments: "Pitching employment deregulation as a major contribution to driving growth is at best a distraction and at its worst could undermine efforts to boost competitiveness and productivity. Recent survey evidence for BIS shows that the proportion of small businesses that regard regulation, including employment regulation, as the main obstacle to business success was only 6%, and this figure has halved over the last two years.
“Removing significant employment protections would have an adverse impact on employee engagement, risking the very economic recovery that the Government is trying to nurture. The proposal to introduce compensated no fault dismissal for the smallest firms runs exactly this risk.
"There’s also a danger of creating a two-tier labour market causing confusion for employers and employees alike, and introducing a perverse disincentive for micro-businesses to recruit more staff and grow.
“Employers have more to gain in productivity and growth from boosting their own abilities, and those of their managers, to make effective use of the skills and involvement of their workforce, than they will through changes to employment law.
"The UK has real deficiencies in management and leadership skills, and the CIPD is urging Government to focus less on giving employers implausible options such as ‘protected conversations’ to cover up for these deficiencies, and more on encouraging employers to develop and nurture these skills, People management is something you have to learn rather than simply pick up on the way – and deregulation is no substitute for better management.”
On youth unemployment, Katerina Rüdiger, skills adviser at the CIPD, comments on the ‘Youth Contract’ and the proposal to give employers greater ownership of the skills system:
“We welcome the package of measures to support employers to hire young people and provide them with additional jobs related skills and an experience of the working world. Research consistently shows the biggest obstacle young people have faced in getting employers to hire them is a perceived lack of experience.
"This becomes an unbreakable cycle for too many young people – with no experience, meaning no job, meaning no experience. Many employers are reluctant to employ young people as they think they are less productive, however all the evidence suggests a big difference in employer attitudes to young people between those who have actually employed them, against those who are rely on commonly held perceptions and prejudice.
"On that basis, if the youth contract is successful in widening the pool of employers who have recent experience of employing young workers, it will encourage more employers to take a more long-term approach to grow their own workforce, and future young people will benefit from the positive contributions made by this subsidised cohort of young people.
“We need more employers to be more proactive and ambitious when it comes to work-based training – such as apprenticeships – for young people, and to engage more in skills development. The proposal of greater employer ownership of the skills system and greater transparency, with funding going directly to employers, will help to improve the job relevance and quality of training delivered, and also to reduce the complexity of the system.”
On the delays announced yesterday to the auto-enrolment pension scheme, Charles Cotton, rewards adviser at the CIPD, comments:
“This is dressed up as a ‘win’ for hard-pressed small businesses, but could cost the small business sector of the economy dear in the long-run.
"The Government’s decision to postpone the implementation of pension auto-enrolment for small employers is a great opportunity for our members to promote their own organisations as being decent places to work in terms of pensions.
"With talent always at a premium, this decision will help put blue water between those employers that are willing to contribute to the retirement plans of their employees and those that aren’t. The downside for the economy is that the whole small business sector could start to pick up an image as a ‘low-grade employer’, deterring the brightest and best for working in what should be the engine room of our economy.
"Auto-enrolment is a small price to pay for access to the best employees on offer. Weakening it in this way risks driving more people to take the ‘safer’ option of working for larger firms, with pensions included.”
On announcements on public sector pay and pensions, Charles Cotton, rewards adviser at the CIPD, adds:
“The CIPD welcomes the Chancellor’s decision to ask the pay review bodies to look at how pay can be varied to better meet the needs of local labour markets, clients and tax payers. The CIPD called for more use to be made of regional approaches to pay in our Building Productive Public Sector Workplaces series last year.
“While the CIPD understands why the Government plans to cap public-sector pay rises at 1% for the next two years as existing two-year wage freezes come to an end, we hope that rises can be focused on the lowest paid .
“The decision to raise the state pension age from 66 to 67 in 2026, rather than 2034, reflects the fact that more of us are living for longer. The challenge will be ensuring that we are able to rebalance the economy so that in the future there are jobs for older workers.”