UK labor shortages are the shape of things to come, Lords warn

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Labor shortages that fuel inflation and squeeze funding for public services could be the shape of things to come for the UK economy, the House of Lords Economic Affairs Committee has concluded.

According to a report released by the committee on Tuesday.

This increase in economic inactivity after the pandemic is unique to the UK. In almost all other developed economies, the employment rate has returned to its pre-pandemic trend or even exceeded it as the effects of the Covid lockdowns faded.

A small workforce represents a serious economic challenge, as it is difficult for employers to fill vacancies; adds to wage pressures that could cause high inflation to persist; slows growth and reduces the tax revenue available to finance public services.

Economists have questioned the reasons for the shrinking workforce in the UK, with some pointing to an increase in long-term illness and disability among the working-age population, while others blame the Brexit for choking off the flow of workers from the EU who filled many lower paid roles.

But the committees’ investigation found that while these factors had contributed, the main driver of out-migration from the labor force had been the early retirement of people who could afford it and who neither wanted nor expected to return to the labor force. work.

The aging of the population was a bigger factor than most people realized, the committee said, a trend that was previously masked by women staying longer at work, but will now continue to weigh on supply. labor.

Lord George Bridges, the committees’ chairman, said this meant policymakers could not count on labor market dropouts getting back to work or on the workforce growing at its pre-rate. the pandemic in the future.

There is a nagging concern that this will be the shape of things to come, he said. We can’t assume that many of these people could return.

However, Lord Bridges also acknowledged that some people who had left their jobs since the start of the pandemic may need to look for work again due to the cost of living crisis.

Inflation in the UK stood at 10.7% in November, after falling slightly from a 41-year high in October.

There are early signs of financial pressures forcing people back to work, with the latest official data showing the number of inactive people over 50 fell in the three months to October.

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A survey from the Office for National Statistics exploring worker motivation, released on Monday, showed that 72% of adults aged 50-59 who had left paid work since the pandemic planned to return in August, compared to 58% when the question was laid in February. .

However, the ONS survey also confirmed the commissions’ findings that most people aged 50 to 65 who had left paid work had done so by choice. Less than one in 10 said they left for health reasons.

Retirement, lifestyle choices and the pandemic were the most common reasons given, with a significant number also citing stress, family responsibilities or feeling they were not valued or supported in their work.

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