FULL REPORT

 
Covid-19 coronavirus report 2020

Executive summary

Coronavirus is a public health crisis and the Government has rightly taken unprecedented
measures to tackle it. This has included significant restrictions on much social interaction
and economic activity.
The result has been the sharpest spike in unemployment on record. There were one
million claims for Universal Credit in a two week period, 7.3 times higher than the same
period one year ago. Gains in employment over the last five years have been lost in just
one month, with unemployment already likely to be at least 50% higher.
The impact of coronavirus will be felt unevenly, and there is a risk that it will deepen
existing social and regional inequalities. These job losses have disproportionately affected
young people, women and the lowest paid. These groups are more likely to work in
sectors that have shut down or reduced activity, such as hospitality and retail. They are
also less likely to be able to work from home.
The impact also varies significantly across the country: 18% of jobs in Greater Manchester
are in ‘shut down’ sectors compared to 15% in the East Midlands. Likewise, 36% of jobs in
the North East are in the most at risk occupations, compared to 32% in London, reflecting
differences in occupational structure and ability to work from home.
The Government’s policy response has focused on: supporting businesses through grants,
loans and other measures; helping people to stay in work, including by covering wages up
to 80% of £2,500 per month per employee; and increasing the generosity of benefits. But
there is further to go and more we can learn from other countries. This includes the case
for the ability to furlough workers part-time and increasing the generosity of benefits.
The future is highly uncertain, but there are five big challenges that policy must address:
1. Support young people. We must avoid a ‘pandemic generation’ of young people with
poorer education and skills prospects.
2. Utilise people’s skills. We should match those out of work or furloughed to jobs
growth areas such as supermarkets, as well as chances to volunteer.
3. Prevent long-term unemployment. We must help those who lose their jobs back to
work as quickly as possible, given the harm long-term unemployment does.
4. Prepare for withdrawal of support. Emergency support should be in place for as long
as needed, but we need to think about how best to withdraw it when safe to do so.
5. Plan for the future. We need to think about how to combine high employment with
improved security for people after the crisis.
Introduction
Coronavirus is, first and foremost, a health crisis and the health response must be
paramount.
However, both the crisis and our response to it will have a very real economic impact. The
social distancing measures and economic restrictions aim to slow the spread of the virus,
protect the NHS and save lives. They have had a profound impact on businesses and jobs
across the country. Alongside these public health measures, the Government has put in
place unprecedented economic measures to protect jobs and incomes during the crisis.
This report aims to provide an early insight into the impact of coronavirus on our labour
market, to explore the effectiveness of the measures taken so far, and to set out what else
could be done to protect jobs and incomes. It looks at timely data which suggest a much
sharper and higher spike in unemployment compared to the recession that followed the
2008 financial crisis. It analyses the labour market policy response in the UK and other
countries.
Finally, the report identifies the key challenges that current and future policy and practice
must address as the pandemic progresses and we emerge from it over time.
How many jobs have been lost?
Both coronavirus and the Government’s necessary response to try and slow its spread
have had immediate and profound economic impacts. We have seen the sharpest rises in
unemployment in living memory and big changes in ways of working and living our lives.
Google search trends show the scale of job losses and financial concerns
The Office for National Statistics produce high-quality labour market statistics, but the
latest data available covers the three months to January 2020. They show a record
employment rate of 76.5%, but this is clearly before the spread of coronavirus in the UK.1
Learning and Work Institute have analysed trends in Google searches relating to
unemployment and difficulty paying bills.2 These can give an early indication of emerging
challenges before they show up in benefit claims or official data, although of course people
use other search engines or go directly to websites and will use other search terms too.
Searches for ‘lost my job’ spiked to five times their usual levels with a particular spike on
Friday 17th March 2020. This is a relative measure, with 100 representing the time with the
most searches. Other search terms, such as ‘Universal Credit’, ‘can’t pay bills’ and ‘can’t
pay rent’ show a similar pattern.
Figure 1: Google searches for ‘lost my job’
1 Employment rate (Aged 16-64, seasonally adjusted). ONS. 2020
2 Trouble ahead? Early warning signs for the labour market, Evans, L&W, 2020.
A range of surveys show the immediate shock to the labour market
Several surveys point to an immediate and sharp shock to the labour market:
o The Chartered Institute of Personnel Development (CIPD) found that 52% of
employers plan to use the Government’s help with wage costs. Many plan to
reduce staffing: 15% expect to make up to 10% staff redundant and 9% expect
to lose 11-50% of staff. Recruitment has also dropped sharply: 52% have frozen
hiring, 25% are hiring less, 14% are recruiting as normal and 4% hiring more.3
o The British Chambers of Commerce (BCC) found that 32% of their employers
planned to furlough 75-100% of their staff in next week, while 44% said they’d
furlough at least 50% of their workforce in the next week. Many employers may
have already reduced staffing before this early April 2020 survey.4
o The Office for National Statistics (ONS) found that between 9th and 22nd
March 2020, 51% of accommodation and food services businesses had reduced
staffing in the short-term, with similar patterns for administrative and support
service activities and arts, entertainment and recreation.
5
o A survey by academics in late March (before the Government’s announcements
of business and wage support) found that 8% of workers said they had lost their
job and that 35% expect to earn less in the next four months.6
o A YouGov survey in late March found that almost one in ten people employed
before the crisis had lost their job and a further 16% had their pay or hours
reduced. This was early in the crisis and is likely to have now risen further.
7
Claims to Universal Credit have spiked off the charts
Data on benefit claims suggest the increase in unemployment as a result of the
coronavirus crisis will be far larger and more rapid than during the last recession. There
have been almost one million new claims for Universal Credit in the last fortnight of March
2020, 7.3 times higher than the same period last year.
By comparison, during the peak of the last recession, claims for Jobseeker’s Allowance –
the main unemployment benefit that preceded Universal Credit – reached 100,000 a week.
This peak was just 1.8 times higher than the previous year.
Both the level of claims and speed of increase is unprecedented.
3 Survey of HR professionals, CIPD and People Management, 2020
4 Coronavirus business impact tracker, BCC, 2020.
5 Coronavirus, the UK economy and society, faster indicators: data as at 9
th April 2020, ONS, 2020.
6
Inequality in the impact of the coronavirus shock: new survey evidence for UK, Adams-Prassl, Boneva,
Golin and Rauh, 2020.
7 Coronavirus survey, YouGov, 2020.
Figure 2: Weekly increase in benefit claims
Eligibility for Universal Credit today is different to that for Jobseeker’s Allowance in 2008. A
wider group of those who are out of work is eligible and around one in three claimants is in
work. This means that some of these new Universal Credit claimants may still be in work,
but have a reduction in earnings. Together this means that comparisons between the two
must be made with caution. Nonetheless, the figures illustrate a large increase in
unemployment, and significantly sharper rise than in 2008.
DWP and Jobcentre Plus staff have worked exceptionally hard to process these claims in
a timely manner, with around 10,000 redeployed to help. This has been a significant effort
by all involved.
The spike in unemployment has wiped out five years of jobs gains
The spike in Universal Credit claims and other survey measures suggests that
unemployment is likely to have increased substantially already. Learning and Work
Institute estimate that unemployment has already risen from 3.9% to at least 6%.
8
8 Based on assuming that two thirds of new Universal Credit claimants are people who have lost their jobs,
with the remainder still in work but with reduced income. This is in line with the total proportion of Universal
Credit claimants who are out of work.
Figure 3: Actual and projected changes in employment and unemployment
Both the scale and speed of change stand out: it took unemployment 18 months to
increase by the same amount in the last recession. The drop in employment so far is likely
to have wiped out five years of employment gains.
Many countries have a similar experience, though the nature and scale varies
Coronavirus is a global crisis, and it is having an impact on economies across the world.
New records for unemployment benefit claims have been set in many countries. The
nature and scale of the increases in unemployment depends both on the scale of the
outbreak, the policy response of governments, and the underlying economic and labour
market conditions.
Timely and comparable data is not yet available for many countries, but a range of data
indicate the scale of impact. There have been 10 million new claims for unemployment
benefit across the USA (only partly the result of widened eligibility criteria for this benefit)
in a fortnight; one million new claims in Canada in one week; projected sharp rises in
unemployment rates in Australia; unemployment claims are up five-fold in Norway; and
four times the usual number of employees are now covered by partial unemployment
(reductions in hours or work by employers) arrangements in France.
Figure 4: Changes in unemployment and reduced employment by country
The scale and speed of economic and labour market change is off the charts in the UK
and many other countries. The recession that followed the 2008 financial crisis led to a
large increase in unemployment. However, this was much smaller in scale than the current
situation and built up over a much longer period of time. In part this is because real wages
took up some of the strain of falling demand in the economy, supported by a significant fall
in the exchange rate and subsequent rise in inflation.
By contrast, this is an unemployment-led recession with an almost overnight change on an
unprecedented scale.
Who is most at risk?
The immediate impact of Coronavirus on employment has been large and rapid. The
nature of the virus and the policy responses necessary for public health reasons, means
that the impact has been unevenly distributed.
Up to 10 million jobs are in the most ‘at risk’ categories
Learning and Work Institute’s analysis suggests almost 10 million people are employed
in the occupations that could be most directly affected.
9 Of course, not all of these
jobs will be lost: some businesses will continue to operate, these roles are split across a
range of sectors not all of which are affected, many people can work at home, and many
businesses will have furloughed staff thus keeping them in employment. However,
unemployment would double if even one in five of the most at risk staff lost their jobs.
The Institute for Fiscal Studies estimate that 15% (4.8 million) of employees work in
sectors largely or fully shut down.10 Together this suggests 5-10 million jobs could be
affected. Unemployment may double on realistic assumptions though there is a high
degree of uncertainty.
Figure 5: Employment in occupations most at risk
There are some areas of the economy where the number of jobs is increasing. These
include distribution and other roles associated with online shopping, as well as a range of
healthcare roles for obvious reasons. Meanwhile, many other sectors continue to recruit
9 Based on two digit SOC codes for the occupations listed in Figure 5: 32, 34, 41, 42, 62, 71, 72, 82 and 92.
10 Sector shutdowns during the coronavirus crisis: which workers are most exposed, IFS, 2020.
(though often at reduced levels as the previous chapter showed). In some respects, this is
accelerating existing trends, such as the shift in retail from the high street to online.
Women, younger people and lower earners are most at risk of losing their job
The sectors and occupations most at risk employ a higher number of young people,
women and low earners: women make up two in three of the occupations most at risk.
YouGov found that 8% of 18-24 year olds said they had been in work before the
coronavirus crisis, but had now lost their jobs, compared to 5% of all adults.11 Around 69%
workers under 30 report working fewer hours and earning less, compared to 49% of 40-55
year olds. 12% of those earning less than £20k per year say they’ve lost their job definitely
or probably because of coronavirus, compared to 5% of those earning £40k or more.
12
Our analysis, based on an IFS assessment of the sectors most directly affected by
constraints on economic activity, shows young people more likely to be affected.
13 Those
in their early 20s are 2.5 times more likely to work in a shut down sector than other
workers. The IFS found low earners are seven times more likely to work in such sectors.
Figure 6: Proportion of jobs in ‘lockdown’ sectors by age
Some of the shifts in employment and growth areas outlined above risk exacerbating these
inequalities. For example, women are more likely to be employed in high street retail
11 How is Covid19 affecting British opinion, jobs and wellbeing? YouGov, 2020.
12 Inequality in the impact of the coronavirus shock: new survey evidence for UK, Adams-Prassl, Boneva,
Golin and Rauh, 2020.
13 Sector shutdowns during the coronavirus crisis: which workers are most exposed, IFS, 2020. We have
used this methodology of identifying sectors most affected and pooled eight waves of LFS data to assess.
whereas men are more likely to be employed in the warehousing and distribution roles
needed for online shopping. Both policy and employer practice can help to tackle this.
The north of England faces a greater risk of job losses
The proportion of employment in industries most impacted by the shutdown varies
between regions. Figure 7 below shows that London has the highest proportion of
employment in vulnerable industries, with 18.4% of all jobs being in shutdown sectors. The
East Midlands has the lowest proportion of employment in these sectors, with 15.6% of
employment being in sectors that have been most impacted by the shutdown.
Looking at the number of people previously working in shutdown sectors, London has the
highest number, with 808,000, followed by the South East of England, with 730,000, and
the North West with 584,000.
Figure 7: Proportion of jobs in shut down sectors
The proportion of employment in at risk occupations also varies significantly by region.
London has the lowest level of employment in at risk occupations, (31.9%), followed by the
South East (32.5%). Northern Ireland (36.6%), the North West (36.3%), and the North East
(36.1%) have the highest proportion of employment in at risk occupations. Figure 8 below
shows the proportion of employment in at risk occupations by region, and the number of
people employed in each sector.
18.4% 18.3% 18.2% 18.0% 17.9% 17.5% 17.4% 17.1% 16.9%
16.2% 16.0% 15.6%
0
150
300
450
600
750
900
13%
14%
15%
16%
17%
18%
19%
London
Wales
Scotland
North East
North West
Yorkshire and
Humberside
South West
South East
East of England
West Midlands
Northern Ireland
East Midlands
Proportion of all employment in shutdown sectors (%, left hand axis)
People employed in shutdown sectors (thousands, right hand axis)
Doing whatever it takes: assessing the policy
response
In his speech on 17th March 2020, just 33 days after taking office, the Chancellor Rishi
Sunak MP said:
“We will support jobs, we will support incomes, we will support businesses, and we
will help you protect your loved ones. We will do whatever it takes.”
The measures taken by the UK Government have been unprecedented in their scope and
scale. The main measures include:
- A Coronavirus Job Retention Scheme which allows employers affected by
coronavirus to furlough employees, and claim 80% of the cost of their wages, up to
£2,500 per month;
- A Self-employment Income Support Scheme which provides self-employed
workers with a taxable grant worth up to 80% of trading profits, up to a maximum of
£2,500 a month;
- A Coronavirus Statutory Sick Pay (SSP) Rebate Scheme for small and medium
sized businesses (SMEs), which repays employers the cost of SSP for employees
who are unable to work because they have coronavirus, or cannot work because
they are self-isolating;
- Increases to benefits with an additional £20 per week added to Universal Credit
and the basic element in Working Tax Credit.
- Support for businesses including business rate holidays for businesses in the
worst hit sectors, grants for small businesses in some sectors, and a scheme to
support access to business interruption loans.
As the Chancellor set out in his initial speech, the measures have focussed on keeping
businesses going, keeping people attached to work, and protecting incomes. The hope is
that this will limit the long-term damage to the economy and to workers, and allow for a
rapid recovery once the worst of the pandemic is over.
The unprecedented measures relate to the unprecedented nature and scale of the crisis.
This is not a traditional recession or financial crisis: large parts of the economy are
essentially being put into economic stasis so they can recover again once the crisis has
passed.
The Government has broadly done the right things and acted impressively quickly, utilising
existing mechanisms to get support to people and businesses as quickly as possible.
There has also been a rapid redeployment of resources within government to respond to
the crisis, including the redeploying of 10,000 DWP workers to process extra UC claims.
Beyond the action already taken, the Government should explore further measures to
protect businesses and workers during this crisis:
- Improving Statutory Sick Pay – sickness benefits in the UK are comparatively
low, with Statutory Sick Pay (SSP) being just £98.85 a week. With a large number
of workers likely to have to take time off sick as a result of coronavirus, the
Government should consider an increase in SSP, at least for the duration of the
pandemic.
- Increasing the generosity of benefits – even following the temporary £20 a week
increase in Universal Credit, the level of unemployment benefit in the UK is low
compared to other European economies, and the real terms value of benefits has
declined significantly following a long freeze on working age benefits. People with
savings of £16,000 or over are not eligible for Universal Credit. This means that
many workers who will lose their jobs will either face a significant drop in income, or
not be eligible for support at all. The Government should consider further increasing
the generosity of the benefit system and increasing or temporarily removing the
savings cap to protect those who do lose their job.
- Extending the job retention scheme to short time working – the Coronavirus
Job Retention Scheme is a welcome measure to protect jobs and keep people
attached to the labour market. However, as those who are furloughed are not
allowed to continue working for their employer at all, the design of the scheme
incentivises organisations to furlough some workers, and concentrate their
remaining work in a smaller number of remaining employees. Some countries –
such as France – have schemes to support the incomes of workers who are placed
on short-time working. Such schemes could allow for a more equitable distribution
of remaining work, and support more workers to remain in touch with their jobs. The
Government should consider introducing a short-time scheme which provides an
income supplement for workers whose hours have reduced.
Many countries have adopted a similar package of measures to the UK, although with
differences around timing, scale, focus and reflecting country-specific factors:16
• Australia. Support of AU$194bn (9.7% GDP) includes: wage subsidies (6 month
Jobkeeper subsidy of AU$1500 per fortnight); income support to households (new
time-limited AU£550 per fortnight supplement to income support); business loans
guarantees; hiring 5,000 extra Centrelink (equivalent to Jobcentre Plus) workers.
• France. Spending of €45bn and loan guarantees of €300bn (total 15% GDP):
liquidity support for businesses; wage support under the reduced hours scheme;
direct financial support for independent workers; extension of expiring
unemployment benefits.
• Germany. Supplementary spending of €156bn (4.9% GDP) as well as running
down reserves and €850bn loan guarantees for businesses: expansion of short￾time working (Kurzarbeit); expanded childcare benefits; access to unemployment
support for the self-employed.
• USA. Federal support includes: $250bn to give a one-time $1200 tax rebate to
individuals; £250bn to expand eligibility for and generosity of unemployment
benefits; £510bn in grants and loans to businesses; £104bn for sick leave.
Overall, there is a broad international consensus around: financial support including loan
guarantees for business; cashflow support including delaying payment of tax bills etc;
increasing eligibility for and generosity of unemployment benefits; improved income and
unemployment support for the self-employed; and improved financial support for people.
However, the US stands out as having less support in the form of direct job subsidies to
keep people in work and having had fewer entitlements like sick leave in the first place.
The focus in the UK and many other countries has been on keeping businesses going and
keeping people in work or attached to work.
16 Policy responses to Covid-19: policy tracker, IMF, 2020.
What challenges do we need to focus on?
The ongoing impact of the virus, the nature and length of restrictions to economic and
social activity, and how and when we can transition from current emergency measures are
all highly uncertain. We argue there are five key challenges that policy must address.
1. Avoid creating a ‘pandemic generation’ of young people with poorer education
and employment prospects.
Young people are particularly vulnerable to the economic impact of coronavirus. During
the last recession, youth unemployment increased further and faster than unemployment
overall. Early evidence highlighted above suggests young people are more likely to have
lost their jobs, as they are concentrated in the sectors most affected.
17 Evidence suggests
that a significant period of unemployment can have a scarring impact on young people’s
long term employment and earnings prospects, and on their wellbeing.18 There is also a
risk that unequal access to online learning, careers advice and wider support networks
further widens existing inequalities in education and employment outcomes.
19
There are almost 1.4 million 16-17 year olds across the UK, and a further 5.5 million 18-24
year olds.20 The restrictions on education establishments and scale of job losses brings a
clear risk of a sharp spike in the number of young people not in education, employment or
training. This would risk permanently reducing their career prospects. That suggests
decisive action is needed to minimise the impact of the economic crisis on young people,
and to support them to progress in learning and work.
2. Utilise the skills and expertise of those out of work or furloughed.
There are still vacancies in the economy: hiring has reduced but not ceased. In some
areas there are a higher number of opportunities, for example working in supermarkets,
which are seeing huge increases in sales. There is also a need for a volunteer army to
support the NHS, local services and vulnerable people through this challenge. There are
already many brilliant examples of linking people to this need, from the NHS Volunteer
Responder scheme in England to cabin crew supporting NHS Nightingale staff.
We need more of this, driven by national and local action, both to meet our immediate
needs as a country and to give those out of work or furloughed the chance to use their
skills and remain close to the labour market.
17 Sector shutdowns during the coronavirus crisis: which workers are most exposed, IFS, 2020.
18 The wage scar from youth employment, Gregg and Tominey, University of Bristol, 2004.
19 Youth opportunity index: Youth Commission report 2, L&W, 2018.
20 Labour market statistics, ONS, 2020.

v 3. Prevent short-term unemployment turning into long-term unemployment.
Despite the unprecedented measures the government has taken, there will be a very
significant increase in unemployment in the short term. Evidence suggests both that
unemployment can harm people’s health and wellbeing, and the longer you are out of work
the less likely you are to find work.21
The Government should quickly develop a plan to get Britain back to work when the worst
of the pandemic is over. A prolonged period of low unemployment had led to reductions in
employment support and Jobcentre Plus staffing. We will need a major re-investment in
employment support, equivalent to a 50% (an extra 6,000) more Jobcentre Plus Work
Coaches, and accelerating the use of technology to support people.
4. Support for as long as needed, but plan for withdrawal of emergency support.
The Government’s first priority for the economic response has rightly been on providing
rapid and significant support for businesses and individuals. It has generally done the right
thing, and listened when gaps that have resulted from the speed of the response have
been highlighted. The Government should continue to listen, and to further improve
support. This could include extending the furlough scheme to cover short-time working,
increasing Statutory Sick Pay, and increasing Universal Credit and temporarily increasing
the savings threshold. We should retain these measures as long as they are needed.
However, we also need to start to think about how these measures will be withdrawn when
it is safe to do so. This may be done in a phased way, with support being removed
gradually in industries and in regions that are less affected.
5. Learn lessons for the future.
It is far too early to say what the world will look like after the peak of the pandemic, let
alone what this should mean for economic and social policy. However, we must learn the
lessons of the crisis, and ensure that decisions we take now offer a bridge to the future.
We went into this crisis with record employment and a rising minimum wage. However, it
has shone a light shortcomings in our labour market and social security support. Many
self-employed workers face low pay and insecurity, and millions of key workers – from
care workers to shop assistants – are low paid and in in-work poverty. Statutory Sick Pay
is relatively limited and patchy, and benefit levels for those out of work low.
Our challenge as we look to the future after the pandemic is to learn from these lessons,
and work to combine high employment, flexibility, opportunity and security. Not everything
will change as a result of this crisis, but we can choose which things will.
21 The causes and consequences of long-term unemployment in Europe, Machin and Manning, CEP
discussion paper 400, 1999.

Post a Comment

0 Comments