- Acute labour shortages prompt government response. This month has seen the emergence of acute labour shortages across the UK economy, with transport, hospitality and construction sectors amongst the worst affected. An estimated 100,000 shortage of drivers of Heavy Goods Vehicles (HGVs) has prompted the government to announce a package of measures to increase the supply of labour in the industry and prevent food shortages in supermarkets.
- ~~Harming economic recovery. A report from the Recruitment and Employment Confederation (REC) and accountancy firm KPMG earlier this month found the number of available workers reduced at the fastest rate since 1997, and warned this could harm economic recovery.
- What’s causing the shortages? Commentators point to a variety of issues causing the ‘perfect storm’ of shortages: the rise in self-isolation due to the more infectious delta Covid variant, hiring difficulties from the post-Brexit immigration regime, and long-term deficiencies in the skills of the UK workforce.
- ~~Covid and immigration. The increased prevalence of the Delta variant has led to more staff self-isolating, but also many foreign workers have returned to their home countries since the onset of the pandemic. The end of free movement when the UK left the EU’s single market has also meant that staff such as care workers and HGV drivers are no longer eligible for ‘skilled work visas’, exacerbating the shortages. Professor Jonathan Portes explored whether loss of EU migrants and the introduction of the post-Brexit migration system might have long term supply shocks in the labour market in an article for UK in a Changing Europe.
- ~~Skills gap. In an open letter to the road haulage sector, the government explains its belief that “market mechanisms will be the predominant way in which this shortage is resolved”. It has committed to “focus on investing in our domestic workforce, rather than relying on labour from abroad”, through a package of measures to support recruitment and retention within the industry. These include reducing the requirements for HGV driving licences, encouraging job seekers to train to become HGV drivers, relaxing maximum limits on driving hours and increasing funding for apprenticeships within the logistics sector.
- The effect on pay. Surveys have found that labour shortages have led to improved recruitment benefits for new employees in sectors traditionally associated with low pay and working conditions, such as “welcome bonuses” of up to £10,000 for care workers and pay rises for HGV drivers. The Chairman of one of the UK's biggest recruitment sites noted that pay rates for jobs in hospitality and catering had gone up “18% on the jobs advertised on their sites, and 14% for all jobs paying £25,000 or less.”
- ~~Towards a high pressure economy? These impacts could signal the emergence of a high pressure economy, where an increased demand for labour will force employers to increase pay and working conditions to fill shortages in supply. In a blog post for the OECD, Minouche Shafik, Director of the LSE, notes that, in the past, labour supply shocks have led to permanent structural shifts in political economy.
- ~~But “a tightening labour market is not the same thing as a tight one.” The Resolution Foundation sounds a note of caution, reminding readers to “avoid drawing general conclusions about the labour market from specific sectors”. Though that average weekly earnings in the past 3 months to April have been the “fastest increase this millenium”, total hours worked in the UK remains 5% lower than pre-crisis levels.
Work and poverty
- Covid, inequality and precarious work. The Women’s Budget Group released a briefing on precarious work in the UK, exploring whether Covid-19 has exacerbated inequalities between genders, races and across occupational groups. The authors recommend investing in universal free or affordable childcare and adult social care, establishing a well-resourced labour rights body and more.
- Automation and unemployment. In a blog post, economists at the Institute for the Future of Work examine the impact of automation on job prospects as displaced workers transition into new jobs, with occupation-specific estimates of changes in short and long-term unemployment.
Housing and ownership
- Who makes decisions in today’s corporations? Adrienne Buller and Benjamin Braun appeared on Grace Blakeley’s A World to Win podcast to discuss Common Wealth’s report on asset manager capitalism and how worker ownership can reform corporate governance.
- Improving internet access. The government has published the next phase of its £5bn Project Gigabit programme to improve broadband speeds and access for rural and semi-rural areas across the UK. Most of the funding is allocated to funding gaps in deployment of private sector suppliers through a “dynamic purchasing system”.
- ~~State-subsidised internet access improves pay and employment. New peer-reviewed analysis examined the effects of state-subsidised broadband on the employment outcomes of low-income Americans. The paper concluded that “local program availability increased employment rates and earnings of eligible individuals, driven by greater labor force participation and decreased probability of unemployment.“
- Gas boiler deadline pushed back. The government has pushed back its ban of all new gas boilers from 2035 to 2040 over a perceived backlash over the costs to the Treasury, in the hope that the price of heat pumps and hydrogen boilers may fall in the extra five years. The Treasury has also scrapped plans to give millions of households “green cheques” to incentivise faster decarbonisation of residential heating.
- ~~Delayed action increases costs to the Treasury. Climate experts were quick to refer to the recent report from the Office for Budget Responsibility, which plainly stated the spiralling costs to the public finances if action is delayed. Economists James Meadway and Paul Johnson appeared on the Institute for Government’s podcast to discuss “How can the UK pay for Net Zero?”. Read our previous analysis of Fiscal risks and net zero for more details.