Sustainable Economic Growth and Employment

Sustainable Economic Growth and Employment

Research on the Agency System in UK Job Agencies: A national job database need to be created by Department of work and Pensions with collaboration of Universities

The probability of international students finding work in the UK is low. It is extremely competitive to secure a job with sponsorship. So competitive that only a very small percentage managed it. Just 2-3% of all international students in the UK between 2017 and 2020 were sponsored on the Tier 2 visa (now the Skilled Worker visa). Despite immigrants’ rising level of qualifications, their employment success is on the decline, thereby hindering participation in the new society in meaningful ways. Given the numbers of immigrants seeking postsecondary education, it seems logical that postsecondary institutions should serve as one of the locations to facilitate successful cultural transitioning and integration of immigrants into British society. Specifically, these institutions could address the primary concerns of students in higher education relative to advancement in a program or field of their study, as well as career development post-graduation (Sinacore, et al., 2011)

UK recruiters are facing increasingly anxious times as the labor market shows signs of cooling. Employers are struggling to offer pay rises that keep up with inflation, and many jobseekers are hesitant to commit. This year, recruiters have experienced a drop in the volume of permanent job vacancies, which has negatively impacted their income and profits. Concurrently, they must work harder to meet the demands of candidates and secure placements (Goff, 2023).

A survey conducted by the Financial Times and research group Statista highlights the multiple challenges recruiters face, including navigating persistently high inflation rates, dramatic shifts in work patterns following the pandemic, and acute skills shortages that have arisen in Britain as a result of Brexit (Goff, 2023).

Adding to these challenges, umbrella companies are increasingly being used by recruitment agencies to pay and employ agency workers. However, people working under these arrangements often experience a multitude of problems. These issues range from a lack of transparency over core terms and conditions to unwittingly becoming embroiled in fraudulent tax arrangements, with serious financial consequences (Trades Union Congress (TUC), 2021).

Exploitation of Students and Graduates

Challenges:

• High Fees: Many job agencies charge substantial fees for their services. These fees can be a significant financial burden for students and graduates who often have limited financial resources.
• Lack of Transparency: Some agencies are not transparent about their fee structures, leading to unexpected costs for students and graduates. Hidden fees and unclear terms can exacerbate financial strain.
• Inequitable Access: The high cost of agency services can make them inaccessible to students from lower socio-economic backgrounds, perpetuating inequality.

Solutions:

• Regulation and Oversight: Implementing stricter regulations to control the fees that agencies can charge students and graduates.
• Transparency Mandates: Requiring agencies to provide clear, upfront information about their fee structures and any additional costs.
• Subsidized Services: Establishing programs that subsidize agency fees for students from disadvantaged backgrounds.

Quality of Service and Outcomes

Challenges:

• Mismatch Between Jobs and Qualifications: Agencies sometimes place students and graduates in roles that do not match their qualifications or career aspirations. This can lead to underemployment and job dissatisfaction.
• Short-Term Focus: Agencies may prioritize placing candidates quickly over finding suitable, long-term positions, leading to high turnover rates and unstable career paths.
• Limited Support: After placement, agencies often provide little to no ongoing support to help students and graduates succeed in their roles or advance their careers.
• Exploitative Practices: Some agencies may engage in exploitative practices, such as pressuring candidates to accept unsuitable roles or working conditions, further impacting mental health.

Solutions:

• Performance Standards: Establishing performance standards for agencies, including metrics for job matching quality and long-term placement success.
• Long-Term Placement Incentives: Creating incentives for agencies to focus on long-term, suitable job placements rather than quick fixes.
• Ongoing Support Requirements: Mandating agencies to offer post-placement support services, such as career coaching and professional development opportunities.

• Ethical Standards: Enforcing ethical standards for agencies to prevent exploitative practices and ensure the well-being of candidates.

Lack of Integration with Educational Institutions

Challenges:

• Disconnected Services: Job agencies often operate independently of educational institutions, leading to a disconnect between academic training and job placements.
• Limited Collaboration: There is often limited collaboration between universities and job agencies, resulting in missed opportunities for tailored career support and job matching.
• Inconsistent Quality: The quality and relevance of agency services can vary widely, leading to inconsistent support for students and graduates.

Solutions:

• University-Agency Partnerships: Encouraging partnerships between universities and job agencies to align services with academic programs and career goals.
• Integrated Career Services: Developing integrated career services that combine university resources with agency expertise to provide comprehensive support.
• Quality Assurance Frameworks: Implementing quality assurance frameworks to ensure consistent, high-quality services from job agencies in collaboration with educational institutions.

Our recommendations

1. Employers should create jobs for job seekers, post them on their website, and recruit staff directly.
2. Prevent agencies from fake jobs for creating fake economic impressions which is not sustainable.
3. Fresh graduate will get jobs directly in their desired field or choice.  Good governance should ensure that no discrimination will happen during the recruitment process.
4. Every university will communicate with local employers or corporate employers to manage jobs for their graduates and international students so that job seekers can develop their careers in the UK to plan for a better life or settle in the UK or any other country.
5. A new era will be introduced that fresh graduates or international students must not be treated discriminately.

References

Goff , S., 2023. Recruiters adapt to structural challenges facing UK jobs market, London: The Financial Times.

Sinacore, A. L., Park-Saltzman, J., Mikhail, A. M. & Wada, K., 2011. Falling Through the Cracks: Academic and Career Challenges Faced by Immigrant Graduate Student. Canadian Journal of Counselling and Psychotherapy, 45(2), p. 168–187.

Trades Union Congress (TUC), 2021. Umbrella companies: Why agencies and employers should be banned from using them, London: Trades Union Congress (TUC).

How Recruitment Fraud is affecting the UK Job Market

Recruitment is the basis of building a skilled workforce and is pivotal for business success. However, amidst the pursuit of talent, a shadow of recruitment fraud looms. With studies finding that a typical organisation will lose around 5% of their annual revenue due to fraud. In the UK recruitment fraud poses a significant threat to businesses, job seekers, and the economy at large.  

It is not just employers who need to be wary, but job seekers must be on the lookout for fake job postings which can lure unsuspecting job seekers into their trap, with promises of lucrative salaries and attractive benefits.  During Q3 last year, JobsAware, a service that provides free help to UK victims, reported a 35% year-on-year increase in job scams. From those looking for work, or to switch jobs scammers are cashing in. Often their approach uses fake job adverts to extract personal information and gain access to sensitive data.  They create a synthetic recruiting experience, from fake job adverts, application process and interviews these frauds have become more convincing than ever before.  Platforms such as LinkedIn are seeing a major surge in fabricated job ads and profiles having to block 22 million fake accounts between January and June 2023. 
Figures from the US Federal Trade Commission show there were more than 92,000 job-related and business scams in 2022, with $367mn reported lost, a sum considerably higher than the previous year’s $209mn. UK companies are warning job seekers to be wary of online recruiters – with their reputations on the line they are keen to combat this prevalent issue. Employers can help reduce this issue by ensuring consistent communication methods and what comms potential employees should expect. 

Reference:

https://hireserve.com/how-recruitment-fraud-is-affecting-the-uk-job-market/

https://www.ft.com/content/85768457-67cd-4f80-8a8d-f46f1bc5fa93

Tax Cut

Large demands for public spending are being created by a combination of demographic pressures, high inflation, rising debt costs, sluggish economic growth and weakened public services. The major tool for tax increases has been freezing tax thresholds, stealthily bringing in substantial revenue. But if the economy continues to struggle, rather than tax cuts, the government will be forced to consider increasing taxes in a more visible way. The concern for all parties will be whether the public are prepared to pay more.

How Tax Cuts Help the Rich Get Richer

1. Greater Absolute Benefits: High-income earners and wealthy individuals pay more taxes, so tax cuts often translate into larger absolute savings for them.
2. Investment Gains: Lower taxes on capital gains, dividends, and corporate profits disproportionately benefit those with substantial investments.
3. Wealth Accumulation: Increased disposable income allows the wealthy to invest more, further growing their wealth over time.
4. Economic Influence: Wealthier individuals and corporations can use their resources to influence policy and further their economic interests.

What Conservatives are doing:

Recent Inflation and Interest Rates:

The rate at which prices were increasing (inflation) slowed down a bit. Because of this, the Bank of England decided not to raise interest rates further. This decision helped prevent the cost of national borrowing from going up.

Current Debt Situation:

Despite the steady interest rate, the cost of paying off the country’s debt is still higher than it was in March when the Spring Budget was delivered. This means the government doesn’t have extra money to allow for tax cuts.

Chancellor’s Statement:

Chancellor Jeremy Hunt emphasized that to reduce the long-term costs of debt, it’s crucial to continue working on lowering inflation and interest rates. This means sticking to the current economic plan, which focuses on controlling inflation.

Future Fiscal Plans:

The Treasury is warning that in the upcoming financial announcements, there won’t be significant new spending or tax cuts. The government is prioritizing the reduction of inflation.

In short, the Conservatives are focusing on reducing inflation rather than cutting taxes because lower inflation and interest rates will help reduce the country’s debt costs in the long run.

Why No Tax Cuts?

Cutting taxes can increase people’s spending, which can lead to higher demand for goods and services. This increased demand can drive prices up again, counteracting efforts to control inflation.

Arguments:

Last week, on the back of its World Economic Outlook update, the International Monetary Fund (IMF) warned the UK government against pushing ahead with further tax cuts. However, the government seems to be driven by the standard story that reducing taxes will raise saving, investment and productivity, which would in turn lead to higher growth.

Traditional economic theory has long suggested that reducing taxes has the potential to enhance economic growth. The rationale is straightforward: tax cuts provide individuals with more disposable income, leading to higher consumption, while lower taxes on firms provide them a greater incentive to invest. Both these factors hold the potential to stimulate economic growth. If this were always accurate, however, countries with lower taxes should have higher growth rates. But, this isn’t always the case. Countries like France, Germany, and Canada, despite having higher taxes than the UK, also enjoy increased productivity, faster economic growth, and less inequality. What are we missing then?

Methodologically, it is hard to determine whether lower taxes have a causal effect on economic growth or not, and if yes, to what extent. Some tax changes occur as a response to economic growth, and analysing a tax cut at a specific point in time may incorrectly suggest that tax cuts hinder growth, especially as they are often implemented during economic downturns. Moreover, failing to account for other factors influencing economic growth, such as government spending and monetary policy, could either underestimate or overstate the impact of taxes on growth. Certain tax changes may show more pronounced long-term effects compared to short-term effects, such as corporate tax cuts, and a study with a shorter time frame might overlook this aspect. Finally, tax reforms involve multiple components: some taxes may increase while others decrease. This complexity can make it challenging to categorise specific reforms as net increases or decreases in taxes, potentially leading to misconceptions about the influence of taxes on growth.

Due to these factors, most of the recent academic literature focuses on examining unforeseen exogenous shifts in tax policy.[3] Evidence from this area suggests that tax cuts can potentially boost growth. But they fail to consider one important piece of the puzzle – what if these tax cuts are accompanied by cuts to public spending as well, as is the case with the current government policy plans? This is important as the manner in which tax cuts are financed has a notable impact on their long-term growth effects. Tax reductions funded through immediate cuts in unproductive government spending may boost output, whereas those financed by decreases in government investment could hinder output.

Given that public services have faced massive cuts in the past fourteen years, there is practically no space left for the government to cut spending in this area without eroding both the quantity and quality of services. This makes cutting public investment sound like the easiest option to achieve but it comes with risks to future economic growth and business investment.

The answer may lie in fiscal innovation. All taxes introduce distortions and inefficiencies in a market economy, but certain types, such as those targeting negative externalities or wealth, can help raise considerable resources without damaging economic activity. A case in point is the implementation of a one-off net wealth tax on millionaire households, earmarked for one-time increases in government spending. Another longer-term example is a capital gains tax which could involve the equalisation of capital gains and income tax as an initial step towards increasing taxes on the largely unearned income generated from assets. In short, we might need to fund tax cuts through other forms of taxation that are less distortionary. 

Explained in Simple Terms:

IMF Warning against Tax Cuts:

The International Monetary Fund (IMF) recently advised the UK government not to proceed with more tax cuts. Despite this, the government believes that reducing taxes will boost saving, investment, and productivity, leading to higher economic growth. But is this the best strategy given the current financial challenges?

Traditional Economic Theory on Tax Cuts:

• Idea: Lowering taxes can enhance economic growth.
• How:
  • Individuals: More disposable income leads to higher consumption.
  • Businesses: Lower taxes increase incentives for investment.

Reality Check:

• If tax cuts always led to higher growth, countries with lower taxes should grow faster. However, countries like France, Germany, and Canada have higher taxes but also enjoy strong productivity, growth, and less inequality.

Complexity of Tax Cuts and Growth:

• Hard to Measure: It’s difficult to determine if and how much lower taxes boost growth.
  • Timing: Tax cuts often happen during economic downturns, making it hard to isolate their effect.
  • Other Factors: Government spending and monetary policy also impact growth.
  • Long-term vs. Short-term: Some tax cuts, like corporate tax cuts, might show benefits only over the long term.

Financing Tax Cuts:

• Current UK Context: The UK government plans to fund tax cuts by reducing public spending.
• Impact:
  • Unproductive Spending: Cutting wasteful spending could boost output.
  • Investment Cuts: Cutting government investment could harm future growth.

Challenges:

• Public Service Cuts: After years of cuts, further reducing public services could degrade their quality and availability.
• Public Investment Risks: Cutting public investment might seem easy but could damage long-term economic growth and business investment.

Alternative Approaches:

• Fiscal Innovation:
  • Types of Taxes: Some taxes, like those on negative externalities (pollution) or wealth, can raise funds without harming economic activity.
  • Wealth Tax: A one-time wealth tax on millionaires could fund government spending without long-term harm.
  • Capital Gains Tax: Aligning capital gains tax with income tax could ensure fairer taxation of income from assets.

Conclusion:

• The key might be to find new, less harmful ways to fund tax cuts, ensuring they do not rely on reducing essential public services or investments.

In essence, while tax cuts can stimulate growth, the UK’s current economic conditions and the way these cuts are financed need careful consideration to avoid long-term negative impacts.