Labour Shortages
According to new data published by the Recruitment & Employment Confederation (REC), the number of job advertisements published during the week to the 12th June 2022 was 1.69 million, a new record which highlights that there is no end in sight in terms of the current problems caused by labour shortages within the UK economy
Half A Million Workers Have Left Labour Market
At the heart of the labour shortages problem according to the REC is the fact that half a million people permanently left the labour force during the Covid-19 pandemic, thereby in conjunction with Brexit and the end of free movement between the UK and the EU, causing severe labour shortages
National Challenge
The chief executive of the REC, Neil Carberry, states that: "The jobs market is seeing very high demand in almost every local area and for almost every type of role. The current glut of adverts reflects the challenge firms are facing. Shortages are constraining many firms’ ability to hire and grow. Our national challenge is that there are over half a million fewer people in the labour force than before the pandemic....Solving this participation problem will be essential to get the UK economy growing again."
Carberry adds: "Government and business must work together to support those not currently working to find a way back to the labour market, reform the skills system to equip people for the future and ensure the new immigration system does meet the needs of our economy."
Inflationary Pressures
The former governor of the Bank of England, Lord Mervyn King, also highlighted the fact that labour shortages caused by half a million workers leaving the labour market, mostly caused by older workers taking early retirement, has heavily contributed to the rise in inflation. Lord King argues that: "A legacy of Covid is that around half a million people have dropped out of the labour force. Their return would ease inflationary pressures and boost output. But there is no pot of gold at the end of the rainbow."
A recent report from the the Office for National Statistics (ONS) found that the number of job vacancies now exceeds the number of people to fill them for the first time, highlighting just how severe the problem with labour shortages now is.
The ONS report revealed that the number of job vacancies stands at 1,295,000, which is 23,000 down from the record peak reached in March 2022 of 1,318,000. However, with unemployment having now fallen to 1,257,000, the number of job vacancies exceeds the number of unemployed by 38,000.
Solutions
Given these statistics, it is hard to see how the problem with labour shortages can be resolved by anything other than immigration. Whilst free movement has ended as a result of Brexit, the UK now has a points based immigration system that adapts to any labour shortages that do arise. This is done through the Migration Advisory Committee (MAC), which reviews a shortage occupation list on a regular basis and allocates additional points to those occupations where a shortage arises, in order to alleviate the problem.
'The Most Urgent Problem Facing The UK Economy'
Chris Giles, writing recently in the Financial Times, called these issue relating to labour shortages "the most urgent problem facing the UK economy." An opinion piece for The Week added: "The government’s ability to control immigration policy was hailed as a Brexit win; so why hasn’t it tweaked the visa rules to encourage more overseas workers to come to the UK to fill the gaps? We’ve heard a lot about no longer relying on cheap labour, and the need to “skill up”, but those are reforms for the long-term; this crisis needs addressing now."
MAC Review
As part of recent announcements in relation to the new food strategy, it was reported that "the Government is promising to work with industry to support the upcoming Migration Advisory Committee (MAC) review of the Shortage Occupation List."
