Closer inspection of the UK labor market reveals economic scars from Covid | larry eliott

At first glance, the UK labor market is in good health. The unemployment rate is back to where it was before the Covid pandemic hit two years ago and job vacancies are at a record high.

But just as X-rays can detect health problems that can’t be seen with the naked eye, a closer inspection of the labor market reveals some hidden damage. The Covid crisis has not caused the sharp increase in unemployment that was feared, but it has left scars.

The number of employees is more than half a million less than at the beginning of 2020, mainly due to the fact that people over 50 are no longer working. According to the Work and Learning Institute think tank, there would be 1.25 million more people in the job market if pre-pandemic trends continued.

The Office for National Statistics (ONS) says there is no single reason for the rise in inactivity. Some have decided to stop working due to health problems, officials believe, while the events of the past two years have convinced others that the time is right to end. Whatever the reason, the demand for workers currently outstrips supply, which is why the number of job openings is so high.

Unsurprisingly, employers are responding to worker shortages in a variety of ways. They are offering more hours to part-time staff, they are offering sign-on bonuses to new recruits, and they are being forced to raise pay rates. The ONS believes that some of the inactive older workers may be tempted to return to the labor market as the cost of living crisis becomes stronger in the coming months.

For public sector workers, falling real wages are already a problem. While the bonus payments mean that the incomes of people in the financial and business sector have increased by an average of 9.8% during the year to February, well above the 6.2% increase in prices during the In the same period, public sector wages increased by only 1.9%.

Inflation is expected to top 8% in April, intensifying pressure on public sector workers. Unions representing teachers, nurses, civil servants and local government workers are not going to be particularly receptive to Rishi Sunak’s calls for wage moderation, especially in light of the chancellor’s recent political and personal difficulties.

In the coming months there will be an exodus of public sector workers to fill vacant positions in the private sector or industrial action for higher wages. Probably both.

Sri Lanka’s default points to wider crisis

Colombo, Sri Lanka. Economic storm clouds are gathering over the country. Photograph: Paula Bronstein/Getty Images

Sri Lanka’s first debt default since independence is an example of the long economic shadow cast by the war in Ukraine. Far from being an exception, it highlights the risk of a broader debt crisis.

The Colombo government’s decision is not a surprise. For months, Sri Lanka has been waiting for something to come up, but any boost to revenue from the resumption of tourism has been outweighed by the Omicron variant of Covid and rising fuel and food costs. The country could use its dwindling stock of foreign currency reserves to pay creditors or buy essential imports.

Negotiations with the International Monetary Fund (IMF) that are due to start soon will undoubtedly result in the usual package of interest rate hikes and government spending cuts. There is no immediate prospect that life for ordinary Sri Lankans will improve, but the prospect of an IMF deal will put pressure on creditors to agree to a debt restructuring.

Sri Lanka is not alone in finding things difficult. Speaking in Warsaw, World Bank President David Malpass said that 60% of low-income countries were already debt-burdened or at high risk of becoming debt-ridden. Sri Lanka is not classified by the World Bank as a low-income country. Neither does Ukraine, which is trying to meet more than $7 billion of debt payments this year while simultaneously fighting a ruinously expensive war.

Malpass has announced an additional $1bn (£770m) aid package for Ukraine, and the money will no doubt be welcomed in kyiv. Even more welcome would be action by finance ministers at next week’s World Bank and IMF spring meetings in Washington on an effective global debt restructuring mechanism that would bring significant relief to countries that desperately need it. .

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