The push and pull of labour market dynamics has only delayed the inevitable

Unemployment in Scotland fell to 3.5 per cent in the three months to February, according to official statistics, the lowest since the final quarter of 2019.

But this figure could be a “false positive” as there were 25,000 fewer people in employment at the end of February than at the end of 2019. The drop is therefore attributed to an increase in the number of people who are “economically inactive” – those between the ages of 16 and 64 who are not in employment and are not looking for work.

The estimated inactivity rate in Scotland was 22.5% in the three months to February. This was 0.8 percentage points up on the same period two years ago, and 0.4 points higher than the previous quarter.

Meanwhile, the Royal Bank of Scotland’s monthly jobs report showed a further rise in permanent appointments across Scotland in March, with the rate of growth quickening slightly since February. However, this was with the sharpest decline in permanent candidate availability for three months, a figure that has been going down since February 2021.

So why aren’t candidates moving jobs? To understand we need to look at the push and pull factors that motivate people to stay in a job or move to pastures new.

Push factors stem from underlying dissatisfaction or unmet expectations including things like poor salary or conditions, a lack of growth opportunities or simply a bad boss. We know anecdotally that people are being asked to do more to bridge the gap from unfilled posts, but the highest push factor at the moment is likely low wage growth compared to inflation.

Excluding bonuses, average earnings in February rose 4.1% from a year earlier. But after adjusting for inflation earnings fell by 1.3%, the most since late 2013.

So people have less money in their pockets and are feeling the pinch, yet for now they seem willing to bear the squeeze.

Some of the reasons employees are pulled elsewhere include better compensation and benefits, better location or culture, or a job more aligned with their interests and goals. During March there were more than 55,000 jobs advertised across Scotland – 6% higher year-on-year and on the previous month – so there is plenty of choice out there. Strong demand is also forcing some attractive salaries to appear, offering shelter from inflationary pressures.

Both push and pull factors suggest candidate movement should be in “high frequency”. The truth is that even combined these forces have not yet been strong enough to win a tug-of-war with people’s deep-rooted desire for job security as they take shelter with there current employer.

How will this play out? Given the war in Ukraine, it would be surprising if inflation can be successfully stemmed in the short-term. Demand for staff is still on the up, and this will force employers to turn up the salaries on offer. The pushes and pulls are likely to hit a tipping point which will drive candidate mobility and overcome the tug-of-war with employee’s lack of confidence to move.

In short, the great resignation has not been avoided. It is just delayed.

Gavin Mochan is managing director of s1jobs.