2022 Exams - Policies to Increase Labour Supply

What government interventions might be successful in expanding the available labour supply to industries facing labour shortages?

One of the most significant issues facing the UK economy as it emerges from the pandemic is the shortages of labour apparent across many industries from transport logistics and farming to health & social care and IT businesses.

Evaluation: Assess policies that might be effective in reducing labour shortages in an industry of your choice

1. Changes to labour migration policy likely to be more effective in the short-run – such as relaxation of visa controls for specified occupation. But there are many factors behind the drop in net inward migration into the UK (consider as an example, poor working conditions and port delays facing overseas European HGV drivers)
   
   
2. Measures to increase whole-economy labour supply can help but a more targeted approach is likely to be more effective in reducing shortages in the medium term.
   
   
3. Effective policies might lower the barriers to entering an occupation – for example financial support in taking professional exams, reducing the cost of housing for key workers, subsidizing child-care. But these inevitably take time to have an impact
   
   
4. Businesses (employers) themselves can respond to labour shortages – a free-market mechanism would involve firms improving relative pay and conditions as a signaling / incentive mechanism to attract new workers
   
   
5. Measures to increase labour supply in one occupation might create shortages in others – important to increase the whole economy labour supply
   
   
6. Persistent labour shortages might be a catalyst for acceleration in the use of new technologies in sectors such as construction, education and farming.