Employment

The problem with Hunt’s ‘back to work’ budget

philmullan Economic growth, Economic policy, Employment, Investment, Productivity

In January, prime minister Rishi Sunak announced his five key priorities for 2023. Conveniently for him, his first priority was something that is very likely to happen regardless of what his government does. Sunak’s top pledge to ‘halve inflation’ came a few days after just about every new-year economic prediction said that inflation would fall by at least half during 2023. Chancellor Jeremy Hunt adopted a similar hollow ploy in his budget statement yesterday, setting himself up to take credit for something that is already happening anyway.

Alongside all the familiar, disingenuous boasts about promoting growth and business investment, Hunt also placed a distinct emphasis on this being a ‘back to work’ budget. He highlighted the importance of ‘tackling labour shortages that stop [businesses] recruiting… by breaking down barriers that stop people working’. Yet ever since the threat of further pandemic shutdowns lifted last year, people have already been returning to work, pretty much as normal. So why the focus on getting people back to work now?

Read the full article here.

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.

Read the full article here.

The fundamental flaw of Levelling Up

philmullan Economic growth, Economic policy, Employment, Productivity

For a long time ‘Levelling Up’ was widely derided as a slogan in search of a policy. With last week’s much-delayed Levelling Up White Paper, we now have lots of policies – 400 pages of them. However, the search to identify the essential causes of lower levels of prosperity and growth in some parts of the UK has missed the mark.

Aspiring to raise living conditions for all, with an emphasis on the most deprived, is a worthy goal. But turning hope into an effective plan needs to start with ‘the why’ to identify successfully ‘the what’ that needs to be addressed. For all its length, the white paper fails to unearth what’s been holding back local, regional and national growth and prosperity. The government continues to evade the fundamental driver for deficient living circumstances countrywide – namely, an economy that has been stuck in depressed conditions for half a century.

Read the full article here.

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.

A ‘rebound’ to the Old Normal is not good enough

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

At the end of April, Barclays boss Jes Staley was forecasting that 2021 would see the strongest boom in Britain since the aftermath of the Second World War. The emerging consensus among economists is only a little less ebullient in anticipating the fastest pace of growth since 1989. The Bank of England’s chief economist, Andy Haldane, captured the upbeat mood: ‘As I’ve been saying for months – drawing on the economics of coiled springs, and crouching tigers, and “Chicken Lickens” – I do think more likely than not we are [set] for a rapid-fire recovery. That is coming, and I think that is coming soon.’

The upgraded forecasts for Britain’s economic growth this year and next from the likes of the IMF and the EY ITEM Club are quite feasible. However, it is short-sighted to think a rapid bounce-back over the next year or so will mean a robust long-term recovery. Moreover, talk of a ‘great rebound’ could also reinforce the tendency of successive governments to abandon their economic responsibilities to help the private sector create new growth sectors with enough decent well-paying jobs for people.

Read the full article here.