Talk to any employer and the conversation turns almost immediately to one thing – staff shortages. From the lowest paid sectors of the economy to the highest, the period after the pandemic has been characterized by an unprecedented shortage of employees. But where have all the workers gone? Research conducted by the Irish Government Economic Evaluation Service (IGEES) – ‘Trends in employment after PUP: April 2022’ – gives some of the answers and shows how many after the pandemic reconsider where and how they work, which leads to a major upheaval in the labor market.
The great reconsideration
International headlines have spoken of the great departure that has happened after Covid in economies such as the United States, where people are completely leaving the labor market. While some have done the same here, the latest Central Statistics Office figures show the workforce, the sum of those who work and seek work, at record levels. There is no great resignation in the republic.
But people have reconsidered their working lives. Many have changed jobs and in some cases changed industries. At the same time, a great jump in the demand for labor after Covid has been driven by the reopening of companies targeting consumers and also by the ongoing boom in the high-tech, multinationally dominated sectors. The latter has created a specific shortage of a whole range of front-line jobs and within the ecosystem of professional advisers – lawyers, accountants and so on – who take care of these companies and their employees. So there are some trends going on, but they are pushing in the same direction. This has created something of a perfect storm in the labor market.
This strangely enough coincides with gloomy economic news about rising inflation and sky-high figures for the cost of living. Whether this will start to reduce the demand for labor significantly over time remains to be seen.
2. Changing jobs and changing sectors
Evidence from the IGEES report relates to November 2021 and shows that 89 percent of previous PUP applicants had moved from the state payment when the economy reopened. It amounted to 774,200 people.
Let us first look at the three quarters of these (571,000) who had returned to employment. Of this group, 55 percent worked for their previous employer, while 45 percent worked for a new employer. When we look at those who work for a new employer, just over two thirds moved to another sector of the economy, while the rest stayed in the same sector but with a different organization. So it is not far from 10 percent of the employed who moved jobs and the majority of these moved to another sector. This is an extraordinary upheaval and far beyond the scope of the normal labor market “churn”.
People moved quickly from PUP, even in reopening sectors such as housing and hospitality. And the return was highest among a group that was most severely affected – younger people, who in general had spent more time on PUP because more people worked in the affected sectors. Over 55 years were the slowest to return; some may have opted for early retirement. But these departures from the workforce have more than been covered by new players in recent months.
The research also shows variations between sectors. We saw above that 45 percent of those who left PUP and returned to work were now with another employer (some had gone back to their first employer and then moved on). The figure rose to 62 percent in the ICT sector, where skills shortages and new arrivals have provided opportunities and clearly led to employees shopping around. In housing and food, about 50 percent of those who left PUP and returned to work with a new employer.
What about those who move to another sector? Research shows that construction and health have been the two sectors that are most likely to stick with employees, probably due to the specific skills required. Two thirds of those who moved jobs in housing and food – one of the sectors worst affected by staff shortages – moved to a new sector. Significant numbers also left the art for other sectors. Given the demand for labor in sectors such as retail, most people will not have had any problems finding work.
The net effect on the sectors has been significant. Housing and food lost about 26,000 employees, or about 20 percent of the workforce, although some have probably returned since then. At the same time, there were gains in sectors such as public administration and health. A separate Failed Ireland survey, with a broader view than just people who moved to and from PUP, estimated that four out of ten employees in hospitality and tourism did not return to their previous employer. The upheaval has been extraordinary.
The IGEES study found that about a quarter of people who wrote for PUP but did not return to work went in different directions. A significant number qualified for other social benefits or left the workforce. Some appear to have been nationals of other countries who left, presumably to return home. The ongoing decline in unemployment since November last year indicates that many returned to some form of work in the meantime.
3. So what’s going on?
A number of factors have interacted. The scale of corporate closures under Covid and the speed of reopening created opportunities for people to reconsider their working lives; there were plenty of jobs and options. A significant number of jobs were moved for financial or lifestyle reasons. The Fáilte Ireland survey shows that low wages and antisocial hours were not surprisingly a factor in people moving away from housing and food, and the IGES survey shows that those with the lowest wages in this sector were most likely to move. The data show that many moved to the retail trade and to the administration and support sector – a sector that includes office administration, personnel, security activities and travel agencies. Some retail workers moved in the other direction – to housing and food – and others went to administration and support, while those who left construction tended to go to public administration and defense. The outflow from the art sector was probably driven by economic necessity given how long the sector was closed.
Some employees decided to retire instead of returning to employment. And many non-Irish nationals left the country under Covid, where immigration fell sharply, according to CSO data. Some return, although high housing costs will be an obstacle. The IGEES study points to the changing preferences of employees after Covid as a key factor, which covers the type of job people want to do and the conditions under which they will work. Demand in telecommunications work in some sectors is an additional factor.
And the boom in the high-tech sector has caused a ripple effect, created a lot of spin-offs as well as direct employment and given many people options to “shop up”, as well as created significant shortcomings in the technology companies themselves and in the companies that provide services to them.
4. What next?
At present, the labor shortage appears to be continuing; OECD studies have shown that this history of shortcomings and shortcomings between skills and available jobs is typical throughout the world. Unemployment in the state has fallen below 5 percent, or 127,500 people. That is a decrease from 6.9 percent a year ago. In other words, the labor market is tight. Many employers have had to respond by restricting services to the public or restricting expansion plans – and by paying more. Many restaurants and pubs, for example, are open fewer hours than before; in companies where this is not possible, such as at Dublin Airport, the results can be chaotic.
Will an economic downturn affect the demand for labor? Undoubtedly. Data from Indeed, the job website, shows that the trends are still positive but that employment is now declining a bit. That said, job postings are still 57 percent ahead of where they were just before the pandemic struck. The form and extent of the impending downturn is still unclear, but it is likely to have a significant impact on the labor market.
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