Sensemaker: A puzzle worth solving

Long stories short

• Ukraine’s Interior Minister Denys Monastyrsky and his deputy were killed in a helicopter crash near Kyiv.
• Maria Ressa and her news outlet Rappler were acquitted of tax evasion by a Philippine court.
• Church of England bishops refused a change in teaching which would allow priests to marry same-sex couples.   

A puzzle worth solving

Britain’s labour market is a puzzle. The UK’s unemployment rate is low and businesses are struggling to recruit new workers. But people are leaving work in high numbers.

By the numbers

• 3.7 per cent – the UK’s unemployment rate, its lowest level since comparable records began in 1971.
• 1.16 million – the number of job vacancies, still 46 per cent above their pre-pandemic level.
• 600,000 – the increase in economically inactive people since the pandemic.

So what? The puzzle is worth solving because more working-age adults who are neither in a job nor looking for one exacerbate the economy’s core problems: fast inflation and slow growth.

Labour shortages – made worse by the loss of almost half a million EU workers (more below) – lead to supply bottlenecks that choke off economic growth. Think of the heavy goods vehicle driver shortages and import delays or the lack of fruit pickers and butchers that left produce and livestock in fields.

As companies raise wages to fill vacancies, labour shortages can also accelerate inflation. Prices rise to match higher incomes, eroding productivity gains in the process.

Is this a British problem? The UK’s economy is still 0.8 per cent smaller than its pre-pandemic size. Meanwhile, the US economy is 4.4 per cent bigger and the Eurozone’s is 2.2 per cent bigger. Economists are searching for answers, including:

• Early retirement. The largest increase in inactive people since the pandemic was among those aged 50 and over. The majority of them own their homes outright and are more likely to be debt-free than those who left their jobs during the pandemic and then returned to work. But retirement only accounts for 13 per cent of the UK’s economically inactive population of 9 million.

• Welfare support. More than 5.2 million people receive out-of-work benefits, but more than half of those claimants are on incapacity benefits or have “no work requirements” under the Universal Credit regime. This means that disabilities, caring responsibilities, or being above the state pension age exempts them from having to find work.

• Faltering public services. Long-term sickness accounts for 27 per cent of the economically inactive population. Looking after children or elderly relatives accounts for 19 per cent. Long NHS waiting lists; weak support for people with disabilities and illnesses like long Covid; some of the highest childcare costs in the world and intransigence from employers to offer flexible work all weigh down on the labour market’s ability to respond to demand.

Does not want a job. People have reassessed their working lives since the pandemic. They want more flexible hours, better pay and the ability to work from home. In the Office of National Statistics labour force survey, which was updated yesterday, respondents can give a number of reasons for their economic inactivity. For example, being long-term sick as well as retired. The single most popular reason – 81 per cent or 7.2 million of the economically inactive population – was “Does not want a job”.

To end Britain’s productivity crisis, employers need to entice people back to work. Not just with higher wages, but with flexible working arrangements and better working conditions. Public policy also has a role. Training, employment support and more investment in public services will support workers looking for work – and maybe persuade those who say they’ve given up on it.

CAPITAL ECONOMY, BUSINESS AND FINANCE

EU exodus
Brexit has led to a shortfall of 460,000 workers from the EU so far – and the gain of 130,000 non-EU workers. The finding implies a net loss of 330,000 workers – i.e. 1 per cent of the UK labour force. The losses are concentrated in so-called “non-skilled” sectors, including transport, hospitality, administration, manufacturing, and construction – and come at a time when the UK’s economically inactive population is growing. Keeping free movement of labour, the researchers behind these findings argue, could have eased the UK’s labour market pressures. Sadly, neither of the two main parties are proposing a return to free movement anytime soon.

TECHNOLOGY AI, SCIENCE AND NEW THING

Taliban ticks
Twitter used to give “verified” blue ticks to accounts on the social platform that were “active, notable and authentic accounts of public interest”. When Elon Musk took over the platform, these ticks became available to buy – and, the BBC reports, at least two Taliban officials and four Taliban supporters in Afghanistan took advantage of the $8/month service. Members of the Islamic fundamentalist group, which seized power in Afghanistan in 2021, have been longtime users of Twitter but until now never carried the verification mark, which also grants subscribers priority ranking in search, mentions and replies. It now appears the blue ticks have been removed; it’s unclear if Twitter or the users removed the verification. Twitter did not respond to a request for comment. 

The 100-year life health, education AND GOVERNMENT

Private healthcare
Billionaire and philanthropist Bill Gates is one of many A-listers currently in the Swiss Alps for the World Economic Forum (more to come from Davos tomorrow). But the power and influence $103.8 billion of net worth can buy seems to be on his mind. In the Bill and Melinda Gates Foundation’s annual letter, CEO Mark Suzman attempts to answer the criticism that the foundation has too much of both, with $8.3 billion to give away in 2023 alone. His answer: the foundation is guided by UN development goals and became the WHO’s second-largest donor because countries reduced their contributions. But even he admits it’s “not right” for a private organisation to have such an outsized role in global health efforts. 

Our planet CLIMATE AND geopolitics

Cold Turkey
It’s been eight months since Sweden and Finland applied to join Nato in the wake of Russia’s invasion of Ukraine. But what should have been a smooth accession process has been stalled by one member of the alliance: Turkey, primarily over security concerns regarding Kurdish groups in Sweden. This week, Turkish president Recep Tayyip Erdoğan demanded that the Nordic countries extradite 130 alleged terrorists. While the Swedish government has attempted to address Ankara’s concerns, changing its constitution to strengthen its anti-terror laws, extradition is something Sweden’s courts have the power to block, somewhat binding the government’s hands. So how much longer will Sweden and Finland have to wait? Probably until after Turkish elections in June, says Jamie Shea, an associate fellow at Chatham House. Then, “we’ll be in a calmer political atmosphere”.  

CULTURE soCIETY, IDENTITY AND BELONGING

The witness
A former commander in Russia’s Wagner Group says he is ready to give evidence about the paramilitary group’s crimes in Ukraine. Andrey Medvedev, 26, was in Ukraine for four months before deserting the military unit and returning to Russia, says the BBC. He crossed into Norway last Friday and asked for asylum – the first case of a Wagner mercenary defecting to the West. Yevgeny Prigozhin, the head of Wagner with close ties to Putin, confirmed that Medvedev had served in his company. Medvedev’s lawyer says he witnessed war crimes, including deserters being executed. For now, he is in custody on charges of illegal entry. And no doubt watching over his shoulder for his former colleagues. 

Thanks for reading. Please tell your friends to sign up, send us ideas and let us know what you think. Email sensemaker@tortoisemedia.com.

Paul Caruana Galizia
@pcaruanagalizia

Additional reporting by Jessica Winch, James Wilson, Phoebe Davis and Nina Kuryata.

Photographs Andrew Testa for Tortoise Media, Getty Images

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