As Covid-19 restrictions have been lifted the labour market picture continues to show a top-line increase in the employment level but with a paradoxical (and sharp) increase in the number vacancies across the labour market as a whole. In fact, as the Institute for Employment Studies reports, vacancies have hit one million for the first time on record. A key part of the reason for this odd dual rise in employment and vacancies, apart from the high rate of growth as the economy reopens, stems from both a higher number of people deciding to go into full-time education and those abstaining from returning to paid employment because for health and other reasons. This economic inactivity may ease as government pandemic-related policy support is withdrawn and more people return to work, although this won’t account for a large number of those who still need further assistance to return to work.
The problem of labour supply, which has become a feature of our post-pandemic economic reality in most countries, is likely to continue relative to demand for several months. As the IES and others are arguing, government support will have to continue and do so in a way in which labour market policy has largely not been employed in recent decades, namely to encourage greater labour market (re)entry when top-line economic growth and employment numbers are going up and looking healthy. The need for extended government support, and probably into 2022, is given further reinforcement by recent update by the LSE’s Programme of Innovation and Diffusion (POID). The POID ‘Risk of Business Failure’ tracker, as also reported in the Observer on 15 August, says that only 1-in-16 firms (6.3%) say they are ‘at risk’ of closure; a marked improvement from January when this was 1-in-7 (15%).
This sharp rise in business confidence explains much of the above rise in vacancies as businesses have greater confidence (and need) to hire new staff. The manner in which government support ends for businesses and individuals, the POID update states, will need to be done with care and should avoid the sort of cliff-edge drop-off in support in favour of part phased closure of Covid19-related policies and part extension and retention of other policies.
As the IES argue in their update, “there is a clear economic as well as social case for doing far more to support those who are economically inactive to return to the labour market and then to take up work” and “employers will need to do more too, particularly by designing jobs and recruiting to them in ways that will enable students, older people, those with health conditions and parents to take them up.”
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