Challenge Poverty Week Blog | Work & the Economy
Of all the truths the Covid pandemic has laid bare the inseparability between the world of work and the fortunes of the economy, might just be the most significant.
Britain’s unemployment rate might have pushed through the lows of the past five business cycles, but the economically active population remains well below its pre-pandemic peak. In essence the demand for labour has been much stronger than people’s willingness to supply it.
Growing labour shortages, have been a key feature of the post-pandemic economy. They have also acted as a significant break on economic and productivity growth and put upward pressure on wages, contributing to the country’s inflation problems.
Jeremy Lawson, Chief Economist at Abrdn
Critically, they have myriad, complex and deep-seated drivers. To name just some of them:
Physical and mental well-being has deteriorated, thanks to the direct and indirect effects of the pandemic, including insufficient health sector resourcing, lowering many people’s ability to work.
Child care is costly, and its total supply inadequate, making it harder for many women to return to the workforce, or work as many hours as they would like.
Migration policy has become more politicised since Brexit, starving key sectors of much needed workers.
Investment in education and vocational training has been insufficient over many years, so the potential of our people is not being exploited.
Diversity and inclusion is still a problem in the workplace, compounded by inadequate leave policies, further eroding our potential.
The country’s industrial relations system is unnecessarily adversarial, making disputes more likely, and strike activity too common a resolution mechanism.
And many potential workers have simply reprioritised their lives, de-emphasising work or at least work that comes at the expense of other life objectives.
None of these issues have simple, or short-term fixes. In most cases they require a wholesale reconsideration of labour laws, government spending priorities, the design of the tax system, and the ways that businesses organise themselves.
And of course they are all closely interrelated. Health resourcing can’t be fixed if doctors’ and nurses’ working conditions aren’t improved, and investment in education and skills too low. And more affordable and widely available child care is one of the keys to unlocking a more diverse and productive workforce.
This collective under-investment in the potential of Britain’s people, ought to have been the real focus of the new U.K. government’s growth plan. It is here where the low-hanging fruit reside, and where there is the greatest opportunity to boost the country’s dismal growth rate.
No economy can truly be healthy unless its workforce is too.
Jeremy Lawson, Chief Economist at abrdn.