Overcoming the unemployment mountain

By Dan Corry | 23 June 2020
  • Dan Corry

The Covid crisis has been difficult for everyone – but especially difficult for some. We have not all been in it together at all. There has a been a class distinction, a BAME distinction, an age distinction.  For those with money in the bank and their job secure, lockdown has not been a lot more than a major inconvenience and a bit of a bore. It has led to changed behaviours of course with ‘forced’ savings for those with good incomes, as their spending on eating out and holidays have plummeted, with one estimate that I have made with colleagues from the New Policy Institute  showing at least £23bn of ‘excess’ saving. But for most, including many of the self-employed, the financial danger is already being felt.

But even as some elements of the exit from lockdown have cheered people up, the avalanche of unemployment that is soon to hit us is generally not yet at the front of people’s minds – not even sufficiently front of mind for policy makers, despite the fact that around 2 million more people have become claimant unemployed since the crisis began and even the cautious Bank of England are expecting unemployment to rise to more than 9% later this year. It needs to soar up the agenda because we still have a bit of time until the furlough scheme ends and the quicker we get things in place the better chance we all have of softening the worst of what is about to happen.

While we are facing a unique crisis, we do know lot about what should be done. For while many things that policy makers have to tackle are beset with very inconclusive evidence on what works, that is not the case with respect to labour markets. We have good data, a lot of international comparisons, buckets of evaluation evidence – a lot of it good quality - and we have recent experience of dealing with a fast rise in the unemployment as a result of the 2008 Financial Crash. Much of this is outlined in a recent paper “Help Wanted: getting Britain back to work” that I contributed to with colleague from various places including the Learning and Work institute.

So, what do we know and what do we need to do?  In the first place we know that you want to get the removal of current support right. Ensuring that the way the Coronavirus Job Retention Scheme (aka furloughing) is phased out minimises the scale of the spike of unemployment is crucial and may require differential withdrawal approaches in different sectors.  At present almost 9 million people are on furlough and even if just 10% went through to unemployment that means a very big increase indeed.

Next and immediately, we need massive action to help ensure that workers who lose their jobs have every chance of quickly re-entering work. This may well mean support delivered online initially. It implies moves to boost back to work support for those newly unemployed, mobilising Jobcentre Plus work coaches- and increasing their numbers urgently - the recruitment industry and crucially, local and voluntary sector employment services to deliver a coherent offer locally.

But however well this works we will see an increase in long-term unemployment which we know has terrible scarring effects and wellbeing impacts on individuals and their families. So, we will need targeted support for the long-term unemployed. Based on the evidence of what has worked in the past, we need employment services that provide personalised support alongside access to training, volunteering and other specialist provision; again, working in partnership locally will be crucial to align with and scale existing provision where possible. There may be a role for wage hiring subsidies or cuts  in labour costs – eg through a time limited reduction in employers national insurance contributions.

While everyone is going to be affected certain groups will undoubtedly be hit harder. One set are young people, up to 800,000 of whom will arrive on the labour market in September. So, we need to make sure everyone leaving education is guaranteed support to find work or a place in education or training, with a Jobs Guarantee for those out-of-work for a longer period of time. The Future Jobs Fund , brought in in 2009, is a model that worked well in the past. In addition, we can be almost certain that those who already suffer in the labour market - those from ethnic minorities, the disabled, the over 50s, those in geographic areas already suffering high unemployment - will also fare badly so a close focus on their needs must inform all of this.

Lastly, we know that the structure of the economy will probably be changed forever. So, we will need to build for the future, to work out how we get people displaced from declining sectors into the new sectors. We should plan now to build more joined-up employment and skills support that helps here, and how therefore to increase access to well paid, high quality work based on understanding the future of the labour market.

These are major challenges in delivering all this. National government needs to act fast but it is not impossible. It is estimated that £80 billion will be spent on supporting wages through the CJRS, and even a small fraction of this amount being invested in active labour market policies could make a transformational difference.

But to work all this needs to be done in combination with combined authorities and local councils who will be key to the response, the local role being particularly crucial in making sure delivery is coordinated, joined-up and avoids duplication. Local government should engage local employers, and have responsibilities and funding devolved where this builds on existing responsibilities and capabilities.

There are solutions that can help avoid the worst outcomes and get us perhaps towards a better labour market as well. Let’s hope we take them.

Dan Corry is chief executive of NPC – a think-tank and consultancy on third sector issues. He is a former Treasury and Downing Street economic adviser


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