New skills vital to drive wage rises

Would you like a pay rise? Of course, you would. In fact, I’m betting that everyone reading these words would not only welcome an increase to their own salaries but would love to award pay bumps to their colleagues too.

A high wage economy must be the destination of Northern Ireland’s post-pandemic recovery, not the starting point.

Simply raising wages to tackle the labour shortages affecting supply chains right now won’t solve the problem. It’s more likely to trigger price rises just when people can least afford them.

We’re at a critical juncture in our recovery, and urgently need a longer-term strategy. The optimism of August has made way for dampened spirits in autumn. As the demand switch has been suddenly flicked on, supply has struggled to keep pace, creating headaches around rising prices, skills shortages, and material scarcity. Northern Ireland firms which were planning investment just a few weeks ago are once again coping, not growing.

In that context, there were a few raised eyebrows in the business world when the UK Government seemed to suggest that these issues could be resolved if employers were simply willing to pay staff more.

I don’t know a single person in business who doesn’t see higher wages as part of a wider vision for a high skill, high investment, and high productivity economy. That’s exactly what we outlined in the CBI’s economic strategy, Seize the Moment, formed in consultation with hundreds of firms.

Fundamentally though, we need higher productivity. Without that boost, the higher wages we want become unaffordable. If wages go up, and skills and investment don’t, we just create a recipe for higher prices and living costs.

Partnership is key to solving this equation. We need the Executive, the UK Government and business working in tandem to create quick, evidence-based solutions to the economic challenges we face now and in the long-term. That’s why the CBI proposed creating a ‘COBR-level’ Government & Business Taskforce with the political weight to combat issues head-on.

The subsequent creation of the Supply Chain Advisory Group, headed by ex-Tesco CEO Sir David Lewis, is one step in the right direction, and one that shows the Government is listening to the concerns of business. The onus is now on us to work closely with Sir David’s team to provide the insight and expertise they need to find effective solutions.

But there’s more to do. We can’t overcome supply chain issues in Northern Ireland without building a more demand-led skills system. With industry ready to make big, long-term bets on areas like digital and decarbonisation, they need a consistent stream of talent to fill the roles of the future. At the moment, there’s a bit of a disconnect between supply and demand.

Government and the Executive obviously have a role to play in resolving that mismatch. For example, funding of increased places in our two local universities to stop Northern Ireland’s “brain drain” would be an important step. Likewise, we need to start thinking of innovative solutions to restore the much-needed supply of labour, for example, ‘Attract Back and Attract In’ campaigns will have a role to play and there is also some merit in considering an all-island work visa which could be targeted at specific sectors with significant labour shortages.

In addition, with 90% of the current workforce expected to need some form of retraining by 2030, implementation of the Executive’s new Skills Strategy will be key.

We also need to work the investment side of the ledger. The Chancellor has a chance to unlock higher business investment this later in the month in his Autumn Budget and CSR. The capital investment deduction, announced in March, was a big positive, and business will be looking for him to continue drawing from that playbook in the weeks ahead.

With a spending review imminent, a global investment summit on the horizon and COP26 fast approaching, the next few weeks are crucial for our economic recovery. The real path to economic success lies in longer-term thinking. By using all of the levers at our disposal to boost productivity, attract investment and upskill our workforce, we can achieve a sustainable recovery that delivers growth, keeps us competitive and, ultimately, puts more pounds in people’s pockets. Now that sounds like a plan we can all support.

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