In the News

Labour shortages - is market power shifting to workers?

Graham Watson

30th August 2021

The Guardian's John Harris writes here about the ongoing labour shortages, arguing that they offer an opportunity for workers to assert their power, supported by trade unions, and see a substantial boost in real wages.

It also highlights the fundamental problem with the current situation - that many of the areas - notably the food producing and processing areas of Lincolnshire and Cambridgeshire - where there are now labour shortages are already experiencing, or close to, full employment. It's all very well saying invest in British workers - but sometimes British workers don't want to do certain jobs.

The Institute of Directors has responded here to the government's call for investing in UK workers by suggesting that it simply isn't as practical as the government suggests and that any solution to skills shortages will require pragmatism, and, in its view, flexible visas.

What to say? It strikes me as odd that the government - who are fans of the free market - seem to want to cherry-pick the features of it that suit them. Surely, factor mobility is vital here?

Stories like this have both micro- and macroeconomic elements - the latter in terms of the impact on the UK's supply-side and, by definition, its productive capacity.

However, it's an example of a shortage, and the Business Secretary is clearly - and largely rightly of the view that markets are self-correcting. If there's a shortage, wages should rise and people should be incentivised to enter the market.

Haulage companies, and those dependent upon them, are struggling to agree with him - it takes 9 months to train an HGV driver, and I suspect that for many young workers, it will take more than a marginal pay increase to see them enter the profession. So, unless wages rise significantly, I suspect the impasse will continue, and bear in mind that the average age of drivers in the UK is 55.

Of course, you could point out to the Business Secretary that efficient markets required perfect factor mobility, and in the past foreign HGV drivers filled this gap, but that probably wouldn't fit with the narrative that he's wanting to project.

Eve Livingston writes an insightful piece here about the need for trade unions to modernise, in a week when the election of Sharon Graham as head of the Unite union caught many by surprise.

She argues that the nature of labour markets has changed, and with it the nature of worker exploitation, most notably with the rise of the gig economy. As a result, she believes that unions need to adapt to remain relevant, although the fact that only 12% of Unite members voted in the leadership election might also suggest that workers don't feel represented to the extent that they used to be.

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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