The Future of UK Employment in a Post-Pandemic World

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Dr Abigail Taylor and Ben Harrison analyse the impact of the COVID-19 on employment to date before discussing what the future might hold. It also introduces the Social Policy Association’s ‘Employment Policy in Context’ group, explaining the group’s aims, plans for the coming year and how to get involved.

This blog was first posted on the Social Policy Association blog

UK employment has experienced a substantial crisis over the last year. Nonetheless, the impact has varied by sector and place. Government interventions have been crucial in mitigating the worst impacts to date. However, as support tapers, the full economic and employment impact will be revealed. Sectors worst affected, and those places particularly reliant on them, face a very challenging recovery. Young people have been particularly badly impacted, leading to many facing further labour market insecurity.

How has the Covid-19 crisis affected employment in the UK?

The UK labour market has been considerably weakened by Covid-19. Analysis by the Work Foundation indicates that at the height of the crisis in April 2020, 31% of eligible jobs were furloughed. The number of payroll employees has fallen by over 800,000 since the pandemic started. Although much reduced compared to what it would have reached without the Government’s furlough scheme, unemployment remains high and was estimated at 4.9% in the three months to February 2021 – 0.9% percentage points higher than a year previously. Payrolled employee numbers have fallen especially in the accommodation and food service sector.

Some sectors have relied to a much lesser extent than others on the furlough scheme. Moreover, employment has increased in certain sectors. An additional 374,000 jobs over 2020 were created in the health and public administration sector primarily to respond to needs created by the pandemic. Other sectors including online retail/distribution, IT, and finance have developed thanks to accelerated demand.

Young people have particularly suffered. Workers under 25 represent 60% of the fall in employment since February 2020. These challenges create issues for the future. Much research suggests that when young people drop out of the labour market, they face long-term scarring effects as regards employment entry, career progression and earnings across the life course.

This comes on the back of a challenging decade for young people following the 2009 financial crisis, where many employers were reluctant to hire workers with limited prior experience, and those without university degrees found it particularly difficult to enter good quality jobs. Even pre the pandemic a large share of young workers entered insecure and often low-paid employment, with more limited progression opportunities.  As well as short-term difficulties gaining experience to climb onto the career ladder, the reduction in job opportunities is likely to exacerbate challenges for young people to enter higher-paying professions and roles in the future.

What will the future hold?

The speed and nature of recovery, and how it will play out across sectors and places, is uncertain. Much is likely to depend on the success of Government efforts to contain and manage the spread of the virus and new variants that might emerge over upcoming months.  Even if those efforts are successful, unemployment is anticipated to remain high as Government support is tapered and employers in the most affected sectors (e.g. retail) have to adjust to lower levels of demand and changing consumer behaviours. This could have particularly acute impacts on places more reliant on those sectors.

Other longer-term trends will also continue to shape the labour market, creating new challenges as well as opportunities. Brexit, automation, the shift to a net-zero carbon economy, an ageing population, the digitisation of services etc. will all shape the kinds, number and location of jobs into the future. Some sectors are likely to be harder hit by automation than others and job growth could become more geographically concentrated over the next ten years.

Evidence already suggests the pandemic has accelerated several pre-existing trends. By 2030, demand for higher-level skills, especially technology and interpersonal/people skills, is likely to increase. Re-skilling and up-skilling the workforce is urgent. Widening of the divide between highly-skilled highly paid occupations and less-skilled poorly paid occupations could deepen class inequalities. The pandemic is also exacerbating racial inequalities. Unemployment has risen faster among BME groups during the pandemic.

In this context, just focusing on creating more jobs will not be enough. Unless concerns regarding the quality and type of employment are addressed, insecure employment is likely to rise further.  The number of insecure, low-paid jobs increased following the financial crisis and there is evidence a similar trend is occurring again.  The number of temporary workers increased by 24,000 in the past quarter and 65,000 over the year. Whilst temporary work can provide flexibility to businesses and workers, the number of workers in involuntary temporary work has grown by 23% over the past year. Temporary jobs are more likely to have ‘bad job’ characteristics – involving less access to training and development, career progression, and employer sick pay.   Covid-19 emphasises the importance of work quality in the foundational economy given low-paid sectors including social care have been at the heart of responses to the pandemic. Access to good quality employment must also be prioritised in the context of levelling up.

Young people will require particular support moving into the labour market. The need for a more personalised employment support policy has been stressed. The Government plans to expand incentives for apprenticeships but it is important to better connect young people to opportunities and strengthen links between apprenticeships and longer-term job opportunities.

Long term challenges within our skills system also must be addressed, ensuring that connections between employers and providers within places are developed to enable greater take-up of training opportunities across the UK. Those who most need support and training remain less likely to participate in adult learning. Workers most vulnerable to losing their job due to automation, such as the low-skilled, are less likely to participate in training than adults facing lower risks of job automation. Barriers relating to balancing work and caring responsibilities, the cost of training and perceptions that training will not lead to opportunities need addressing.

Policy will be key. The new SPA Employment in Context Group is keen to hear from the social policy community about what policy changes might be needed to address these and other key challenges. We are launching a call for ideas to identify proposals to tackle current employment policy challenges. A selection of the proposals will be developed at a policy workshop in the autumn. Proposers will be invited to attend and contribute to the discussion.

SPA Employment in Context Group

Understanding how these challenges can be overcome is at the heart of the SPA ‘Employment Policy in Context’ group. The group seeks to bring together people with interests in employment policy. We particularly aim to promote discussion of:

  • demand-side policies, including integration with employment support, employer perspectives;
  • skill policy;
  • in-work progression, particularly its role in overcoming disadvantage;
  • strategic approaches to economic recovery and addressing inequalities;
  • setting employment policy in broader context;
  • active labour market policies (with our sister group, the Employment and Social Security group).

This blog was written by Dr Abigail Taylor, Research Fellow, City-REDI / WM REDI, University of Birmingham and Ben Harrison, Director, The Work Foundation. 

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The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI / WM REDI or the University of Birmingham

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