Talk to any employer and the conversation almost immediately turns to one thing — staff shortages. From the lowest-paid sectors of the economy to the highest, the post-pandemic period has been characterised by an unprecedented shortage of employees. But where have all the workers gone? Research by the Irish Government Economic Evaluation Service (IGEES) — ‘Trends in Post-PUP Employment: April 2022′ — provides some of the answers and shows how many people are, after the pandemic, reconsidering where and how they work, leading to a major shake-up in the jobs market.
1. The Great Reconsideration
International headlines have talked about the Great Resignation which has happened post-Covid in economies such as the US, with people dropping out of the jobs market entirely. While some have done the same here, the latest Central Statistics Office figures show the labour force, the total of those in work and looking for employment, at record levels. There is no Great Resignation in the Republic.
But people have been reconsidering their working life. Many have been switching jobs and in some cases switching sectors. Meanwhile, a big jump in demand for labour post-Covid has been driven by consumer-facing businesses reopening and also by the ongoing boom in the high-tech, multinational dominated sectors. The latter has created specific shortages in a whole range of frontline jobs and within the ecosystem of professional advisers — lawyers, accountants and so on — who look after these companies and their employees. So there are a few trends at work, but they are pushing in the same direction. This has created something of a perfect storm in the jobs market.
This coincides strangely with grimmer economic news of rising inflation and soaring cost-of-living figures. Whether this will in time start to cut the demand for labour significantly remains to be seen.
2. Changing jobs and changing sectors
Evidence from the IGEES report relates to November 2021 and shows 89 per cent of previous Pandemic Unemployment Payment (PUP) claimants had by then moved off the State payment as the economy reopened. This amounted to 774,200 people.
Let’s look first at the three-quarters of these (571,000) who had returned to employment. Of this group, 55 per cent were working with their former employer, with 45 per cent working for a new employer. When we look at those working for a new employer, just over two-thirds moved to a different sector of the economy, with the rest staying in the same sector but with a different organisation. So, not far off 10 per cent of people in employment moved job and the bulk of these moved to a different sector. This is an extraordinary upheaval and well beyond the scale of normal labour market “churn”.
People moved quickly off the PUP, even in reopening sectors such as accommodation and hospitality. And the return rate was highest among one group most seriously affected — younger people, who had generally spent more time on the PUP as more worked in the affected sectors. Over-55s were the slowest to return; some may have chosen early retirement. But these departures from the workforce have been more than covered by new entrants in recent months.
The research also shows variations between sectors. We saw above that 45 per cent of those who came off the PUP and returned to work were now with a different employer (some had gone back to their first employer and then moved on). This figure rose to 62 per cent in the ICT sector, where skills shortages and new arrivals have provided opportunities and clearly led to employees shopping around. In accommodation and food, about 50 per cent of those who came off the PUP and returned to work were with a new employer.
What about those moving to a different sector? The research shows that construction and health have been the two sectors most likely to hold on to employees, presumably due to the specific skills required. Two-thirds of those who moved jobs in accommodation and food — one of the sectors worst hit by staff shortages — moved to a new sector. Significant numbers also left the arts for other sectors. Given demand for labour in sectors such as retail, most will have had no trouble finding work.
The net impact on sectors has been significant. Accommodation and food lost about 26,000 employees, or about 20 per cent of its workforce, though some have probably since returned. Meanwhile there were gains in sectors such as public administration and health. A separate Fáilte Ireland survey, taking a wider view than just people who moved on and off the PUP, estimated that four in 10 employees in hospitality and tourism did not return to their previous employer. The upheaval has been extraordinary.
The IGEES study found that about one quarter of people who signed-off the PUP but did not return to work went in various directions. A significant number qualified for other welfare payments or left the labour force. Some appear to have been nationals of other countries who left, presumably to return home. The ongoing fall in unemployment since last November suggests many returned to some kind of work in the interim.
3. So what is going on?
A number of factors have been working together. The extent of business closures during Covid and the speed of reopening created opportunities for people to reconsider their working life; there were plenty of jobs and options. Significant numbers moved jobs for financial or lifestyle reasons. The Fáilte Ireland survey shows low pay and antisocial hours were unsurprisingly a factor in people moving away from accommodation and food and the IGES survey shows those on the lowest pay in this sector were most likely to move. The data shows many moved to retail and to the administration and support sector — a sector which includes office admin, human resources, security activities and travel agencies. Some retail workers moved in the other direction — to accommodation and food — and others went to admin and support, while those who left construction tended to go to public administration and defence. The outflow from the arts sector was presumably driven by financial necessity given the length the sector was closed.
Some employees decided to retire rather than return to employment. And many non-Irish nationals left the country during Covid, with inward migration falling sharply according to CSO data. Some are returning, though high housing costs will be a barrier. The IGEES study points to the changing preferences of employees post-Covid as a key factor, covering the type of jobs people want to do and the conditions they will work under. A demand in some sectors for remote working is an additional factor.
And the boom in the high-tech sector has prompted a ripple effect, creating a lot of spin-off as well as direct employment and giving many people options to “trade up”, as well as creating significant shortages in the tech companies themselves and in the firms who provide services to them.
4. What next?
For now the labour shortage looks set to continue; OECD studies have shown that this story of shortages and mismatches between skills and jobs available is typical worldwide. The unemployment rate in the State has fallen below 5 per cent, or 127,500 people. This is down from 6.9 per cent a year ago. The jobs market, in other words, is tight. Many employers have had to respond by restricting services to the public or limiting expansion plans — and by paying more. Many restaurants and pubs, for example, are open for fewer hours than before; in businesses where this isn’t possible, as in Dublin Airport, the results can be chaotic.
Will an economic slowdown hit demand for labour? Undoubtedly. Data from Indeed, the jobs website, shows trends are still positive but that hiring is now slowing a bit. That said, job postings remain 57 per cent ahead of where they were just before the pandemic hit. The shape and extent of the looming slowdown remains unclear, but it is bound to have a significant impact on the jobs market.