Labour shortage: UK needs 1.1 million people to fill record job vacancies

The UK has a record number of job vacancies but the lowest ever rate of unemployed people for each one, new data shows.

There were 1.1 million vacancies between July and September, according to labour market statistics released by the Office for National Statistics on Tuesday. And as of August there were 1.5 million unemployed people – 1.45 per vacancy, the lowest ever ratio. This time period does not account for the end of furlough, which is likely to have a significant impact on the unemployment rate.

Between a quarter and third of the labour shortages can be explained by lower migration, analysis by The Institute for Employment Studies found.

IES estimates that the UK now has a “labour gap” of 900,000 people, between the number of people in the labour market now and what would have been expected based on pre-crisis trends.

“The recovery is testing the capacity of the economy to adjust to a new post-pandemic environment, a task made more difficult by the reduced availability of overseas workers,” said Yael Selfin, the chief UK economist at KPMG.

Employers have gone on hiring sprees with 821,000 people starting new jobs in September, and while this might be good news for the million workers who came off furlough, this is not enough to fill labour shortages affecting the whole of the British economy. 

“Last month’s ending of the furlough scheme could briefly raise the headline unemployment rate,” Selfin continued.

Headlines have been dominated by the worker shortage in certain fields, such as HGV drivers, but the new data shows that the whole economy is suffering from a lack of workers. 

“These shortages are holding back our economic recovery, and won’t fix themselves by just exhorting firms to pay people more,” said IES Director Tony Wilson.

Reports of pay rises including £30 an hour to pick broccoli or £60,000 per year as a HGV driver have gripped people’s imaginations, and sparked debates over raising the minimum wage. 

However the UK’s labour shortage cannot be filled by simply upping wages. 

Older people and young people are dipping out of the labour market, as many chose to return to education or retire early. Changes in working patterns have also sparked many to move towards self-employment or starting their own business.

The data paints a picture of large falls in participation in the workforce by older people and young people, alongside widening long-term unemployment for disabled people and those with health conditions.

“We need to do far better at helping some of the six million people who are outside the labour market because of ill health, caring or full-time study to get back into work,” said Wilson.

Chancellor Rishi Sunak recently unveiled a £500million plan for jobs which focused on moving those claiming universal credit in to work. 

The plan has been praised for boosting opportunities for older and younger workers, but does not extend provision to those who are furthest from the labour market and face barriers to joining such as mental illness, caring or childcare responsibilities.

Government proposals to allow staff to request for flexible working as soon as they start a new job hope to enable more people to join the workforce, though unions have claimed they don’t go far enough in mandating compliance from employers. 

While unemployment generally has decreased compared to the same time last year, we are still feeling the effects of the pandemic as long-term unemployment is continuing to increase.

Wilson called on the government to conduct “urgent action” to “improve support for older workers, parents and disabled people in particular, where we’ve spent less on employment support in the last year than the furlough scheme costed in a single week”.  

He added: “Firms will need to do more too, particularly by improving how they advertise and recruit, but also in trying to meet people half way on job security, flexibility and workplace training and support.”