Has Rishi Sunak’s furlough scheme contributed to the labour shortage?

Did Rishi Sunak with his “passive and prolonged” furlough scheme miss a trick? 

“With the Conservatives we’ve seen our economy grow, with rising wages and unemployment at a historic low.” www.conservatives.com Eh? – Owl

David Smith www.thetimes.co.uk (Extract)

…Brexit is one reason why the UK is an outlier when it comes to employment performance since Covid. But there may also be a contribution from other factors, including the policies designed to fight the pandemic.

The furlough scheme, a first for the UK, achieved its main aim of preventing what could have been a huge rise in unemployment. But there are growing suspicions that it may have contributed to the rise in economic inactivity.

This may have been by giving older workers, those most responsible for the rise in inactivity, a rehearsal for retirement. But also, as Tony Wilson, director of the IES, says, the furlough scheme was “passive and prolonged”.

Other countries, notably France, combined their pandemic job support with “active” measures to encourage workers to train or re-train, rather than just sit at home. Some tried to anticipate the changes in job demand. Most had previous experience with furlough-type schemes. For the UK, it was novel. As Wilson notes, people were “parked in furlough”, with few obligations on them or their employers.

Re-establishing the flow of EU migrants is not an option, at least in the short term. Getting the newly inactive (and some of those inactive longer term) into work, notably those not suffering from long-term ill health, must be a priority. Governments used to do this in response to high unemployment. Now they need to do it in response to rising inactivity, its 2022 equivalent. Both Wilson and Saunders emphasise that there is no shortage of potential “active” labour market measures, as recommended by international bodies.

The labour market needs some help, a necessary element of supply-side policy to boost long-run economic growth. Doing nothing is not an option……