It’s too soon to worry about post-Covid labour shortages

After the Black Death killed a vast swath of England’s population in the 14th century, the remaining workers were in high demand and they knew it. “Some, seeing the straights of the masters and the scarcity of servants, are not willing to serve unless they receive excessive wages,” explains the introduction to the Statute of Labourers in 1351.

The statute was a heavy-handed (and ultimately doomed) attempt to stymie the law of supply and demand. It declared that if workers took more for their labour than was “customarily paid” before the plague, they “shall be committed to the nearest jail.”

It is not hard to detect faint echoes of history as we inch out of the coronavirus pandemic. As restrictions lift, employers from the US and UK to Hungary and Germany are complaining of labour shortages. Some want policymakers to intervene on their behalf. The US Chamber of Commerce has called for an end to unemployment benefit top-ups, saying that “paying people not to work is dampening what should be a stronger jobs market.” In the UK, the hospitality industry is lobbying for a “coronavirus recovery visa” scheme which would allow migrant workers to enter the country to fill entry-level jobs.

We are getting carried away. It’s too soon to worry about spiralling wage inflation, or to predict a widespread shift in the balance of power between labour and capital. To focus on the UK, the latest data on pay settlements from XpertHR shows the median award in the three months to April was 1.9 per cent. While this was an increase from 1 per cent the previous month, more than half of all pay awards were still lower than the same group of employees received a year ago. Much of the public sector workforce, which accounts for 17 per cent of all employees, faces a pay freeze. And minimum wage increases have decelerated from 6.2 per cent last year to 2.2 per cent this year.

That is not to dismiss reports of labour shortages and higher pay offers in some sectors, such as hospitality, where reopenings mean vast numbers of hotels, restaurants, pubs and bars are all trying to hire.

Some potential workers are still nervous about the virus (not unreasonably: chefs are among the 10 occupations with relatively high male death rates from Covid-19). Others fear they could be furloughed or made redundant again if there is another lockdown. Workers from abroad who went home to be with their families might worry about coming back, only to be stranded on the wrong side of a border from their loved ones. People are weighing these risks against the potential rewards: median pay in hospitality is lower than any other sector, at just £8.64 in 2019, and about a fifth of workers are on zero-hours contracts.

Some employers have made their own lives harder. The point of the UK’s generous furlough scheme was to maintain the connection between employers and employees to avoid mass redundancies and a subsequent scramble to rehire. But a slew of hospitality employers chose to let workers go anyway, especially after July, when they had to start contributing towards the costs of the scheme.

The number of jobs sustained by the hospitality and leisure sectors fell 20 and 21 per cent respectively between January 2020 and April 2021, according to the Resolution Foundation (furloughed workers are classed as still having jobs in this data set.) PizzaExpress, for example, made 1,300 job cuts in October last year, only to launch a campaign to recruit 1,000 employees in April. Rishi Sunak, the chancellor, did not help by threatening to close the scheme at the end of October before making a last-minute U-turn.

Even some employers who did furlough workers have struggled to keep them. One chef at a high-end restaurant, where a salad costs about £20, says almost half the kitchen team has left. The company, expecting staff to be grateful for having been furloughed, extended their hours on their return and cancelled previously promised promotions.

“I think they read the room badly, and constantly reminding the employees of their debt of gratitude and dependence on the company was the fastest way to foster resentment,” he said.

The scramble for chefs and other workers might well ease off as the economy settles down and the pandemic recedes. But this moment should serve as a reminder to employers that labour isn’t a commodity that can be picked up and put down at a moment’s notice. Rather, it is a relationship with people that can be sustained or squandered. The shortage of workers isn’t a problem to be solved, but a lesson to be learned.

sarah.oconnor@ft.com