Conundrum of the mysteriously shrinking workforce

Skills Shortage

Crazy though it may seem when unemployment is so high, research has suggested that one of the biggest hurdles to economic recovery from the pandemic could well be a shortage of skilled workers.

A recent report produced in conjunction by KPMG and the Recruitment and Employment Confederation found that the availability of labour has fallen at its fastest rate in four years, with the overall number of candidates during the last quarter declining at its quickest since May 2017. Staff available for both permanent and temporary roles fell significantly.

The skills in short supply are wide-ranging with businesses reporting difficulty in recruiting highly qualified professionals like accountants and engineers, as well as lower-skilled retail and hospitality workers.

On the face of it, this appears a conundrum, but there are several factors at play.

The most significant is arguably the Brexit effect which has triggered a drop in the number of workers coming to the UK from overseas. Approximately 1.3 million foreign nationals left the UK last year, many of whom would have been working in sectors such as hospitality, construction, food processing and produce picking, all of which are experiencing shortages.

They have not been replaced by a new influx of people as restrictions during the pandemic, the post-Brexit visa system and increasingly hostile immigration policies have made it difficult for those considering making the UK their home.

Another factor affecting sectors that have suffered the strictest lockdown restrictions, hospitality in particular, is that many staff have moved on to find work in more secure occupations.

The stop-start nature of the past few lockdowns has meant that employees in these industries have been unable to predict if they will be working from one week to the next. With the threat of being placed back on furlough or being made redundant hanging over their heads, it is hardly surprising that many are jumping ship.

Add it all up and this improbable shrinking of the labour market could be the start of a welcome economic adjustment for some employees.

The potential good news from workers’ perspectives is that with employers unable to rely on cheap labour from overseas, they could be forced into increasing wages to attract new candidates, while also investing more in training to develop their local workforce. For those with skills that are in demand, this could translate into better bargaining power when negotiating terms of employment.

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Posted on June 15, 2021