2 September 2021updated 07 Sep 2021 7:02am

Leader: Britain isn’t working

The labour shortage crisis shows why the UK must end the race to the bottom on pay and conditions.

The spectre that haunted the British economy during the Covid-19 crisis was that of mass unemployment. As the furlough scheme was unwound, forecasters warned, joblessness could reach its highest level since the 1980s.

But the crisis now afflicting the UK is not a lack of jobs but a lack of workers. The number of vacancies has exceeded one million for the first time since records began, with dramatic consequences. Supermarket shelves lie empty for want of lorry drivers and stock levels are at their lowest since 1983. Nando’s, the fast-food chain, was forced to close 45 restaurants due to a lack of chicken; McDonald’s ran out of milkshakes. Christmas is once more at risk of being disrupted.

Labour shortages are not merely a British phenomenon. Countries including the US, Germany, France and Spain are also grappling with a lack of workers. No economy has been untouched by the global supply chain disruption inflicted by Covid-19 and the quarantine rules imposed on employees.

But the UK’s woes have been exacerbated by an exodus of EU migrants since Brexit and the pandemic. Estimates suggest that as many as 1.3 million people born abroad left the UK between the third quarter of 2019 and the same period in 2020, the largest fall in Britain’s population since the Second World War. The number of Romanian and Bulgarian workers in the UK, who often fill food production roles, has fallen by 90,000 (24 per cent) since the end of 2019, while the number of eastern European migrants has fallen by 12 per cent.

Britain has traditionally been prized by migrants for its political stability and economic openness, but its withdrawal from the EU’s single market, and a succession of haphazard lockdowns, has deterred them. Business leaders and Remain campaigners have responded by urging the government to liberalise migration rules (with lorry drivers added to the essential and skilled worker list). But the fragilities exposed by the crisis run deeper than Brexit.

In his first Budget as Chancellor in March 2020, Rishi Sunak declared that “the story of this government has been the story of a national jobs miracle”. But this familiar boast masked an uncomfortable truth: while Britain did not lack jobs, it desperately lacked good ones. Two-thirds of the growth in employment from 2010 onwards was accounted for by self-employment, zero-hours contracts and agency work. The number of people living in poverty who are in a working family reached a record high in 2018 (56 per cent). As Lyndsey Stonebridge writes on page 42, it is a culture that is “indifferent not just to our best interests, but our basic needs”. The twin shocks of the pandemic and Brexit have now exposed the Potemkin village built by both Labour and Conservative governments.

For too long, the jobs boom, which led to the UK becoming the employer of last resort during the eurozone crisis in 2011, disguised the structural weaknesses of the British labour market: a lack of training, investment and productivity. The fate of lorry drivers is instructive. As the Financial Times’s Sarah O’Connor has reported, median hourly pay in the industry has risen by 10 per cent since 2015 to £11.80, compared with 16 per cent for all UK employees. Average real wages for all workers remain below their 2008 level.

The present crisis is an opportunity for an overdue rebalancing between employers and labour. Rather than the race to the bottom of recent decades, firms can begin a race to the top as they vie to attract workers with improved pay and conditions (lorry driver salaries have surged in recent weeks). Companies now have a sharp incentive to invest in training and labour-saving machinery (Britain has fewer industrial robots than any other G7 country).

The age when the UK was content to rely on unskilled, cheap labour to drive GDP upwards should end. Britain needs a more resilient economic model capable of withstanding the shocks that will define this century. Rather than hailing the illusory miracles of the past, the government should make this its ambition and create a labour market fit for the future.