The role of accountants is changing, our clients no longer just expect us to complete a set of accounts for them and ensure they meet their filing requirements and pay the right amount of tax. Increasingly our role is to help our clients understand their business, navigate what’s happening in the world, and work with them to plan ahead.
In this new regular series, Gus Williams and Harri Lloyd Davies will try to provide some insight into the key trends and issues impacting businesses and business owners in Wales, be they local, national or global.
Where have all the staff gone?
Almost every conversation we have with clients post covid includes stories of businesses not being able to find the staff, no-one applying for open vacancies, people not turning up for interviews, people calling the day before they were due to start a new job to say they’ve had a better offer, or people turning up for a week or two and disappearing. At Bevan Buckland, we have not been immune to the problem, so it’s a good place to start this new series.
Here we will look at the root causes and suggest ways businesses will need to adapt and plan ahead to alleviate the issue.
Covid-19 has undoubtedly exacerbated the staffing issue, but the difficulty of hiring and replacing staff has been long coming. The underlying cause is a simple one – demographics. All covid-19 has done is bring the issue forward a few years.
Looking at the UK population by age tells the story of why businesses are finding it difficult to recruit:
The first issue is the Boomer generation hitting retirement (those born 1945-1969). Their exodus from the job market is due to peak in the next few years, and Covid -19 has brought that exodus forward. If you are looking to hire an experienced member of staff to replace someone senior who is retiring, then the simple answer is that the numbers of prospective employees are just not there.
If you want to hire someone senior and experienced, the chances are that you are looking to hire someone in their 40’s, otherwise known as “Gen X” – roughly those born between 1965 and 1980. Gen X is the smallest generation in the current workforce. The peak of the Boomers hit their 20’s in the 1970s, a generation of women could for the first time focus on their careers, birth control was easily accessible, and other social and technological changes led to a marked drop in the reproduction rate.
Gen X today are generally highly skilled and have good careers, they hit their stride in the job market in the 90s when the economy was strong and there were lots of opportunities. They had excellent on the job training from the experienced boomers, benefitted from the rapid roll-out of computers and other technology, benefited from a more meritocratic education system (the much maligned comprehensive system and more university funding), and entered a meritocratic workplace (cool Britannia), and developed strong social and leadership skills.
Gen X are the perfect prospective employees, but there are not enough of them. If you are looking to hire a new Finance Director, chances are that you will not be able to find one. Those who would normally be suitable are comfortable, in-demand and settled, and Covid has encouraged the successful ones to want an easier life: working from home; less travel; more time with their families. Prising anyone in their 40’s away from their current jobs is going to be hard and expensive.
If you can’t hire someone in their 40’s, what about those in their 20’s and 30’s? Gen Y are those born between 1981 and 1994, more often referred to as Millennials. The birth rate did bounce back in this period, so is the recruitment problem just a temporary blip? Well, no. the Millennial problem is rooted in the financial crisis of 2007.
The first thing companies did in response to the Financial Crisis was to reduce recruitment, cut graduate intakes and cut other training programmes. After the Financial Crisis, much of the economic growth came in the gig economy – driven by technology and reduced costs related to the circumvention of traditional regulated employment. The problem with Millennials is that too many of them spent too long in low skilled jobs, particularly when they first entered the job market in the late Naughties and early Teenies.
Unlike the Boomers and Gen X, they did not go straight from education into training for skilled jobs. They were all encouraged into university by the massive expansion of higher education in the 90s (see graph), and as a result of this, they are better educated but lower-skilled than previous generations.
This is the next problem for employers, if you are looking for staff with some experience, the 20 and 30-something generation you would normally recruit from does not have the right skills and experience. While Gen Y is larger than Gen X, it has a far smaller pool of skilled and experienced workers, making good staff in this age group also hard to find (and expensive to attract).
Surely the answer then is to recruit current university and school leavers and train them up? This is where the demographics really start to fall off a cliff. Gen Z, those born after 1994, is smaller even than Gen X, and those of them that were supposed to enter the workforce in the past couple of years didn’t because of Covid.
Gen Z is also the first generation to have grown up immersed in technology and social media. Not only is this generation not big enough to supply the workers (and consumers) needed to maintain the economy, they have very different skills, different social norms, different expectations, and different ambitions and lifestyles from the boomers and gen X, who are the ones trying to recruit them. Boomers and Gen X left home and went to work or university at 18 and spent years learning their trade from an early age. The workplace was also their social hub, and the pub or smoking room was often where they formed their networks and skills and advanced their careers. Gen Y is staying at home.
The good news is that the economy is desperately short of programmers, and Gen Y is likely to provide these – spending your nights in your bedroom on your computer is a good grounding if you want a career in programming. The problem is filling all the other jobs.
So where does this leave businesses like our own? There are too few 40 somethings to recruit and they are very expensive if you can find one willing to move. 20 and 30 some things don’t have the skills we need, and those entering the workforce now are even fewer in number and have markedly different skills and expectations.
These are things that all businesses are going to need to adjust to and plan for:
⦁ Retain your existing staff – this isn’t just about salary. If you think working from home is the worst thing in the world, think again. Having no staff is worse.
⦁ Look at your benefits – providing benefits like private healthcare is going to become increasingly valuable with current waiting lists. Paying experienced staff full pay on maternity leave and therefore ensuring they return to the workplace could work out cheaper than having to replace them. At least match competitors on holiday pay and other provisions.
⦁ Invest in technology now – any technology that reduces the need for staff will pay off in the long run as the recruitment problem gets worse.
⦁ Outsource non-core functions. Do you really need to spend 6 months trying to hire an IT Manager? Or someone to manage your website and social media or answer the phone? Look at your back office functions and see what you can outsource to a specialist company. Focus your time and recruitment on your core value add processes and outsource everything else.
⦁ Review and if necessary revamp your training programmes – school and university leavers entering the workforce today have different skills and experiences. Training programmes and career paths that worked for previous generations may no longer be fit for purpose.
⦁ Are you a “good place to work”? Branding is no longer just about your product or service, you need to market yourself to prospective employees.
⦁ Understand critical functions and identify your single person risks – understand where your business has one person on whose knowledge and skills your business relies. If that person is a Boomer, start planning now as to how you can replace them.
⦁ Productivity is central to all of this – have a plan as to how you can increase productivity – do more with fewer people.
Bevan Buckland is here to help you navigate these issues – contact your usual advisor.
Predictions for the future:
There is some good news in that the UK birth rate did pick back up in the 2000s. this was almost entirely driven by immigration – first generation immigrants tend to have more children.
The bad news is that this is likely to drop off again quickly in our current hostile environment and as birth rates continue to decline generally in the developed world.
It’s worth noting that much of the hardening attitude towards immigration in the UK was driven by the fact that this uptick in births placed too much pressure on local amenities such as housing and schools. House building and school places had been run down in the 80s and 90’s line with the declining birth rates and will take time and money (and political will) to rebuild.
The broader topic of how this declining birth rate is likely to impact politics, the economy, and businesses is something we will cover in future articles but at the heart of this are the big political questions of the day.
With specific regard to Wales, there are likely to be 3 major political trends which will drive both the direction in which we travel and where we end up:
Firstly, there is the question of how Wales pays for the growing costs of health care, especially if we see large inward migration of boomers from England to Wales looking for a lower cost of living.
Secondly, I predict that we will see an increasing diversion between the UK government and the devolved governments in Wales and Scotland on immigration policy. The simple fact is that the only real way to overcome the economic problem of demographics is through immigration, and I expect Labour in Wales and the SNP in Scotland to acknowledge this and want to do something about it.
Thirdly – there is the issue of government policy on housing and house prices – the other topic of conversation we are hearing a lot of at the moment.
How the UK and Welsh Governments choose to deal with these issues (and how the people vote on them) will have major short term and long term consequences.