An entrepreneur holds a sign reading “Slow” on Van Ness Boulevard in San Francisco, California, United States, Monday, March 22, 2021.
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LONDON – The Covid-19 pandemic is not only having a seismic impact on global public health, but also causing chaos for the economy, with supply chain disruptions and labor shortages being a big deal problem for businesses around the world.
The changes that have taken place in the labor market are increasingly pronounced, with many people voluntarily leaving their jobs as the demand for workers increases as economies reopen.
Economists say changing demographics, such as aging and retiring workers, is a factor behind the shortages, along with border controls and immigration limits, and demands for better wages. and flexible working arrangements.
The latest employment data in the United States, for example, shows that more workers are ready to quit or change jobs. The U.S. Department of Labor’s most recent monthly job vacancies and job turnover survey, released last week, showed that there were 10.4 million job vacancies in August while the number of people leaving their jobs (the so-called “quit rate”) rose to 4.3 million, the highest level seen on records dating back to December 2000.
Sectors particularly affected by workers leaving their jobs were accommodation and food services, wholesale trade, and state and local government education.
The problem is not just American, with many countries around the world experiencing labor shortages. This is important because it exacerbates supply chain disruptions around the world, with key industries struggling to regain momentum due to a lack of workers or raw materials.
This disrupts local and global production and supply networks, hampering economic growth and causing shortages of products and services for consumers.
Read more: Supply chain chaos is already hitting global growth. And it’s about to get worse
Experts are assessing the potential impact that labor shortages could have on the economies of the United States, the United Kingdom and the euro area. They also point out that while the pandemic has accentuated and highlighted labor shortages, the roots of these problems are pre-pandemic.
“The lack of skilled workers is not only another symptom of the post-containment economy, but also the result of more fundamental developments in the United States, the euro area and the United Kingdom,” economists of ING Carsten Brzeski, James Knightley, Bert Colijn and James Smith wrote in a note on Tuesday.
What’s going on with American workers?
By examining the cyclical and more fundamental drivers of these shortages, ING economists examined the similarities and differences between labor markets around the world.
In the United States, they noted that the economy had fully recovered all of the lost economic output caused by the pandemic, although “employment remains at 5 million [jobs] below the February 2020 level. ”This is not, however, due to a lack of demand for workers.
“There are currently over ten million job openings spread across all industries with a record proportion of companies raising wages to try to attract staff. Rather, it is a supply issue. of workers, which both curbs production and increases inflation pressures in the economy. “
One possible explanation for this is that households have built up savings buffers and have no rush to return to work, economists note, but the problem could be more structural than that.
“We believe there is a more permanent loss of workers driven by a large number of older workers taking early retirement. The thought of returning to the office and commuting can seem unpleasant to many people and soaring Stock markets having boosted 401,000 retirement plans, early retirement may seem like a very attractive option, “they noted, adding that closing borders will have slowed immigration and slowing birth rates mean fewer young people. workers are now entering the labor market.
Principal Nathan Hay checks students’ temperatures as they return to school on the first day of in-person classes in Orange County at Baldwin Park Elementary School on August 21, 2020 in Orlando, Florida, United States. Face masks and temperature checks are required for all students, as Florida’s death toll from COVID-19 now exceeds 10,000, with some teachers refusing to return to their classrooms due to health concerns.
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“If this is correct, labor market shortages could persist for much longer than the Federal Reserve expects, which means companies will increasingly raise their wages to attract staff,” ING said.
“Not only that, but the high quit rates suggest that companies may also need to increase wages to retain the staff they currently have, given the high costs of worker turnover on morale, training and employee satisfaction. customers. This indicates increased inflationary pressure for the Fed. to react with interest rates rising earlier and faster than the prices currently set by the financial markets. “
What about the UK?
Trucks and automobiles approach the Dartford Tunnel in the UK on September 3, 2021.
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Post-Brexit visa rules make it harder for EU nationals to work in the UK in lower paying positions and ING has said this means it will permanently be more difficult for UK companies to recruit staff from abroad. “Recent changes to temporary visas for specific roles, including trucks [truck] drivers, they are unlikely to make a huge difference in this story, ”they noted.
As in Europe, the UK also faces structural challenges, namely that the growth of the working-age population is expected to slow over the next decade. ING noted that “like the United States, this may amplify some of the current shortages, but it is also a structural drag on the UK’s potential growth.”
And the euro zone?
Like the UK, the neighboring eurozone has sought to limit massive job losses during the pandemic by introducing leave schemes (where the government subsidized workers’ incomes in order to stop layoffs).
“At 7.5%, the unemployment rate is only 0.4 percentage point from its historic low, reached in March of last year,” noted ING.
Yet, while concerns about labor shortages started later than in the US and are less pressing than in the UK, “they are increasingly mentioned as a concern for businesses. “, added ING.
“More than ever, companies in industry are reporting work as a factor limiting production, in services this number is still below historic highs.”
The European auto industry has been hit by production shutdowns during the pandemic.