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This is about more than Brexit. The supply of immigrant labour has also slowed due to the pandemic and international lockdowns. When faced with the Covid crisis, many immigrant workers chose to return home, while new, tougher UK border rules prevented more immigrants from arriving. That was a double whammy for companies that depend on their labour.
The low paid are benefiting from these changes. Salaries in construction work, for example, are up 14 per cent year on year. This means longer waits and higher prices for people seeking to extend their houses, but it’s good news for builders enjoying the pay rises. With higher wages comes a greater incentive for businesses to invest in training, better job prospects for workers and an economic recovery whose benefits may be more fairly distributed than the last one. If that pushes consumer prices up a little, it would be a fair trade-off.
The official number of job vacancies now stands at 953,000 — the highest figure ever recorded. Combined with the pay rises, it is a good time for anyone looking for a career change. But this needs to be viewed against the 1.9 million people still on furlough. If their jobs have not yet been restored, there is quite a high chance they will not come back. If so, those still on furlough may be missing the opportunity to retrain.
So much of the current worker shortage has been induced by Rishi Sunak. The labour market is being denied potential recruits, partly thanks to a decision to extend furlough far past the period of economic crisis. The pandemic has brought lasting changes to consumer habits and the way businesses operate. The economy is reshaping. A new, leaner, higher-paying economic model may be the result. But the sooner this transition is made, the faster the nation will recover.
The furlough scheme was an appropriate response during lockdown. It came at huge expense (an estimated £66 billion) but it was intended to minimise the immediate economic damage. Many businesses were forced to close at short notice and have since successfully reopened. But furlough needs to end before it is allowed to become a permanent part of the benefits system and ends up, like the old incapacity benefit, causing more harm than good.
That said, the government also needs to be keenly aware of high-skilled labour shortages. It is one thing for factories to be forced to offer higher wages to low-skilled workers; quite another for growing technology–rich businesses to be deprived of the specialists they need to develop new products and services. Britain’s economy depends on air travel to a far greater extent than other European nations, yet the Covid restrictions have badly damaged our international mobility.
Some 93 per cent of British adults have Covid antibodies, which helped to ensure that there were relatively few hospitalisations and deaths in the third wave of the pandemic. The vaccines have done their job. This means we simply do not need to fear the outside world in the same way as New Zealand or Australia. Yet in recent months Britain has deterred foreigners from travelling here, with expensive and quite often pointless tests and quarantine. Now we have left the EU we can come up with a migration regime that helps to protect low-pay work but also opens Britain up to the high skills the economy needs.
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