At present, the UK, US, and ANZ (Australia and New Zealand) markets are experiencing an inflationary period, with the inflation rate in the UK recorded at 11.1%, in the US sitting at 7.7%, in Australia at 7.3%, and in New Zealand at 7.2%, as of October 2022. The governments’ fights with inflation were accelerated by various factors outside their control, considering these ‘Black Swan’ events:
- COVID-19 pandemic
- Global supply chain disruptions
- Russia-Ukraine crisis
The UK, US, and Australia governments, especially the recruitment industry, are trying to corral inflation without tipping the economy into a recession. Even though the business leaders and decision-makers deny contributing to inflation, the theory and impact regarding this conflict end up in mixed interests, considering the phenomenon ‘Wage-Push Inflation’ as minimal.
Whereas the New Zealand government, with the Reserve Bank of New Zealand (RBNZ), has been at the forefront of global monetary tightening and adopting the 30-year-old monetary policy – RBNZ Act 1989, surging energy prices and supply chain disruptions. However, the New Zealand government has also considered the above phenomenon to some extent, to feed the expectations of a hike in wage rates.
Read on to learn more about the implications of inflation on the recruitment market, and what staffing firms can do to combat inflationary pressures.
Inflation Accompanied by Black Swans Slash Recruitment Sector
Against fierce market pressures, the recruitment industry prioritised speed and agility in the recruitment processes for successful outcomes. However, it led to changes in the workforce, but not in the typical recruiting methods. The recruiters are facing a major challenge in the job market: getting the right candidate with navigating all the elements of the job to avoid salary hikes.
By the end of February 2022, a huge gap was recognised in the UK and US markets. Inflation rose to 8%, and salaries at the time were at 5%. This ‘inflation outpacing wages’ intensified the gap, creating imbalances and distortions in the job market. However, to overcome this challenge, many companies chose to raise salaries to be competitive in the recruitment sector, but they expressed their concerns that ‘inflation would erode the value of pay increase.’
On the other hand, ‘Stagflation’ resulted in slow growth, high unemployment, and rising prices accompanied by inflation, global supply chain disruptions, and Ukraine-Russia crisis. After the free movement of EU migrant workers, Brexit became the primary driver of the high and widening inflation differential. This led to an unusual inflationary pressure on the cost of living of an individual.
The new tariff and non-tariff barriers implemented by the UK government slashed the purchasing power, and stagnated the labour supply. With uncertainty in the UK economic policies and investment prospects for the recruitment sector, Brexit turned stagflation into a shock – 96% of HR professionals and recruiters shared their hiring strategies got impacted, as per a LinkedIn report.
According to the labour cost index (LCI), wage growth got strong in NZ to 3.4% in June 2022, the biggest increase since 2008. The RBNZ also raised its official cash rate to 2.5% to avoid future consequences. “The risk for the RBNZ is that wage pressures provide an avenue for the recent bout of price shocks to turn into sustained inflation over time.”, acting chief economist Michael Gordon said. However, most economists have mixed reactions towards the RBNZ decision.
These factors played an important role in showcasing a shortage of candidates to fill the job vacancies, and hiked the Great Resignation, where the inaction influenced the employees to resign to secure bumper pay high packages.
Impact of Inflation on Staffing Firms
Although the high earners are not significantly impacted by inflation, the small and medium-sized wage/salaried employees experience hardship. Firstly, Wage-Push Inflation compels employees to leave their positions for higher pay offered by the competitors, ultimately decreasing employee retention. But real communication systems help staffing firms to create a valuable candidate pool to meet the job criteria and company requirements. However, if the estimated wages/salaries do not meet the interests of the job seekers, then they will be unlikely to fill the job vacancies, resulting in a lack of quality candidates in the talent pool.
Secondly, to give superior value to the clients as compared to the competitors, the staffing firms should prioritise being listed in the follow-up list of large businesses by maintaining a quality talent pool.
Offshoring Combats Inflation
The recruitment offshoring services’ goal is to save the staffing firms’ expenses, and increase revenue in the long run of the business. The impact of inflation results in a struggle to retain employees, and incur higher wages/salaries. To mitigate these adverse effects, recruitment offshoring services play an important role in supporting staffing firms to be fierce in the recruitment sector.
To enhance the performance of the recruitment industry, recruitment offshoring services act against Wage-Push Inflation and Stagflation, allowing employees to focus on other important strategic business tasks, helping them become more productive to elevate a business.
The benefits of recruitment offshoring services help you to handle crucial challenges such as:
- Improve recruiting functions
- Finding the right people, quickly
- Recruiting skilled talent for all levels and domains
- Using statistical analysis to find the best candidates for a job
- Making a great impression on job seekers with a professional approach, helping them through the hiring processes
The experience, connections, resources, and technology of the recruitment offshoring services help you streamline your recruitment process, ultimately aiding you to find better candidates, since there will be less time spent responding to the queries of applicants, and assessing talented candidates.
“Offshoring your business functions is the answer to allow and operate at maximum capacity,
while controlling costs during inflation.”
Staffing Firms Must Prioritise Predicting Levels of Inflation
The inflation and unemployment rates contrast each other in the job market. The increase in the rate of wages/salaries results in greater expenses, cost of living, and an increased demand for talent by outstripping supply to contribute to a widespread skills shortage. These are a few parameters that staffing firms can use to calculate and predict the level of inflation for the future.
Choosing the right partner, like IMS People Possible, is important for offshoring your tasks. We can help you focus on your profitable market segments to increase revenue, maintain cash flows during inflation, and plan and implement strategies for the future of your business at the right time. Our team of recruitment experts can quickly fill your vacant positions with experienced, ready-to-work resources, saving you time and money in the long run, and helping you to focus on customer relationships.
Connect with IMS People Possible to find out how offshoring your recruitment services can prove to be a competitive edge during inflation or Black Swan events.