Tuesday 7 July 2020 8:58 am

To avert an unemployment crisis, the government must act now and equip workers for the post-pandemic world

Charlotte Pickles is director of the think tank Reform
and Stephen Evans
Stephen Evans is chief executive of the Learning and Work Institute

Tomorrow, the chancellor will rise to make his economic statement with the country teetering on the edge of the worst unemployment crisis since the Great Depression.

Around 10 million people face the possibility of losing their jobs. Clearly not all of them will, but as the furlough scheme unwinds, half of businesses say they expect to have to lay off workers. We saw the start of this last week, with 10,000 redundancies announced in 24 hours.

To state the obvious, lifting lockdown is not enough. Many businesses won’t reopen, even though they legally now can, because social distancing measures mean a fraction of normal footfall. And not all customers will be rushing out to spend their money — 69 per cent of people say they are avoiding crowded public spaces, and almost half are scared about catching the virus. Don’t be fooled by footage of Soho streets on Saturday.

It took several years for jobs to recover from each of the last three recessions, and this recession is like no other. Even if we avoid a second spike and demand bounces back as people’s confidence in their safety returns, the sectoral shape of the labour market is going to look markedly different.

The (non-food) retail and hospitality sectors have been devastated by the lockdown measures, accounting for a third of all furloughed employees. Even with a “V-shaped” recovery, it is highly unlikely they will rebound to their pre-pandemic levels, meaning many of those jobs will just disappear.

The lion’s share of workers in these at-risk occupations are low paid, lower skill, and are likely to have few or no qualifications. In other words, those least resilient to job loss are at greatest risk of it — and they’re going to have to switch sectors entirely to get back into work.

Bank of England chief economist Andy Haldane made this very point last week. In an otherwise upbeat speech, he cautioned that despite a better than expected GDP outlook, the UK may still be heading for high levels of long-term unemployment, with the associated economic scarring that causes. During recessions, he noted, people tend to “move down the skills spectrum” to re-find work, but that option is not available for people already at the bottom. “Skilling or reskilling” will be essential.

Tomorrow, then, the chancellor must set out a comprehensive plan to support those at risk of unemployment to retrain, job switch and career change.

The Prime Minister has already promised young people an “opportunity guarantee”, including a big expansion in apprenticeships. There will almost certainly be a doubling of the number of jobcentre advisers. This is standard recession protocol to manage rapidly rising unemployment rolls. We’re also told to expect an extra £32m for the National Careers Service.

All this is extremely welcome. But it’s not sufficient. To avert a long-term unemployment crisis the chancellor needs to make a bold offer of support to anyone — not just the young — on furlough, or in an at-risk sector like retail or hospitality. Waiting until the furlough scheme winds down is too late. A few hundred million here and there is inadequate.

That’s why Reform and Learning and Work Institute have put forward a £3.2bn package of proposals to equip workers for the post-pandemic world.

We propose a universal package of advice, support and skills development for anyone at risk of losing their job, including £1bn investment in adult learning.

For the up to 200,000 people who will have to change sectors, the government should provide a £5,000 learning account to access accredited training. To incentivise these career changes and mitigate wage drops as people start over, means-tested maintenance grants should be made available. The social and economic costs of long-term unemployment would far outweigh this time-limited expenditure.

The government is said to be considering wage subsidies for young people, including through apprenticeships. This again is welcome, but employers should also be allowed to use a portion of the apprenticeship levy to pay living wages to older apprentices and career changers, and provide grants to the same value for non-levy paying SMEs. This is key to a jobs recovery.

This government came to power on a wave of working-class support from the very areas that are likely to be hardest hit by the economic aftershock of coronavirus. Delaying serious action in the hope that pent-up consumerism drives a v-shaped recovery could have catastrophic consequences for those communities. 

Tomorrow the chancellor must show he understands that.

Main image credit: Getty

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