MNI INTERVIEW: Great Resignation Arrives In UK, Saps Workforce

Older UK workers are increasingly retiring early, bringing the so-called “Great Resignation” to Britain and further tightening a labour force already sapped by lower net migration and health problems since the onset of the Covid pandemic, the chief executive of the Learning and Work Institute told MNI.

There are an estimated 1.25 million fewer people in the labour market compared to pre-pandemic trends, Stephen Evans, a former Treasury official, said in an interview, adding that the phenomenon of the “Great Resignation” noted in the U.S. since Covid now appeared to be adding to other factors previously identified by the thinktank in the UK, including a rise in disability sapping the over-50s cohort. (See MNI INTERVIEW: Pandemic Leaves UK Labour Market Less Slack)

“There is a bit more growth in people of working age saying that they have retired which suggests that people have been out of the labour market for long enough now and they have given in,” Evans said.

While the unemployment rate fell to 3.8% in the three months to February, the lowest since the end of 2019, before the pandemic struck, this improvement has largely been driven by people dropping out of the labour force, with employment stalled at just over half a million below pre-pandemic levels since autumn 2021, he said.

JOBS MISMATCH

There is little evidence, he added, that the labour-market squeeze is prompting higher pay, even as the rise in the ratio of vacancies to the unemployed to one-to-one highlights employers’ struggles to recruit.

“It may well be that employers are finding other ways to cope with these staff shortages, whether it’s reduced service or whether it’s that they think about investing in automation. There are lots of other responses beyond raising wages,” Evans said.

Advertised vacancies may simply stay unfilled.

It is “not the case that if employers raise wages more people who were suited to their jobs would magically appear. I think there is a risk of a mismatch between the people who have dropped out of the labour market and what their skill sets are, and the skill sets the employers are looking for,” Evans said.

There is still a chance however that some of the drift away from the workforce may be reversed as purchasing power is hit by surging inflation, which the Bank of England forecast in February would peak at over 7% in the second quarter but could end up a couple of percentage points higher than that following the invasion of Ukraine.

“It will be interesting to see if the cost-of-living crisis does draw more people back into the labour market. Rising prices mean you have got to earn more money, whether that is working more hours or more people coming back into the labour market,” Evans said.