Public sector takeover

One of the more remarkable economic aspects of the pandemic has been the resilience of the jobs market. This time last year, as another lockdown loomed, the fear was of mass unemployment once the furlough scheme was withdrawn. Yet despite the biggest drop in output in almost 300 years, a great army of the workless has not materialised.

What was not fully appreciated was the extent to which the expansion of the state to cope with the pandemic also acted as a giant job creation scheme.

Andrew Bailey, the Bank of England Governor, said at the weekend that the public sector has created as many jobs as were lost in the hospitality industry during the pandemic.

Schemes such as NHS Test and Trace and the Covid vaccination programme have contributed to an increase of about 200,000 to 300,000 publicsector jobs. This means the public sector is competing with businesses that are trying to flourish once more after the lockdowns but are finding it hard to recruit staff.

Pubs and restaurants are being forced to reduce the hours they serve food because of a shortage of chefs and waiters who were laid off or on furlough during the lockdowns and have gone to work elsewhere, mostly in the public sector.

In September, job vacancies hit another record high of 1.2 million, while employment was up and economic inactivity down, suggesting a mismatch between the jobs that employers need filling and what people are prepared or able to do as the economy recovers from coronavirus.

Inevitably, these Covid schemes must be wound down as the pandemic recedes, which may release some staff back to the private sector. But once the public sector has expanded, history tells us that reducing it again is the devil’s own job.