I am lucky to be invited every quarter to the launch of the latest InterTradeIreland All-Island Business Monitor (AIBM), a quarterly survey of 750 businesses across this island.
It asks a range of questions which provide fairly current insights on how businesses are performing, their levels of optimism, and what issues or challenges they are facing which may be holding them back. Most importantly the results are published very quickly upon completion of the survey which means they are available much sooner than many other business and economic indicators.
The results of the third quarter monitor were released in mid-November and once again made for some interesting reading. What stands out to me though, I suppose given my interest in economic inactivity, is the challenge that firms are having in hiring.
And this is an issue which is seen right across this island. In the third quarter, 90% of businesses reported as either stable or growing with for the most part sales and profitability also holding steady or growing. However, despite relatively positive results for businesses many did face significant challenges in their day-to-day activities.
Despite inflation dampening in recent months rising energy costs as well as rising overheads more broadly continue to be significant challenges for businesses. Of these overheads of concern, staff costs are the most concerning with 46% of businesses surveyed reporting concerns about wage bills and other staffing costs. And that’s something that is likely to be made worse by changes to national insurance and the national minimum wage following the UK Autumn Budget.
Attracting and retaining staff has emerged as a consistent problem for businesses and as such the AIBM has adapted to include more specific questions on this issue to improve the awareness of InterTradeIreland and others engaged in this space of this acute problem.
Over a third (35%) of those who have tried to recruit in the last couple of years have struggled to find the necessary skills for to meet their business requirements. Many of these firms are experiencing long-term vacancies. A large proportion (80%) of those with recruitment difficulties put it down to their being a lack of people available to work, that is they are negatively affected by the tight labour market that NI and Ireland are currently facing.
That they can’t find the appropriate staff is then having a knock-on effect on the incumbent staff as they are faced with an increased workload, or in some cases that work is simply not getting done. Some firms cited issues with a mismatch between the skills employers need and the skills that students and graduates have.
Firms have had different ways of responding to these challenges. Nearly 60% of those with recruitment difficulties are attempting to increase their recruitment activity and reach by using different and perhaps less traditional methods such as social media recruitment campaigns. Some are giving up on recruiting and instead are focusing their efforts on staff retention and while not ideal this is a logical step in such a tight labour market. There are also firms who are utilising new and emerging digital technologies to solve their staffing problems.
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One in five firms surveyed in the AIBM reported that a lack of available staff for recruitment was impacting their potential to grow and with 30% of firms planning or considering to recruit in the next year solving this labour shortage is crucial for businesses and therefore the wider economy.
Given both NI and Ireland are facing such low levels of unemployment it is imperative that government continue to reduce economic inactivity. In Ireland, since the pandemic, inactivity has fallen considerably likely due to that tight labour market and the resulting increasing wages encouraging some of the inactive population into the labour market. The same trend has not been mirrored in NI.
We hear constantly about skills shortages and while they remain important in any developed economy what may benefit businesses most is solving the people shortage by focussing on economic inactivity and getting people into the labour market. Or perhaps more importantly reducing people moving into inactivity in the first place.
While economic inactivity is a multifaceted problem with heterogeneous groups of people and various barriers faced, there are things we know will help. Increased wages have seen a reduction of inactivity in Ireland for example.
However, wages alone will not fix the problem. Lack of public transport, availability and affordability of child care, a lack of confidence or fear of the labour market and coming from a jobless household all feed in to the high levels of inactivity in NI and all can be targeted by NI Executive policy levers or initiatives.
Despite this the social security system remains one of the most significant barriers to labour force participation for the inactive population in NI. And despite it not being a devolved power of the NI Executive, our elected representatives should use their powers in London to encourage a flexible social security system which protects people when needed.
But it’s also required to give them the option to attempt to enter the labour market without ending up back at square one in terms of their social security payments if things don’t work out. This is especially important for the long-term inactive, those with caring responsibilities or those with fluctuating health conditions.
To see the full findings from the InterTradeIreland All-island Business Monitor please see: https://intertradeireland.com/insights/business-monitor.
Dr Anne Devlin is a research officer at the Economic and Social Research Institute in Dublin, an Adjunct Assistant Professor at Trinity College Dublin and a visiting researcher at Queen’s Business School