30 Jul 2013
Flash: Analyzing the UK labor supply – Goldman Sachs
FXstreet.com (New York) - A prolonged period of economic weakness is more typically associated with a reduction in labor supply, as discouraged workers leave the workforce, notes the Economics Research Team at Goldman Sachs.
Key quotes
“This is what happened in the UK following the recessions of the early 80s and early 90s and it is what appears to be happening in many advanced economies today. That the UK has bucked this pattern and witnessed an increase in labor supply is due to a combination of factors, notably a shift towards later retirement.”
“Participation rates amongst older workers have been rising for some years, but this trend appears to have been accelerated by changes in UK retirement legislation and to the state pension age in the past 2-3 years.”
“The key implication of increased labor supply for policy is that there is likely to be a considerable amount of slack in the labor market. While there is uncertainty surrounding all estimates of the output gap, we judge the degree of spare capacity in the UK to be currently around 4-5% of GDP.”
Key quotes
“This is what happened in the UK following the recessions of the early 80s and early 90s and it is what appears to be happening in many advanced economies today. That the UK has bucked this pattern and witnessed an increase in labor supply is due to a combination of factors, notably a shift towards later retirement.”
“Participation rates amongst older workers have been rising for some years, but this trend appears to have been accelerated by changes in UK retirement legislation and to the state pension age in the past 2-3 years.”
“The key implication of increased labor supply for policy is that there is likely to be a considerable amount of slack in the labor market. While there is uncertainty surrounding all estimates of the output gap, we judge the degree of spare capacity in the UK to be currently around 4-5% of GDP.”