Bank of England chief economist Huw Pill had an unusually hard act to follow when he was appointed – after stints at Goldman Sachs, the European Central Bank and Harvard – to succeed the free-thinking Andy Haldane in 2021. Pill’s face is still not one most of us recognise, but he’s an interesting speechmaker and his latest, delivered in New York, is worth reading for its analysis of the UK’s labour market problem and its potential to prolong the current inflation.
In essence, he observed, the US has a tight labour market because its economy has surpassed pre-pandemic levels and may even be ‘overheating’. But the UK has not reached that benchmark and is afflicted (as indeed The Spectator was early to point out) by an unforeseen decline in participation rates among the working-age population, particularly 50- to 65-year-olds, either from choice or for long-term health reasons – exacerbated, though Pill does not say so, by extended NHS waiting lists.
It’s also worth quoting Pill on Brexit’s contribution to the labour problem, not least because Brexiteers so avidly play it down: ‘While aggregate levels of immigration… remain elevated, the loss of flexibility associated with the end to free movement of EU workers into the UK [means that] post-Brexit immigration has proved less effective in addressing labour market mismatches and more costly for employers.’
One way or another, if we have relatively fewer workers willing or well enough to fill vacancies, then – even as unemployment rises in recession – we’ll have more wage pressure, more inflation and slower recovery than rival economies with keener, healthier workforces. The Sunak solution of teaching teenagers more maths is comically irrelevant. But you, Mr and Mrs Early-Retired Spectator Reader, hold the key. Forget new year resolutions about drinking less or taking up crochet. Just get back to work, flexible as you like, paid or voluntary, doesn’t matter so long as you’re economically active rather than slumped in your armchair.