Is the government to blame for labour shortages?

The public sector has been responsible for almost 90% of the rise in total employment since the pandemic and now accounts for the largest sustained share of employment since the early 1990s. The latest data show signs that this is being reversed, but the government’s fiscal plans imply that public sector employment will remain permanently higher. That would prevent a wholesale easing of labour shortages elsewhere and could cause economy-wide productivity to remain below its pre-pandemic trend.