Rising job vacancies could add to inflation risks: IMF
Companies in several markets around the world are struggling to fill job vacancies in a post-pandemic boom, and while this is a boon for jobseekers, it is adding to inflation risks, the International Monetary Fund (IMF) has warned.
Hiring went up in the months after COVID-19 lockdowns and restrictions eased, but employee turnover also increased, with workers quitting roles, especially those that are contact and labour-intensive. By late 2021, there were 50 percent to 80 percent more unfilled jobs in Australia, Canada, the United Kingdom and the United States than there were prior to the pandemic, the IMF noted in its latest blog.
Unfilled positions were at or above their levels before the health outbreak in other advanced economies too, and have risen steadily across all sectors, including hospitality and transportation. The increases in vacancies have been largest for low-skilled jobs.
Why vacancies are rising
“Vacancies have been hard to fill for several reasons… One is health concerns related to the pandemic. Because of these, some older and lower-skilled workers previously employed in contact-intensive industries remain outside of the labour force, shrinking the pool of available jobseekers,” the IMF said.
“Another reason why vacant jobs have been hard to fill is that COVID-19 may well have changed workers’ job preferences.”
In some labour markets, data suggest that workers are in search for better working conditions or shy away from roles that are contact-intensive, physically strenuous or offer little flexibility. Resignations have been high in many businesses, including those in transport and storage, wholesale and retail trade, or hotels and restaurants.
“Some workers who left during the pandemic have yet to return, while others have lingering concerns about their current jobs and new expectations, restricting labour supply,” the IMF said.
Impact
As the labour market tightened, companies increased wages to attract and retain talent. The IMF said that nominal wages in low-pay industries in the US and UK alone went up by 4 to 6 percentage points between mid-2020 and late 2021.
However, on average, the increases in salaries have not yet resulted in additional spending power due to higher inflation. So far, the impact on wage inflation has been moderate, at least 1.5 percentage points.
“Labour shortages have pushed up wage growth, benefitting low-wage workers but adding to inflation risks,” the IMF said.
To ease these pressures, the IMF said more efforts should be made by governments to bring more workers back into the labour force. These can include curbing COVID-19 outbreaks, offering training programmes to help workers prepare for “digital-intensive” jobs and passing labour laws and regulations to facilitate remote working.
