New decade could see an end to "benign employment relations", says CIPD

CIPD chief economic advisor Dr John Philpott says:

The benign employment relations of the long Noughties boom may have just about survived the worst ravages of the Noughties recession but they face a severe test in the coming decade. Private sector employers will seek to contain wage costs and public sector employers will have to cope with the consequences of fast shrinking budgets and mass job downsizing.

The CIPD's nearer-term forecasts are for a return to economic growth, but one that is accompanied by "a sting in the tail of the recession" in the shape of a further rise in redundancies during winter 2009/2010 as employers cut jobs to boost productivity and shrink labour costs. This will result in a further spike in unemployment in 2010:

The CIPD's baseline forecast is that the number of people in work will fall by 250,000 between the third quarter of 2009 and the second quarter of 2010, with unemployment rising to a peak at 2.8 million next summer. This, however, represents a marked improvement on the CIPD's mid-2009 forecast that unemployment would peak at 3.2 million.

As we noted last week, the rise in unemployment seen during the current recession has been much less severe than might have been expected. But, as the CIPD notes, further waves of job cuts remain possible if private sector employers who have hoarded labour during the recession decide to reverse this policy in light of slow recovery.

The expected post-election clampdown on public spending is also likely to result in a wave of public sector job cuts. And while severe pay restraint has so far been largely confined to the private sector, public sector pay will also fall victim to spending cuts.

The coming decade certainly looks set to be an interesting one. The period characterised by Bank of England governor Mervyn King back in 2005 as the "great stability" (PDF format, 95.4K) (external website) would appear to be firmly behind us, and employment relations will inevitably change as a direct result.

As ever, XpertHR will continue to provide you with authoritative and up-to-date guidance, analysis and data to help you keep on top of all the challenges presented by the coming decade.