A recent House of Lords report, titled ‘Where Have All the Workers Gone?’, attempted to answer this salient question which recruiters address daily but is now starting to produce real harm to the UK economy. A vibrant economy needs workers!
Some of the issues are circumstantial, but others are structural caused by lack of foresight and investment and planning over number of years, which now appear baked in for decades to come.
If we take circumstantial reasons first, the pandemic has seen workers ‘reflect on their careers’ and resulted in a large proportion of workers opt for early retirement. There are 565,000 fewer people classed as economically active than at the start of 2020, many who have made a ‘lifestyle choice’ not to work. Within Engineering this is particularly an issue as the older workers often hold a lot of knowledge and skill, which is lost to businesses.
The cap on lifetime allowances for private pensions has recently been brought to the fore as a disincentive to carry on working for older workers, once people reach the limit. The government is looking into this, to assess whether early retirement is a blip associated with the pandemic or a long-term trend.
The report stated there are 8,935,000 economically inactive 16 to 64 year olds in the UK, a near 7 per cent increase since the start of 2020. Earlier retirement is seen as the ‘’key driver’’ of this change, which is exacerbated by an aging population. Despite the cost-of-living crisis the report says that most over 50’s who have retired have no intention of returning to work.
One of the other major circumstances that has resulted in the loss of workers is the rising prosperity with Eastern EU countries and the fall out from Brexit. There is no longer the financial incentive that there once was to move from countries like Poland to the UK. According to the Office for National Statistics (ONS) the number of Polish nationals living in the UK has fallen from over a million to less than 700,000. This is a consequence of lower tax rates in Poland 35pc compared to 40 pc for a 55k worker in the UK, and increasing wages since Poland joined the EU in 2004, up 47 pc to an average of £27,900.
According to Oxford University’s Migration Observatory, net migration to the UK from Poland and other ‘EU-8’ countries plunged 126 pc between 2016 and 2020. With a net loss of 15,000 EU-8 migrates in 2020.
More worrying for the UK economy is the trend of economic output per head. In some part of the North West ($34,000 per head) and North East it is already below the Polish average, and comparable with parts of north Greece. Although the London effect skews Britain’s average to $55,974 per head, significant challenges face the ‘levelling up’ agenda.
The structural reasons for the loss of workers has been our economic strategy has not been joined up with our education policy. Simply put, the explosion in higher education and courses has resulted in lots of graduates with degrees not suited to the job available. This is particularly stark in Engineering and manufacturing.
Jeremy Hunt the new Chancellor recently launched his 4 ‘E’ (Enterprise ,Employment, Education, Everywhere). It was an attempt to relaunch what has been the know for a long time. Education and investment are the key to a high skilled high wage economy.
The UK remains one of the top 10 manufacturers globally, but the challenges in the labour market look likely to persist until we can realign and train some of our future generations into the high technology jobs of the future. The hope is maybe not to become the ‘workshop of the world’ Britain once was built of fossil fuels, but to become a high tech green, cutting edge economy built on intelligent AI and automation.
Published by SL 13.2.23