UK’s growing skills shortage driven by people who don’t want to work
▶ Urgent need to confront a worsening issue highlighted by smaller labour force and 40 per cent more unfilled vacancies than before pandemic struck
Go to Britain’s parks, beauty spots, golf courses, beaches, seaside resorts on a sunny afternoon and you will find them busy. It’s the same in the bars and restaurants. The popular ones are doing a roaring trade – in the middle of the day.
Some are elderly. But a lot of the folk out enjoying themselves are younger and definably not of pensionable age.
Possibly, they’re on holiday or have jobs with flexible hours. Again, not all. A large portion are not employed in any capacity whatsoever.
It’s clear, just from looking around the place, that Britain isn’t working.
People retiring early, says Bank of England governor Andrew Bailey, is causing the steepest price rises of any large, rich country.
Mr Bailey said the sharp decline in the number of people in the workforce was “part of the reason why we have had to raise the bank rate by as much as we have”.
The rise in inactivity of people aged 50 to 64, he said, was “particularly striking”.
Those retiring early are dipping into their savings to maintain their lifestyle, which is propping up demand in the economy – at the same time as dropping out of the workforce and reducing labour supply.
“We should expect this to put upward pressure on inflation in a way that would call for a higher level of interest rates to dampen demand,” Mr Bailey said.
It is strange what is going on. Among wealthy nations, the UK appears unique in having a workforce that is smaller than before the pandemic.
There are more than 1.1 million unfilled jobs across the country, 40 per cent more than at the beginning of 2020.
Just why it is hard to fathom. Partly it has been driven by a surge in people taking early retirement after working fewer hours and enjoying being at home during Covid.
Some may also be suffering from long-term illnesses and medical conditions.
Record patient backlogs in Britain’s NHS may be a factor, in that people can’t get treated but, in the meantime, they quit working.
Brexit, also unique to Britain, and the timing of its implementation with the onset of Covid, and EU workers returning home, not to return, may be another contributor. Shortage of skills is another. Manpower says four in five businesses are struggling to fill vacancies because of a lack of skilled workers – the highest number in 17 years, according to the employment group’s annual study.
The number of employers reporting skills shortages has increased sixfold over the last decade and more than doubled since pre-Brexit and the pandemic.
The most difficult to fill, says Manpower, are in energy and utilities, health care, transport, real estate and computing.
We are suffering from disappearing workers. It’s long been a worry in Whitehall, in the Treasury, that Britain is being held back by people retiring early or going part-time, ceasing to work 9 to 5, five days a week. More than eight million people – a quarter of the UK workforce – are in part-time work, according to the Office for National Statistics. The current trend among the younger age group, to only work the minimum hours expected of them, is not helping.
Employers repeatedly complain they cannot get younger staff to work overtime, even for boosted pay; that they’re not interested in advancing their careers by putting in the hours.
This disinterested approach is borne out by a recent survey by City & Guilds. It found that more than 250,000 18 to 24 year olds have been put off working for life. Thirty per cent don’t feel they will be able to meet their career ambitions, while 9 per cent – which equates to 227,000 people – say they never intend to start working at all.
Those who do intend to work remain downbeat about their chances of getting a job. Of those surveyed, 43 per cent said their education had not equipped them with the skills they need to get the job they want. A further 29 per cent said they could not get interviews and 19 per cent said there just weren’t the jobs available in their area.
So bad has it become that defence chiefs are even permitting dismissed squaddies to reapply to the army because of a shortage of troops.
They are taking a second look at those who were sacked for theft, brawling, failing drug tests or going missing.
Soldiers who were medically or mentally discharged from service may even be allowed to return and retain their compensation. The opportunity is extended to anyone who accepted redundancy.
More than £70 million ($86.16 million) was spent on recruitment campaigns by military chiefs between 2019 and 2021, but they’re now having to resort to calling fired soldiers back. The return age has also been increased from 52 to 57. It’s a two-pronged crisis: lack of skills coupled with people not wanting to work or learn those skills. Yael Selfin, chief economist at KPMG, flagged shortage of skills and workplace participation as “two structural issues that dominate the longer-term risks to the UK outlook”.
Jeremy Hunt, the Chancellor, used his budget this month to encourage over-50s to work for longer, scrapping a cap on the amount that can be saved in a pension without paying tax.
Mr Bailey said: “I welcome them, I think they’re really addressing the right things.
“I’m pleased we’re having more of a national debate on the labour supply because it’s very important.”
The governor is right. We urgently need to confront this growing issue. Mr Hunt cannot stop there: much more needs to be done, by employers as well as government.