Labour problems may be an early sign of inevitable economic readjustments around the world following the pandemic
Last modified on Sun 6 Jun 2021 08.55 EDT
Jamie Rogers is a former semi-finalist in the BBC’s Masterchef: The Professionals, and the founder of an award-winning restaurant called Twenty Seven, located in the south Devon town of Kingsbridge. As it reopened for business after the recent lockdown, a handful of staff handed in their notice. As he told me last week, he then began to explore what was happening in his part of the economy, and was confronted with huge changes: “Jobs that were worth £10 an hour last year are suddenly paying double that.”
Brexit is part of the story. “A lot of international people have gone home – a lot of people are telling me that,” he said. So too is a shift among British-born workers. “I bumped into someone the other day who was working in Tesco. He used to be a head chef. He said, ‘I’m happy where I am now.’ He’s seen that he doesn’t have to work a 60- or 70-hour week, and he’s still probably making the same money.”
Rogers has now taken a bold approach to pulling in managerial staff, offering a £1,000 bonus if successful applicants can guarantee they will stick with him through the summer. He has also put up his hourly rates for middle-ranking jobs. The worst seems to be over, although he is still looking for a restaurant manager.
What has happened in his corner of the south-west is a small aspect of one of the early summer’s biggest stories: a global labour shortage. The US Chamber of Commerce is warning of a crisis affecting businesses “across every industry, in every state”. Angst is spreading about a lack of workers in Germany’s hospitality sector, and there are comparable issues in other countries such as Norway, Australia and Singapore.
Meanwhile, despite unemployment at 1.6 million, the UK is experiencing its own labour problems, partly caused by the fact that 1.3 million foreign nationals have left the country in the last year. As consumer demand surges, hospitality businesses don’t have the staff to keep pace, and shortages are also mounting in construction, road haulage, food processing and fruit and vegetable picking.
Restrictions on travel within Britain due to Covid are part of the explanation – but Brexit and the ever-more hostile approach to immigration by Priti Patel’s Home Office are also factors, as suggested by what Rogers has heard in south Devon. In that context, the recent spectacle of the Brexiter founder of the Wetherspoons pub chain, Tim Martin, moaning about his sector’s recruitment headaches and demanding “some sort of preferential visa system for EU workers” was grimly hilarious – – though as I know from bitter experience, time spent in his pubs rarely assists one’s powers of coherence and consistency.
Beyond the UK, as well as Covid rules and border closures, blame for labour shortages is also being placed on wage subsidy schemes such as furlough, increased unemployment benefits and people’s reluctance to go back to jobs they never much liked in the first place. The Washington Post recently interpreted the US’s labour problems as “a great reassessment of work in America”, as people look “to do something different with their lives than they did before the pandemic”. In that sense, what is happening might be an augury of long-lasting changes and disruptions, not all of which will be unwelcome.
We all know how western economies have been run for the last couple of decades. Wages have stagnated, as exploitation and precarity have increased. This has been partly enabled by the transfer of manufacturing to countries where wages are low, such as China, keeping the price of consumer goods down; and the use of workers from overseas has also played some part in keeping a lid on costs in sectors such as retail, distribution, hospitality and construction.
These are messy, difficult elements of recent history, which have mixed up questions of diversity and openness with raw economics. Woven through them are changes that coverage of the labour market too often ignores: the weakening of trade unions, and welfare states remodelled to relentlessly push people into poorly paid work. In addition, the ultra-low interest rates that have been in place since the 2008 crash have widened access to cheap credit, and made many people’s mortgage payments manageable, thus further reducing pressure for pay rises.
Like the crash of 2008, the pandemic has proved that economies characterised by these features are full of weaknesses. Worse still, in the period between these two events, these defects created seething tensions that fed into the growth of a new rightwing politics, whose figureheads are now attempting to slam the door on globalisation and the movement of people, with apparently blithe disregard for both the human and economic consequences.
But here is the really interesting thing. Whatever the toxic actions of modern populists, the big, long-term picture suggests that 2021’s labour problems may be an early sign of inevitable economic readjustments. The size of China’s workforce began to decline nearly 10 years ago, and wages there have increased accordingly. Across the west, working-age populations are also declining. And Covid has introduced another set of changes to economies and societies, pausing globalisation, apparently squashing birthrates and planting big questions in people’s minds about life and work. All these things may yet begin to restore at least some of the bargaining power that most employees have lacked for years.
As British businesses plead for the government to rethink its post-Brexit approach to labour mobility, one of Patel’s aides was quoted last week insisting that businesses “can’t always say the answer is to hire cheap foreign labour”; the official Home Office line is that employers must now “focus on training and investing in our domestic workforce”. Whether by choice or necessity, plenty of businesses are already moving in that direction. Restaurant chains are reportedly putting up pay for some positions by as much as 15%; in construction, there is talk of a 10% rise in going rates.
The prospect of rising wages is one of the reasons that there are fears about the possibility of increasing inflation, a change that would tip our flimsy economic model into trouble (Martin Wolf wrote in the Financial Times that it “would raise interest rates, destabilise exchange rates, ignite unrest in labour markets [and] push the highly indebted towards default”.). If you are on the left, such disruption might be a price worth paying for a long-overdue step towards fairness and equality; on the political right, the possibility of danger and havoc might be one reason why some people in Boris Johnson’s government may want to restrict “levelling up” to rhetoric instead of trying to fundamentally alter economic reality.
In fact, it looks like things might be changing of their own accord. Capitalism being capitalism, in the labour shortage’s mixture of startling numbers and fascinating human detail, it is difficult to distinguish between progress and turmoil. But amid Covid’s endless fallout, a new economic era may be messily starting, and what that will mean for our lives is something we are only just starting to understand.
John Harris is a Guardian columnist
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