Britain’s jobs miracle hides some uncomfortable truths

Where are all the workers? This is increasingly a puzzle. On the face of it, the good news is that unemployment is still falling – it has just hit a 48-year low in the UK.

But this obscures something less positive: More and more people are dropping out of the labor market altogether.

The “miracle” of jobs was routinely trumpeted by Boris Johnson’s government, and it certainly is a good time to be a plumber, or a teenager who can take a pint. There are still as many vacancies as there are people looking for work, despite the fact that employers have scaled back a bit as the economy has worsened. But the stresses are taking their toll: Luggage piles up at airports, while builders and architects close their books on new contracts. Some managers I talk to are almost asking for a recession.

The latest figures from the Office for National Statistics show that, astonishingly, despite the cost of living crisis, average weekly work is still not back to pre-pandemic levels. In the three months to July, there was a slight fall in overall employment.

It turns out that the new low unemployment is not due to more 16-65-year-olds being in work. This is because more people are not looking for a job. The percentage of economic inactivity has reached a six-year high of 21.7 per cent. This is partly because some students have extended their education through the ravages of the pandemic. But that is mainly because hundreds of thousands of people in their 50s and 60s now have a long-term illness, which, according to the ONS, is a record.

It is hard to escape the conclusion that the NHS backlog must now have a direct and devastating impact on the workforce. Long Covid also affects what according to some estimates could be as many as 1.5 million people in the UK, and between 10 and 20 per cent of those who have had Covid.

Yet the push we saw from governments to fight Covid itself seems to be totally lacking when it comes to the aftermath. Politicians seem to hope that Covid will just disappear for a long time. But anyone who has suffered from it, or knows someone with it, knows that this condition can be crippling – and that research is urgently needed.

The number of people requiring hospitalization during the pandemic was always going to cause chaos afterwards. But while we’ve seen this week that queuing is our national pastime, there’s nothing charming about queuing for basic healthcare.

People who put off seeking medical help during the Covid crisis are now sicker than they should have been. Those whose operations are constantly postponed lose hope. The number of people paying to go private is sky high; others are trapped in quiet desperation.

This should worry ministers – not only because it is an absolute scandal, but also because 50-year-olds rarely return to work once they have retired. Their disappearance can only add to inflationary pressures in the economy driven by the tight labor market.

In this unusual situation, the term “unemployment” feels quite unsatisfactory. It usually makes sense to measure the number of people who do not have a job but want one, and to exclude those of working age who are not looking. These tend to be students, housewives and those who care for elderly relatives.

But if a large number have been incapacitated by errors in the health care system, that feels like a different matter. This makes the strict measure of unemployment a less accurate reflection of available labor capacity.

The exodus of European citizens since Brexit has not helped, particularly in sectors that had previously been heavily dependent on EU work and are struggling to adapt. The National Farmers Union has complained convincingly about fruit and vegetables rotting in the fields.

A detailed analysis last month, by the Migration Observatory at Oxford University, found that many low-wage sectors – including social care, construction and hospitality – are struggling to adapt to the end of free movement from the EU. Even in sectors such as construction, which are eligible for skilled work visas, take-up has been low.

The UK is not the only country with low unemployment and vacancies. In terms of total immigration, the inflow of non-EU arrivals from 2019 to 2021 has largely offset the number of EU workers lost. However, these non-EU workers tend to be in higher-skilled jobs, according to the Migration Observatory, so they do not replace lost EU workers on a one-to-one basis.

A key Brexit goal was to end the undercutting of wages by migrant workers in low-wage industries, and to increase productivity. But it may be that the crackdown on visas for workers in low-wage sectors has gone too far.

The Migration Observatory says that employers are reducing production. I have certainly met restaurateurs who say they have to close several days a week due to a lack of staff, despite customer demands.

Until the pandemic hit, economic inactivity had been on a downward trend. Universal Credit changed the benefits system to make work pay, and to get people off long-term sick pay where possible. It would be terrible if we now congratulated ourselves on low unemployment, while keeping people unnecessarily out of the workforce.

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