The Cost of Living Crisis and its Impact on Careers

It Recruitment discussion

The Cost of Living Crisis sadly isn’t going anywhere soon. Due to a combination of factors, inflation in the UK rose to over 9% between 2021 and 2022. At the same time, permanent salaries fell 7% according to APSCo.

This has put a squeeze on both employee and employer finances, and has radically transformed the job market in less than a year.

While in February 2022, Heat Recruitment found most workers valued work-life balance above pay, the Cost of Living Crisis has forced a rethink. This crisis isn’t just affecting the number of candidates in the job market. It’s also changing the type of jobs prioritised, and the wages workers expect.

In this article, we’ll take an objective look at the trends between the Cost of Living Crisis and work opportunities for both businesses and workers, plus how companies can come out of this crisis stronger than before.

How the Crisis Is Affecting Employees

Money Worries

The ONS found recently that over 75% of British adults worried about the cost of living, and 50% admitted they worried almost daily.

This has driven a massive increase in the number of job seekers. CV-Library is reporting that 75.1% of UK professionals have considered looking to change jobs because of rising costs.

Currently half of people between 18 and 42 report using all their monthly income on living costs. At the same time, 40% have taken on a second job or “side hustle” to stay afloat. This is reflected in the wider job market too. TotalJobs reports that 17% of all workers have had to take a second job to boost income, including 1 in 5 essential workers.

Falling Wages

Salaries are plummeting across multiple industries and sectors. Social Care workers’ salaries have fallen by 1.2% since 2021 (a decline of over 10%, accounting for inflation). Indeed, TotalJobs estimates over 700,000 care workers (47%) could leave the sector within the next year.

But social care workers aren’t the only ones to see their wages drop. By analysing live vacancies, CV-Library have found that average Medical, Pharmaceutical and Scientific wages have fallen by 1%, Sales wages by 1.6%, and Retail by 5%.

Is it any wonder that a fifth of the total UK workforce has had to take on a second job to make ends meet?

Health Impacts

Side hustles and second jobs are taking a heavy toll on workers’ physical and mental health. 55% of British workers feel their health has worsened due to the rising cost of living, with 1 in 4 of those having received a professional diagnosis.

This isn’t limited to young people, either. ONS research shows over a quarter of people 50+ who chose not to work in recent years were forced to make that choice due to health concerns. Additionally, 10% of people taking early retirement blamed stress or burn-out.

And yet, despite all this, the previous number one benefit sought in a new job – work-life balance – has been supplanted by salary increase. Unfortunately people’s mental and physical health has had to take a back seat to the costs of inflation.

How the Crisis Is Affecting Employers

Increased Overheads

With costs rising everywhere, some businesses can’t raise wages high enough to keep current workers or attract new ones.

At the entry level, recent graduates are expecting higher salaries than ever before. 51% of 1013 graduates surveyed by graduate-jobs.com and GradTouch expected starting salaries over £25,000. Previously it was only 42%.

Creative Difficulties

Despite this, it’s still very much an employer’s market for now. With over a third of workers planning to change jobs this year, and 75% considering it at some point many employers are looking to expand.

In August 2022, the Chartered Institute of Personnel and Development found almost ¾ of employers planned to recruit in the next three months. This suggests their strategy in this time is to invest in their workforce to come out the other end of the crisis as strong as possible.

Problems Filling Vacancies

It appears that failing to offer the wages job-seekers are expecting is rather ham-stringing this effort. That same CIPD study found that 47% of companies also had vacancies that they were struggling to fill. Whether this is due to lack of available talent for niche roles or unattractive wages is unclear. It is telling, though, that 30% of current job seekers are finding employers’ salary offerings won’t cover the cost of living.

So it would appear that we are at something of an impasse. Many employers struggle to fill vacancies, and a large proportion of workers won’t take a job if the wages won’t cover living costs.

There is opportunity here for the savvy employer to capitalise on this deadlocked market, however. But it is not without risks.

The Opportunity for Employers

Turning Crisis Into Opportunity

With many workers looking to leave their roles, there is a potential wealth of talent available. Employers therefore need to focus on making their job posting as attractive as possible. The two best places to start looking at are pay and perks.

Paying for Quality

By offering wages above industry averages, companies can choose the cream of the crop for any role they need to fill. Nearly half of all employees had no pay rise last year, and for 42% of those who did (21.8% of all workers), the increase was still less than the rate of inflation. The number of talented workers businesses could sway to leave their current roles is enormous.

This could prove a stumbling block for smaller businesses of course. To offer increased wages above the rate of inflation, they will have to pay 10% higher than in 2022. This isn’t an easy task in any economy.

Making the Job Attractive

The alternative for smaller companies, then, is to focus on perks.

Though flexible or remote working has fallen as a priority due to the Cost of Living Crisis, many workers are still looking for it. Working remotely is a great means of cutting costs by limiting spending on daily commutes. Travelling to work is often more of a stretch on finances than the increased costs of working from home. Even though higher wages are the top priority currently, hybrid or remote working is still prized by many job seekers. TotalJobs has found 31% of applicants would not apply to a job that gave no option of hybrid working.

It may be a concern for some employers who prefer to have their staff more easily accessible. But switching to flexible working reduces costs for both parties. Fewer workers on-site means lower energy bills, and can allow downsizing to a smaller office space, reducing rent and heating costs.

Improving pay and perks also applies to retaining the workers you have currently. Workers between 18 and 44 say a salary increase of between £2,500 and £4,900 would encourage them to remain loyal, according to reed.co.uk. This raise may be too much for many businesses to consider, though.

A New Approach

Finally, though it’s counterintuitive, a four day work week with no pay reduction can improve productivity, and reduce costs.

A trial by Microsoft Japan in 2019 found giving employees 5 consecutive Fridays off on the same pay boosted productivity by 40%. Trials in New Zealand found similar results. Here in the UK, 86% of companies testing a 4 day week said they would continue the approach once the trial was over.

Employees surveyed in these trials reported increased happiness, a healthier work-life balance and better mental health.

This can have benefits for recruitment and retention as well. According to 4 Day Week Global, the not-for-profit promoting this new approach, 63% of businesses found it easier to attract and keep quality staff with a four-day working week.

Final Thoughts

Though there is inevitably a lot of doubt and insecurity in society related to the cost of living crisis, there is also opportunity. For both employers and employees, this time will be hard, but the manner in which businesses respond to it could be what makes or breaks them in the long run.

Choosing to invest in a crisis is admittedly a risky decision, but with the potential talent available to an employer willing to take the leap, the pay-off could be enormous.