UK employers report weaker hiring and pay growth in July
With the Bank of England watching the jobs market closely, the Chartered Institute of Personnel and Development (CIPD) said yesterday only 57% of private sector employers planned to recruit staff over the next three months, the lowest since the start of 2021 though only slightly down from 58% in the last quarterly survey.
The professional body for the human resources sector said higher employer social security charges introduced by Finance Minister Rachel Reeves and an increased minimum wage were hurting jobs, particularly in hospitality and social care.
Planned changes to employment law which are likely to make it harder to sack employees in their first two years in a job were also making businesses more reticent to hire younger, less experienced staff, CIPD economist James Cockett said.
Other business surveys have shown similar concerns, as well as broader headwinds from weak domestic demand and residual uncertainty for some exporters over US trade tariffs.
Official data due today is likely to show the jobless rate in the three months to June held at 4.7%, close to a four-year high, according to a Reuters poll of economists who will be watching to see if pay growth slows as the Bank of England (BoE) expects.
Four of nine BoE policymakers opposed its quarter-point interest rate cut to 4% last week and they are likely to need further convincing that domestic inflation pressures are easing.
CIPD members expected to raise pay by a median 3% over the coming year, unchanged from the previous five quarters.
Separately yesterday, the Recruitment and Employment Confederation (REC) said growth in starting salaries in July was the weakest since March 2021 while pay for temporary staff grew by the least in five months.
'Economic uncertainty, the complexities of artificial intelligence adoption and global headwinds are all weighing on business planning,' said Jon Holt, group chief executive at accountancy firm KPMG which sponsors the REC survey.
REC said higher payroll costs and weak confidence contributed to a steep fall in permanent appointments in July. — Reuters
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OSCAR Wilde once famously said that "A fool is someone who knows the price of everything and the value of nothing". In the economics profession nowadays, where the neoclassical paradigm dominates, prices are seen as the ultimate measure of value. Under the neoclassical school of thought, value no longer determines prices, but prices determine value. This is explained through the concept known as marginalism. For instance, the neoclassical theory says that price is basically the proxy of how people measure their utility. And as things become scarcer, people are more willing to pay for them, reflecting a higher marginal utility and thus higher value. Accordingly, neoclassical theory, which emerged in the late 19th century and gained prominence since the 1980s, managed to shift the discourse of value in the field of economics to merely focus on consumer preferences. To put it another way, the production boundary has become malleable than other economic traditions that preceded it, like Classicals (where value comes from labour), Physiocrats (where farming is seen as productive activity and thus where value is derived), and Mercantilists (where value originates from trade). The implications of neoclassical thinking are indeed enormous to society at large. Just look at what happened during the Covid-19 pandemic. Those who are seen as most productive and valuable workers, such as in the care economy, are paid less. Activities, which are not calculated on a gross domestic product (GDP) basis, are seen as less productive compared with the ones which are included in the GDP, as they are seen as having "economic value", so to speak. After all, the maid is paid for her work in the house. But if she is married, her work at the house is eventually unpaid. Another implication would be on how the GDP number can be easily manipulated. The GDP number can be increased on paper, like building a bridge to nowhere. But what value does it create to society at large? Even if building something, like a factory, may give benefits to society by producing garments for the people, what value will it have in terms of the environment? This is how I see the 13th Malaysia Plan blueprint, which was tabled by Prime Minister Datuk Seri Anwar Ibrahim recently. Perhaps this is what it meant by "Melakar Semula Pembangunan" (Redesigning Development), particularly at the more conceptual level of it, that is, to put back the discussion of value back in its proper place in development economics. Thus, when it comes to the main sectors prioritised, such as Artificial Intelligence (AI), or the Digital Economy, the equal value emphasised is also being put on inclusivity and sustainability. Conceivably, one of the significant strategies under the 13MP on value creation would be the "Made by Malaysia" approach. Simply put, we must create our value in economic activities such as intellectual property or innovation, regardless of whether it is produced domestically or anywhere else. This is a great shift from the "Made in Malaysia" approach, where, for example, in the semiconductor industry, many companies which produce in Malaysia are not our own companies. How should value be created when automation and digitalisation are disrupting the labour market? This is where, under the 13MP, reforms in the education system, such as the focus on the Technical and Vocational Education and Training (TVET) and STEM education, play a crucial role. The concentration on new areas of economic growth, that is, of high-growth, high-value (HGHV), expresses the need for Malaysia, moving forward, not merely obsessing itself on the rate of economic growth per se, but its quality and above all else, its direction. The value created in the economy eventually must be proportionately distributed without harming the environment. This is basically how common justice is manifested in the process of economic growth. It is also worth mentioning that under the 13MP, the government is committed to shifting from race-based solutions to need-based approaches. Among areas being focused on are Islamic finance, halal industry, tourism industry, Green economy (sustainable development), Orange economy (creative industry), Blue economy (ocean resources economy), and the Silver economy (aging society economic activities), and how they are integrated with the Micro, Small, and Medium Enterprises (MSME) industry players. In his speech, Anwar also quoted a well-known world economist, Professor Amartya Sen, who in his book entitled Development as Freedom, highlighted that, "Economic Growth cannot be sensibly treated as an end in itself. "Development has to be more concerned with enhancing the lives we lead and the freedoms we enjoy". Sen, the 1998 Nobel laureate in economics, argues that the "capability to function" is what matters when it comes to development. Thus, Sen is viewed as one of the scholars in economics who is associated with the notion that economic development is human development - the very core of development - must directly address the very core needs of humans, like poverty eradication, health and education improvement, and their freedom to realise their full potential as human – which defines many of the measures in the 13MP document. What is left is twofold: The buy-in from the people and the effective execution by the government. For these two to materialise, all stakeholders must work together with a clear sense of direction and purpose towards the same destination of Malaysia - that is, high-income and developed in our own way by the year 2030 or earlier.
