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The conundrum of 'strong' private sector employment during 'weak economic growth'

One of the riddles posed by the latest CIPD Labour Market Outlook is why employment has grown 'strongly' in the private sector since 2010 in a climate of 'weak economic growth'.

The majority of public sector organisations (55 per cent) have cut their workforces over the last three years, but during the same period, more than a third of private sector employers and over half of voluntary sector organisations increased the size of their workforce, according to the report.

The report said that low productivity and low pay awards had helped sustain employment growth in the private sector, while public spending cuts had driven contraction in the public sector. Of the respondents who had either frozen or offered lower salaries for new recruits, most had done so for unskilled or low-skilled roles (64 per cent) rather than highly skilled roles (39 per cent).

Private sector employers, however, cited rising demand, increased market share, entering new markets and restructuring as the most common reasons for the workforce increase. Other research, it said, had found that the number of managers and senior officials had risen by almost half a million in the last three years. From this it concluded 'that many have sought to stimulate demand rather than do the work itself'.

Analysts are waiting to see whether rising employment is followed by a rise in real wages, or whether it is a function of static or falling pay. Some encouraging research from the Federation of Small Businesses has found that half of smaller companies are now planning to increase salaries over the next 12 months or have done so in the past year.

Acas advisers are experts on change management and employment relations, and there's invaluable Acas support for public sector organisations undergoing change, as well as support for private employers through training in Managing change and Recruitment. Acas can also lend a helping hand to Employing people - a guide for new employers and give Help for small firms to get it right.

Visit the Acas Training and Business Solutions area for more information.

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