Belfast Telegraph

Shortages of labour and skills starting to emerge across range of sectors

Economy Watch

By Andrew Webb, director of economic advisory for Baker Tilly Mooney Moore

Having spent a large part of the past month engaged in developing an economic strategy for one of our councils, it has been striking how, when seeking views on key economic challenges, the importance of skills and ensuring an appropriate supply of labour is a point of unanimous agreement.

I've written previously about how skills shortages are emerging across a range of sectors.

Ask anyone involved in hospitality what it is like recruiting for chefs or anyone in manufacturing about welders and you will see what I mean.

At the graduate end of the labour market, we lose a significant pool of potential labour due to around a third of our students leaving NI to study. Many never return. It has been clear to see that over the past decade or more, one easy way to fill skills gaps has been with migrant workers.

Indeed, at the time of writing, the Department for the Economy has released its research into migrant labour. This suggests that job growth since the economic downturn has been filled by migrant labour. Indeed, around a decade ago, estimates suggest that around 5% of the labour force was made up of migrants. More recent estimates suggest that 13% of the total workforce is from outside the UK or Ireland.

This is a significant increase and one which has prevented a full-blown labour supply crisis emerging in key sectors such as agrifood, manufacturing and tourism. Over the past three years, the average number of National Insurance numbers issued is just over 9,000 per annum. Key sources of this labour have been European Union residents. Over the past 12 months, the numbers from the EU have increased by 500, with a significant increase in people from Bulgaria offsetting a decline in people coming from other parts of the EU. While this flow of labour has been consistent for several years, there is a definite shift in the pattern at a national level since the vote to leave the European Union. In 2017, applications for National Insurance numbers from non-UK nationals were down by 142,000 on the 2016 figure.

A lack of clarity around how workers from outside the UK will be treated (in terms of access to our labour market) during and after the Brexit process and the collapse of sterling after the EU exit referendum have driven this decline. While NI has maintained its figures, if that easy supply of around 9,000 labour market entrants is turned off or reduced considerably after Brexit, that leaves us seeking to grow the pool of labour from other sources, more specifically the inactive population. Or, if addressing inactivity proves an insurmountable challenge, the much-mooted move towards automation may have to gather real pace. These issues should bring our labour market policies into sharp focus, but I fear that tackling economic inactivity is the Sisyphean task of our time. It has been a feature of our economy for over 30 years and shows no signs of being solved.

The high level of economic inactivity is part of a dichotomy at the heart of our labour market.

On the one hand, we are rightly able to lay claim to a strong labour market recovery since the Global Financial Crash and can report that over 60,000 jobs have been added to the employment roll since the lowest ebb of the downturn in late 2011, bringing NI's employment numbers to record levels. On the other hand, we have increasing levels of economic inactivity and an increasing gap with the rest of the UK. Getting behind the inactivity numbers identifies some interesting observations. For example, there are 326,000 working age people currently economically inactive across Northern Ireland. This is 18,000 higher than one year previous and the highest rate of inactivity since 2010.

Within this cohort, 78,000 are students and 36,000 are retired.

From a labour market and labour supply perspective, it would be expected that students will become economically inactive when not studying and we would expect retirees could be 'lost' to the labour market. Other categories of inactive include long term sick (76,000) and 53,000 that look after the home. This cohort of just over 261,000 people are classified as not wanting a job and the balance of 63,000 of the total working age economically inactive classified as wanting a job.

So what, if anything, is being done to address this issue?

There is a vast array of support programmes available across Northern Ireland.

The main return to work programme is the Steps 2 Success programme, which was introduced in October 2014. Since then, close to 50,000 people have been through the Steps 2 Success programme.

The outcomes from the programme are striking in demonstrating just how difficult an issue this is the solve. Of the c.50,000 participants on the programme, fewer than 7,000 got a job they were still in after 12 months.

As economic inactivity increases and the free-flowing source of labour from across Europe potentially slows, drawing people into the labour market from the economically inactive is becoming a more pressing issue, an issue that has never come close to being solved here.

Belfast Telegraph

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