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Presentation to defence college 13 january 2015
The document discusses economic and employment trends in the UK from 2015 to 2020, indicating slower growth, modest wage increases, and a continued expansion of the labour market. Concerns include the risks posed by Europe's economic situation and the implications of an aging population on labor dynamics. There is a noted gap in perception between business and HR leaders regarding strategic capabilities in the face of these trends.
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Presentation to defence college 13 january 2015
- 1. Economic and employment trendsto 2020 and beyond Mark Beatson Chief Economist HR lecture to Defence College of Logistics, Policing and Administration, 21 January 2015
- 2. Economic and labour market trendsto 2020 and beyond • The economy will grow more slowly in 2015 than it did in 2014 • The labour market will continue to expand but wage growth growth likely to remain in 1-2% corridor – but lower inflation means real terms increase? • Wage and productivity growth expected to be higher in 2016 – but not a given • Europe remains a risk • Population ageing and technology have visible effects
- 3. Why HR hasto become more strategic
- 4. There is agap in perception between business leaders and HR leaders
- 5. HR is seenas lacking strategic capability
- 6.
- 7. UK economic growthis expected to continue -5 -4 -3 -2 -1 0 1 2 3 4 5 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 %changep.a. GDP growth 7 Sources: Past data OECD, forecasts from OBR Autumn Statement 2014 Economic Forecast. Forecast
- 8. Emerging economies continueto support global economic growth 0 1 2 3 4 5 6 7 8 World USA Euro Zone Japan UK China India %changep.a. GDP growth 2014 2015 2016 Source: IMF World Economic Outlook., January upate.
- 9. Business confidence remainspositive but has dipped slightly since the summer
- 10. Capital investment nowexceeds pre-recession levels but there is a potential backlog 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 Investment by sector, £ million) Business investment General government investment 0 5 000 10 000 15 000 20 000 25 000 30 000 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 Investment by asset, £ million) Transport equipment Other machinery & equipment Dwellings Other buildngs & structures IP products Source: ONS.
- 11. Intangible investments mayhave held up better than tangibles 0 20 40 60 80 100 120 140 £billion Tangibles Intangibles Source: NESTA Innovation Index 2014
- 12. Fiscal consolidation –more to come 12 32 34 36 38 40 42 44 46 48 50 1948-49 1958-59 1968-69 1978-79 1988-89 1998-99 2008-09 2018-19 PercentofGDP Current receipts Total managed expenditure Forecast Source: ONS, OBR
- 13. Shrinking public sectoremployment – more to come 0 1 2 3 4 5 6 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 General government employment (millions) Source: OBR
- 14. The UK labourmarket
- 15. The labour marketcontinues to expand 0 1 2 3 4 5 6 7 8 9 2009Q1 2009Q4 2010Q3 2011Q2 2012Q1 2012Q4 2013Q3 2014Q2 2015Q1 2015Q4 2016Q3 2017Q2 2018Q1 2018Q4 %oflabourforce ILO unemployment 25 26 27 28 29 30 31 32 33 2009Q1 2009Q4 2010Q3 2011Q2 2012Q1 2012Q4 2013Q3 2014Q2 2015Q1 2015Q4 2016Q3 2017Q2 2018Q1 2018Q4 Millions Employment Source: Office for Budget Responsibility
- 16. Employers still expectto recruit -19 -10 -3 -5 5 2 11 -3 3 -1 -3 -8 6 5 7 5 9 14 24 16 26 23 30 Netemploymentbalance Three months ahead employment expectations The net employment balance is the difference between the % of firms expecting to recruit over the next three months and the % expecting to make redundancies. Source: CIPD Labour Market Outlook.
- 17. Employers find thatmost vacancies attract sufficient applicants 32 25 14 20 15 8 Low skill Medium skill High skill Mean number of applicants for each vacancy advertised Not suitable Suitable Source: CIPD Labour Market Outlook survey, Autumn 2014.
- 18. Employers’ pay expectationsremain modest 1.5 1.6 1.5 1.5 1.3 1.6 1.5 1.5 1.7 1.5 1.6 1.7 1.8 1.7 1.7 1.6 2 2 2 2 Average predicted annual pay award (% p.a.) Based on all employers expecting to have a pay review in the following 12 months. Source: CIPD Labour Market Outlook.
- 19. -1 0 1 2 3 4 5 6 Jan01 Jun01 Nov01 Apr02 Sep02 Feb03 Jul03 Dec03 May04 Oct04 Mar05 Aug05 Jan06 Jun06 Nov06 Apr07 Sep07 Feb08 Jul08 Dec08 May09 Oct09 Mar10 Aug10 Jan11 Jun11 Nov11 Apr12 Sep12 Feb13 Jul13 Dec13 May14 Oct14 %changep.a. Average regular payCPI Average earnings growth and CPI inflation Source: Office for National Statistics.
- 20. The ‘cost ofliving crisis’ is largely a pay and productivity issue 80 85 90 95 100 105 110 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2008Q1=100 Output per hour Real earnings deflated by CPI Earnings data are the Average Weekly Earnings index, GB, seasonally adjusted. The middle month is used for each quarter, e.g. Q1 uses the February observation. Source: Office for National Statistics.
- 21. Official forecasts showlittle growth in real earnings until at least 2016 -2 -1 0 1 2 3 4 5 2013 2014 2015 2016 2017 2018 2019 %changep.a. Nominal earnings growth Real earnings growth (deflated by CPI) Real earnings growth (deflated by RPI) Source: Office for Budget Responsibility, Autumn Statement 2014 forecast.
- 22. Europe remains a sourceof concern
- 23. The Euro Zoneis growing - just -1 -1 0 1 1 2 2 3 EuroZone Germany France Italy Spain %changep.a. IMF forecasts of GDP growth 2014 2015 2016 Source: IMF World Economic Outlook, January update.
- 24. Is potential deflationin the Euro Zone a worry? -3 -2 -1 0 1 2 Bulgaria Greece Spain Poland Croatia Slovakia Cyprus Estonia Hungary Slovenia Portugal Belgium Denmark Ireland Luxembourg Italy Sweden Netherlands Croatia EU Lithuania Euro Zone France Germany Czech Republic Malta Latvia Finland United Kingdom Austria Romania HICP inflation rate (% change p.a., November 2014) 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 HICP “core” inflation for Euro area (% change p.a.) “Core” HICP excludes energy, food, alcohol, tobacco Source: Eurostat.
- 25. Most Euro Zonegovernments are heavily in debt 0 20 40 60 80 100 120 140 160 180 200 Euro Zone Germany France Italy Spain Portugal Ireland Greece Cyprus %ofGDP General Government debt/GDP ratio 2014 2015 2016 Source: European Commission, autumn 2014 forecast.
- 26. Unemployment will remainhigh in much of Europe 0 5 10 15 20 25 30 Germany UK EU Euro Zone Spain Italy Portugal Greece Cyprus Unemployment as % of labour force 2014 2015 2016 Source: European Commission, autumn 2014 forecast.
- 27. Slow growth inEurope affects the UK because of trade links 13.2 10 8.5 6.9 6.1 4.6 4.3 2.9 2.9 2 UK top ten goods export markets, 2013 (% of total exports) Source: Office for National Statistics.
- 28. Labour market conditionsin Europe are likely to continue to affect migration patterns 69 48 0~ 20 40 60 80 100 120 140 YE Dec 03 YE Dec 04 YE Dec 05 YE Dec 06 YE Dec 07 YE Dec 08 YE Dec 09 YE Dec 10 YE Dec 11 YE Dec 12 YE Dec 13 Thousands Work-related migrants into UK EU15 A8 Source: Office for National Statistics.
- 29.
- 30. Emerging economies willbecome bigger global players 22% 7% 16% 3% 15% 18% 7% 12% Global GDP 2012 USA Japan Euro Area UK Other OECD China India Other non-OECD 18% 4% 12% 2% 13% 28% 11% 12% Global GDP 2030 USA Japan Euro Area UK Other OECD China India Other non-OECD Source: OECD, “Looking to 2060: Long-term global growth prospects”, OECD Economic Policy Paper No. 3, November 2012.
- 31. -677 -94 1,387 770 -305 186 1,235 1,956 15-24 25-49 50-6465+ Illustrative projections of change in employment by age group from 2012 baseline, thousands 2022 2032 Sources: CIPD calculations based on ONS 2012 Principal population projections and revised mid-year estimates for 2002 and 2007 , employment rates for May-Jul 2002 and 2012 based on the Labour Force Survey and CIPD assumptions for employment rates for 2017 onwards. Population ageing means the workforce will in future contain more over 50s
- 32. The “hourglass” labourmarket? Jobs growth strongest in highly skilled occupations (and some low skill ones) 32 Source: UKCES “Working Futures 2012-22” 0 1 2 3 4 5 6 7 8 Elementary Process, plant operatives Sales and customer services Caring, leisure and other services Skilled trades Admin and secretarial Associate professional and technical Professional Managers and senior officials Employment by occupational group (millions) 2022 2012 2002
- 33. And just forfun … Who will stay ahead of the machines? Job Probability that total employment will fall in next 20 years Recreational therapists 0.003 Dentists 0.004 Athletic trainers 0.007 Clergy 0.008 Economists 0.43 Technical writers 0.89 Retail salespersons 0.92 Accountants and auditors 0.94 Telemarketers 0.99 Source: Frey and Osborne, 2013
- 34. To find outmore and join the debate • Visit our website http://www.cipd.co.uk/cipd-hr- profession/whats-new/megatrends.aspx • Read the Megatrends report and our five follow-up reports • Watch the video, listen to the podcast, look at the infographic • #megatrends
- 35. What does itmean? • Impact on HR practitioners: • Little scope for pay rises (especially in public sector) • Will recruitment become more difficult? • Impact on the policy debate: • More public expenditure cuts/tax increases • Low pay/productivity • Migration/Europe
- 36.
Editor's Notes
- #32 These are CIPD illustrative projections we produced for a recent research report on managing age diversity. Based on ONS population projections and assumptions about future employment rates (set out in the report). Key point = total employment projected to grow by 10% between 2012 and 2032, from 30 million to 33 million. This is due to more people in employment over the age of 50, especially 65+.
- #34 Left hand side = predictions of whether numbers employed in a job will fall or not in next 20 years due to computerisation (don’t ask how these numbers arrived at, they are just a talking point). Jobs “safe” use physical dexterity, emotional empathy, interpersonal skills. Right hand side chart – point is we will need to keep learning to say ahead of the machines. 50% of people in UK say they are learning new things.