Is the UK the ‘sick man of Europe’ once again?

Almost 9 million people of working age are now classed as “economically inactive” – that is, neither in work, nor looking for work – a rise of more than 600,000 since the pandemic began.

This includes an increase in early retirement and, crucially, a sharp jump in long-term sickness, which is “the driving factor for increases in inactivity among older age groups”, reported The Health Foundation.

“The combination of rising long-term sickness and a backlog of 7 million people waiting for NHS treatments is a toxic one,” said David Smith, economic editor at The Sunday Times. “It all adds up to a labour market that is more dysfunctional than at any time in recent history.”

Back in the 1970s, the then US secretary of state Henry Kissinger famously declared that economically “Britain is a tragedy”, said Politico. Now “the United Kingdom is heading to be the sick man of Europe once again”, the news site added.

What next?

While “the starkest number contained in the latest employment figures is the record gap between pay rises in the private and public sectors”, that the size of the potential workforce continues to shrink “remains most baffling to economists”, said BBC business editor Simon Jack.

Chancellor Jeremy Hunt made it clear over the weekend that he saw the UK’s shrinking workforce as one of the main challenges facing the economy, because it would hold back economic growth while adding to wage pressures that could make higher inflation last longer. 

As a consequence, with “living costs rising and fewer people available to work, employers have had to offer higher pay to fill vacancies, even though earnings have still not kept pace with rising prices”, said the Financial Times.

How exactly the gaps in the labour market can be filled “remains a source of debate”, said The Spectator: “should full emphasis should be put on getting British natives back into work, or do we need more immigration?”

“One certainty is that Tory ministers are concerned about the labour shortage – leading to internal rows over loosening immigration – and Labour has noticed,” agreed The New Statesman. Shadow work and pensions secretary Jon Ashworth has proposed a “reformed employment service” to give specialist, tailored help to over-50s.

“Reviving the UK’s flatlining economy will not happen overnight,” said Politico. “Experts speak of an unbalanced model heavily reliant upon Britain’s services sector and beset with low productivity, a result of years of underinvestment and a flexible labour market which delivers low unemployment but often insecure and low-paid work.”

But, the news site noted, “as Italy’s experience demonstrates, it’s one thing to diagnose an illness – another to cure it”.

Article source: https://www.theweek.co.uk/business/economy/958513/is-the-uk-the-sick-man-of-europe-once-again