Road to recovery: Impact of the pandemic on the Scottish labour market
The Royal Society of Edinburgh (RSE), Scotland’s National Academy, in conjunction with the Young Academy of Scotland (YAS), welcomes the opportunity to respond to the Scottish Parliament Covid-19 Committee’s inquiry on the impact of Covid-19 on labour market inactivity. We appreciate the importance of understanding recent changes to the labour market and would be very pleased to work with the Committee to better understand these trends, to assist in the creation of policies that should help alleviate the current crisis.
RSE contends that the current key factors driving labour shortages are not solely driven by labour market inactivity and that three main factors drive labour shortages across Scotland:
- The direct and indirect impact of the Covid-19 pandemic on labour market inactivity
- Recent trends in migrant labour
- Demographic trends and the impact of a more rapidly ageing population in Scotland than in most of the UK.
RSE notes a change in the composition of economic migrants as a potential factor driving labour market shortages in Scotland. Indeed, in recent years there has been a reduction in migration from Eastern European countries such as Poland (included in the EU8 cohort). As a result, RSE believes there could be a correlation between the decline in net EU migration and both the pandemic and Brexit, given that during the Covid-19 pandemic fewer people were entering the UK and net EU migration in 2020 was negative, with approximately 94,000 leaving the UK.
Long Covid has had a notable impact on labour market inactivity. According to the Institute for Fiscal Studies (IFS), in the UK an estimated 110,000 people were missing from work at any given time due to the long Covid; most of these were on sick leave. Indeed, recent data suggests that long Covid is more prevalent amongst disadvantaged communities (i.e., those in poverty, receipt of welfare benefits, or living in social housing).
RSE notes that long Covid is not the only ongoing issue related to Covid-19. The pandemic also had an indirect impact on population health and well-being. Across the UK, data collected from the inactive working-age population suggests that there has been an increase in those reporting either mental illness, cancer, or other progressive illnesses as their primary reason for economic inactivity.
Across Scotland, levels of economic inactivity are relatively high in socio-economically deprived regions. Indeed, long-term physical and mental health problems, like long Covid, tended to have a greater impact on the most deprived communities.
RSE contends that Scotland’s ageing population could also be contributing to economic inactivity. Indeed, Scotland’s ageing population is already a larger % of the population and growing at a faster rate than the rest of the UK, with rural and island communities particularly vulnerable.
Labour shortages have impacted a number of sectors, notably the agriculture, health and social care, leisure, and hospitality sectors. Some of the reasons for these shortages predate the pandemic, as underscored by the impact of Brexit.
Ultimately, Scotland’s current labour market shortages are unprecedented, and there is a need for more rigorous, objective and policy-related research into the phenomenon. To this end, RSE would be pleased to support the Covid-19 Committee with further research into recent changes in the labour market, as required.