Covid-19

The myth of Britain’s missing workers

philmullan Covid-19, Economic growth, Economic policy, Employment

The discussion over labour shortages, especially in the UK, has been characterised by excessive fatalism. Bewildered commentaries have presented labour shortages as both the big economic problem of our age and the consequence of forces beyond our control. As if they were just the inevitable, irreversible consequence of the pandemic and subsequent lockdowns in 2020 and 2021. There is even talk of a ‘Great Resignation’ or a ‘Great Retirement’.

The evidence suggests otherwise. The impact on the labour force from the lockdowns and their lifting has been hugely disruptive. But it has not permanently diminished the size of the workforce. In fact, by the end of last year, total employment levels had already mostly recovered – to only 251,000 below pre-pandemic levels. Vacancies were also falling by the end of 2022, with 166,000 fewer vacancies reported than at its pandemic peak. In the second half of 2022, the working-age inactivity level had also fallen from its earlier peak (by 125,000). Towards the end of 2022, employment levels for over-49s had pretty much returned to pre-pandemic levels. And there were fewer retired people aged under 65 at the end of last year compared to before the pandemic. The ‘Great Retirement’ has become a small unretirement. So, despite the gloomy fatalism, the labour market has in fact been getting back to normal.

This doesn’t mean that everything is hunky dory in the employment world, of course. The pre-pandemic causes of our economic malaise and the problems in the labour market remain. Above all, investment levels remain as low as ever, meaning that there are way too many poor-quality, low-productivity and low-paying jobs on offer – and too few decent jobs for people who want them.

The numbers of ‘missing’ workers from the economic turmoil of lockdown are neither mysterious nor especially surprising. They are certainly not today’s top socio-economic problem. The unusual features of the current British labour market are primarily the consequence of lockdowns hitting an already anaemic economy. In future, policy discussions on the labour market, or other economic challenges, should address the causes of Britain’s protracted economic slump. That way, we might be able to start solving it.

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The end of the age of globalisation

philmullan Changing world order, Covid-19, Rivalries, State intervention

The economic consequences of Russia’s bloody and despicable assault on Ukraine are very much a secondary consideration to the immediate human and geopolitical implications. And since the various national responses to the conflict are still so fluid, it is far too early to be able to identify the war’s precise longer-term economic effects. Nevertheless, it is possible to suggest tentatively what could unfold on the international economic front. While today’s military confrontation appears to revive US leadership of the old West, because of its dominant military capabilities, in the longer term it is likely to speed up the shift to a post-American world. The invasion could hasten the demise of the US-led economic order.

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The fatalism of the inflation debate

philmullan Covid-19, Economic growth, Economic policy, Inflation

When it comes to the misery of falling living standards, we don’t need a fevered and fatalist debate around rising prices and some short-term counter-inflationary devices, but a proper plan for economic growth. The wealth from rising productivity is the only reliable source of durable prosperity. Moreover, it would allow society to deal better with material disruptions of the sort we have had to endure over the past two years of restrictions and lockdowns.

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Why China haunts America

philmullan Changing world order, Covid-19, Rivalries

The events of 2021 confirmed that the US political class sees containing China as its No1 foreign-policy goal. Indeed, China is now one of the few issues that publicly unites Republicans and Democrats. Treating China as the biggest external threat to America can no longer be regarded as a Trumpian aberration. The Joe Biden administration has been similarly focused on China, building on a theme that goes back at least to Barack Obama’s ‘pivot to Asia’ 10 years earlier.

America’s growing antagonism towards China owes less to the rise of a new power and to a rapidly changing world than to the domestically driven insecurities and drift afflicting the US elite – a situation with parallels in Britain and the other ageing Western powers.

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How to bring about a high-wage economy

philmullan Covid-19, Creative destruction, Economic growth, Economic policy, Employment, Productivity

According to some pundits, the empty petrol stations and gaps on supermarket shelves are a forewarning of another ‘winter of discontent’ – a reference to 1978-9, when widespread strike action brought the UK to a standstill.

In the energy crisis, some see a return to the oil crisis of 1973-4, when OPEC imposed an oil embargo on the likes of the UK and the US because of their support for Israel during the Yom Kippur War.

And, as prices rise across the board, there is a great deal of speculation about a return of 1970s-style ‘stagflation’, when economic stagnation co-existed with sharply rising prices, precipitating a cost-of-living crisis.

As evocative as these trips down economic memory lane are, they do not help us understand what is going on today. The general fashion for reaching for old labels, such as new New Deals or new Cold Wars, to describe the present often obscures what is distinctive about the contemporary moment – and this certainly applies to our current economic situation.

Read the full article here.