Monetary policy to control inflation is ‘tough love’
The sustained increase in the general price level of goods and services in economies around the world has significantly reduced the purchasing power of money, forcing the cost of living up to unmanageable levels for many.
As the cost of living crisis continues to rumble on, governments are seemingly powerless to act, except by taking action through monetary policy in an attempt to address the driver of the crisis, inflation. But these measures take time to have an effect and for many, it equates to little more than ‘tough love’.
With no quick end in sight to the current period of disruption, market uncertainty and volatility, concerns are growing among businesses. The precise effect that a sustained cost of living crisis is going to have on the recruitment industry is difficult to predict.
However, it’s likely that as businesses which outsource hiring services adapt to reduced revenues and perhaps come under financial stress, it will impact their hiring policies. As the crisis continues to deepen in economies around the world, here we look at some potential areas of focus.
6 impacts of the cost of living crisis on recruitment
- Reduced hiring – Companies without cash to invest in talent are certainly going to be a real problem for recruitment businesses, with some agencies experiencing reduced revenues. As always though, there are winners and losers. Agencies recruiting in-demand, niche or specialist skills of high value are going to be winners.
- Slower future growth – Reduced hiring now will impact the future. As the recessive part of this current economic cycle unwinds, the inability to invest now in future talent is going to slow the return to greater prosperity, reducing the speed of economic recovery. Indeed, the message for companies that have cash reserves but that are conservative and cautious of spending, is that investing in tomorrow’s talent now is an excellent way to build future competitive advantage.
- Many lay-offs are short-term – Lay-offs, especially high-profile redundancies at tech giants, and disputes over pay and working conditions are widespread, indicating the depth of the crisis. However, as economic prospects improve, cash-rich tech giants are likely to re-hire to replace many they have let go.
- Labour disputes may backfire – For many, pay has been stagnant in real terms for years. Disputes over pay and working conditions are widespread, but taking strike action is a strong tactic, and it may backfire. Employment laws that protect workers’ rights have been tested or side-stepped in recent times, and workers in dispute with employers may find themselves being replaced by cheaper human labour. Consequently, agencies that are able to recruit, assist with relocation and support workers from lower-cost economies may also be winners.
- Losing out to AI and robotics – Of course as AI and robotics continue to develop at a great pace, at some point, robot labour is also likely to be an option for replacing some human workers doing physical jobs. Just like making new hires, adopting robotic workers will require investment, and it seems likely recruiters are going to lose out as the economics of Robots V. People suggest humans lose out. Recruiters simply won’t be sifting through the CVs of machines and interviewing robots, even with AI-assisted RecTech!
- Increased use of gig economy workers – During the height of the Covid pandemic, elements of the gig economy came to the fore. The trend for temporary working increased. Agency contract and freelance workers, and the practice of keeping workers on standby for work, through the use of zero-hours contracts, proved to be instrumental in helping many businesses to match their productivity output with the fluctuations they experienced in demand for goods and services.
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