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Innovation - not more immigration - will tackle the worker shortage

A wave of automation would make up for a lack of workers, improve flagging productivity and even increase people's wages

A cashierless shop. A reception-less hotel. And perhaps even a pay-at-the-pump bar. It might sound like something from a lost episode of Star Trek. And yet it could be everyday life in a few years.

Squeezed between Brexit and the furlough scheme, and with the economy opening up again, British businesses are starting to run desperately short of workers. Ritzy restaurants are cancelling lunch bookings, chains are handing out bonuses to anyone who can bring in a new recruit and some are remaining closed because they don’t have the people to open up.

Inevitably there are calls for visa rules to be relaxed, and for more cheap foreign workers to be allowed into the UK to fill all those vacancies. But hold on – innovation is a vastly superior fix than immigration. There are lots of different ways that companies can get by with fewer staff. It will take some investment and some creative thinking but it will be far better for the economy – and it won’t happen unless there is some pressure on managers to change the way they operate.

When lockdown ended, most companies probably imagined it would be customers they would be short of. Nervous of going out again, low on money and worried about their jobs, people would stay at home. Instead, they have a very different problem. There is lots of demand, but not enough staff to meet it all.

Le Gavroche in Mayfair has decided to scrap lunch – a disaster for nearby hedge funds – on account of staff shortages. The restaurant group Hawksmoor is offering its people a bonus of up to £2,000 if they can bring in a new colleague.

More broadly, the labour market is getting very tight. The Office for National Statistics reported there were 657,000 vacancies in the latest quarter, the highest level since the start of the pandemic. Its real time statistics culled from online job ads showed vacancies 18 percentage points above pre-Covid levels, led by construction, hospitality and transport. Meanwhile, the Recruitment and Employment Federation this week reported that the supply of workers was falling at the fastest rate in four years.

It is not hard to work out what is going on. Now that we are out of the European Union there is no longer an endless supply of relatively cheap workers, mainly from Eastern Europe (in hospitality, for example, an estimated 23pc of workers were from overseas and in London that figure reached 60pc).

Several million people remain on furlough and there isn’t much of an incentive to put in an eight-hour shift when you can collect 80pc of your salary for staying at home. The result? There are not nearly enough people to fill all the jobs available.

The hospitality industry has already started calling for a “coronavirus recovery visa” to bring in more staff, and the London Mayor, Sadiq Khan has backed that. Over the next few weeks we can expect to hear plenty more business leaders calling for immigration rules to be eased. And yet there is a better way of dealing with the issue: more innovation.

There are lots of examples out there of changes that can be made. Amazon has already started trials of cashierless shops. You just walk in, get the stuff you need, and an app on your phone tots up the bill and collects the money from your account. That is designed mainly to improve the customer experience – some of us hate queuing at the till – but it can hardly escape anyone’s notice that it will also involve far fewer staff. Not every shop will be able to make that switch, but a lot could if they had to.

Given that three million people work in retail in the UK that would free up a huge number of workers. A robot cocktail waiter – he is called Makr Shakr and can serve 80 drinks an hour – has already been tried out at the Barbican Centre in London. Machines that serve drinks could easily become widespread.

Alternatively, if you can have pay-at-the-pump petrol stations, then it isn’t hard to imagine you can fairly easily have a pay-at-the-pump pub as well: just swipe a contactless card, grab a glass, and fill up with a round of drinks. Very soon there could be robot table staff at restaurants and automated chefs in the kitchen.

Self-driving cars are a little way off, but delivery vans with nobody at the wheel may be a lot closer and so are lorries that move themselves around the country without any truckers. Hotels can get rid of reception staff with self-check-in apps – many already have – while warehouses can replace people with machines. In fact, with artificial intelligence, smart devices and robotics, we could be on the cusp of a productivity revolution, especially in labour-intensive service and distribution industries.

The important point, however, is this: companies don’t innovate in a vacuum. They do so when they are under pressure, and the market forces them to change. Switching to new ways of working is not necessarily cheap. A robot barman, for example, comes with a price tag of £80,000. A booking app might cost a chain half a million to design and install. If a business can instead just bring in some more workers on minimum wage then they will. It is cheaper and easier. And yet we need a wave of innovation to finally raise productivity, and increase real wages, especially for people at the bottom end of the labour force.

Immigration, and loose visa rules, are the quick and easy fix for the shortage of labour. More innovation is the long-term solution. Sure, plenty of businesses will complain. It raises costs, and will cut into their profits.

In the medium term, however, it will be far better for the economy.

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