Coronavirus

How will the coronavirus pandemic change the UK jobs market?

BY Ian Stewart | tweet IanStewartEcon   /  1 June 2020

A personal view from Ian Stewart, Deloitte’s Chief Economist in the UK. To subscribe and/or view previous editions just google ‘Deloitte Monday Briefing’

The impact of the lockdown on the UK job market has been dramatic. Last month about a third of the UK’s 33m workforce were being supported by the government, through the furlough scheme, self-employment income support or Universal Credit. A further third were working from home and a final third were at work.

The impact has been not uniform. People under-30 or over-60, in part-time work or on low pay are the most likely to have been furloughed or made redundant. Conversely, those aged 35 to 59, on higher pay or in full-time work are the most likely to be working from home and to have remained in employment. Jobs in retail, hospitality, leisure and travel have been hardest hit. Manufacturing and construction businesses, though not required to cease operations during the lockdown, have also cut jobs.

There are areas of growth too, mainly in health and social care, grocery and online retail. According to research firm Nielsen, over a four-week period during the lockdown 7.9m UK households ordered groceries online, up from 4.8m last year. The majority of vacancies currently posted on the Department for Work and Pensions “Find a Job” website are in healthcare, nursing, social work, teaching, warehouse and logistics.

The lockdown imposed a nationwide experiment in working and consuming remotely. The experience has given an impetus for the organisational changes needed to exploit digital technologies.

Before the crisis, homeworkers tended to be older, hold more senior roles and were concentrated in sectors like IT, professional services and real estate. The lockdown has widened the age range and skills of those who work from home. Some service sectors like retail, education, entertainment and healthcare have adapted rapidly in order to continue operating. Consider, for instance, the almost wholesale adoption of telephone consultations with GPs or the doubling of online grocery purchases. Some changes will become permanent.

Adam Ozimek, chief economist at freelancing platform Upwork, notes that the share of US employees working remotely has quadrupled during the pandemic to 50% of the workforce. 62% of US recruiters expect a permanent increase in the portion of their workforce operating remotely.

The disruption to jobs caused by COVID-19 comes after a decade of strong employment growth. From 2012 to early 2020 the unemployment rate fell from over 8% to below 4% while the employment rate rose from 70% to a record 76.6%. For all the problems of austerity, low productivity and weak wage growth, the UK economy did well in creating work.

A huge contraction in the economy and continued social distancing mark the end of that period of plentiful work. Between 12 March and 9 April the proportion of people claiming out of work benefits shot up from 3.5% to 5.8%. Unemployment will head much higher still, though the damage so far has been mitigated by the furlough scheme. Goldman Sachs estimates that the unemployment rate would have reached the 25% by June without the scheme.

Major downturns contribute to a reshaping of the jobs market. In the wake of the financial crisis public sector employment shrank while the proportion of the workforce who were self-employed or working in private equity-owned business soared. How will the pandemic change the UK jobs market?

The events of the last three months are likely to accelerate some long-term trends including the decline of high-street retail jobs and growth in employment in IT, education and healthcare. The rapid job creation seen in the 2010s in accommodation and food services is unlikely to repeat itself. Conversely the decline in public sector employment underway since 2010 is likely to reverse as the state assumes a greater role. The success of online retail will reinforce demand for workers in warehousing and transport. Amazon has said that 70% of 175,000 new US hires it added in March and April in response to the boom in online orders will become permanent employees. Rectifying vulnerabilities revealed by the crisis will also create new jobs, notably in public health and the production of medical and protective equipment.

The jobs market of the 2020s will be reshaped by other factors, notably a new, post-Brexit immigration regime and an ageing population. The rapid growth in the overseas-born labour force in the last 20 years is unlikely to be repeated, although the major contribution of foreign workers to the NHS and the wider economy will remain a key factor in immigration policy.

For some businesses productivity – and profits – are likely to suffer as operating models designed for a pre-COVID world adjust to social distancing and enhanced hygiene standards. But in the long term an acceleration in technology adoption, and a necessary reorganisation of work, would raise productivity. The UK’s poor productivity performance partly reflects a “long tail” of low-productivity firms that do not implement the organisational changes required to exploit technology. The lockdown could be a catalyst for some to change.

By international standards the UK has a very flexible labour market, one which, by the end of last year, had helped bring the unemployment rate to the lowest level in almost 50 years. That flexibility will not be enough to prevent a sharp rise in unemployment in the coming months. But it will be a source of strength as the UK seeks to innovate and grow its way out of the COVID-19 downturn.


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