The latest jobs data this week issued a clear signal that the UK labour market is set to cool further. And while the latest figures are in line with expectations, they serve as a stark reminder of the challenges businesses and policymakers are grappling with in their pursuit of growth.
Vacancies fell 119,000 year-over-year in the July to August period, according to the Office for National Statistics, while unemployment rose 0.1% on the previous three months to 4.7% – the highest rate in four years.
At the same time, annual wage growth sat at 4.8% excluding bonuses, which is above what the Bank of England sees as compatible with its inflation target. That said, real wages are thought to be just 1% higher than a year ago, meaning many consumers are still feeling the squeeze and employers face mounting pressure to continue to offer wage increases.
The challenge for businesses
A number of businesses find themselves caught between a rock and a hard place, navigating higher labour costs and increasingly cautious or price-conscious consumers in an uncertain market.
This tension is perhaps most apparent in the hospitality sector, where staff are typically younger and often in part-time, lower-paid roles, and which accounted for 53% of all UK job losses between October and August. This is sad to see, given it often provides the foundation for an important career in service, where we learn the valuable skills that we need more of.
There is also concern in many service-led sectors, both B2B and B2C, including wholesale, retail and manufacturing. So, what can businesses do to boost productivity when faced with a contracting, but potentially more expensive, workforce?
Strengthening productivity and operational resilience
The truth is that good organisations are always looking for ways to improve the service offering, making it more efficient and effective in tandem, to hold onto their customer base and ensure long-term financial sustainability.
Simply replacing ‘expensive’ people with tech clearly won’t solve the underlying issue. And our research highlights what we probably all feel based on our personal experience as customers: while technology can help to make the more transactional elements of service quick and easy, nothing can replace the human, personal touch we value in situations requiring more nuance or sensitivity. In a world that is becoming more disconnected, shouldn’t we start to value the personal touch that comes from an authentic human experience?
The question, then, is how to make our people more productive to enhance the service experience at a reasonable cost. That means two things.
First, our people need to be well-trained, engaged and supported by robust systems and processes that get things right first time. As we outlined in our Breakthrough Research on employee engagement recently, a workforce that feels connected to and supported by its organisation can be more resilient, adaptable and collaborative, reducing errors and the need for costly complaint resolution.
And second, businesses should think carefully about the purpose of any new technologies, prioritising effectiveness over efficiency. This means deploying AI to empower and enable human service staff, with access to real-time data or personalised recommendations, making us smarter as humans, not more robotic.
The most successful organisations today recognise that navigating the current market pressures requires fostering a working environment that supports performance, well-being and job satisfaction. All of these factors are directly tied to the quality of service, customer experience and, ultimately, business success.
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