Retraining schemes could be crucial to avoid mass long-term unemployment post COVID

An economist specialising in employment trends is predicting the pandemic could lead to long-term unemployment for some unless the Government does more to help them retrain and find new jobs.

COVID-19 has had a massive impact on the jobs market, with some industries, such as hospitality, retail and the motor trade, being hit disproportionately hard. In contrast, other sectors have thrived, so while there has been a 17% drop in hospitality jobs, non-frontline public sector jobs have increased by 11%.

According to the Office for National Statistics (ONS), unemployment currently stands at 4.8%, with a further 14% of the UK workforce on furlough. Gross domestic product (GDP), an indicator of how well the economy is doing, has fallen by 21.8% - the biggest fall on record, and far in excess of the 5.4% fall experienced in the financial crash of 2008. 

While the furlough scheme, which peaked in April 2020 when a third of the UK workforce was furloughed, has helped to keep the rise in unemployment relatively modest, it has been accompanied by a more significant rise in inactivity. And it has also come at a cost - £64 billion up to May this year.

Professor Carlos Carrillo-Tudela’s team from the University of Essex and University of Edinburgh, is looking at what can be done to avoid the risk that the COVID-19 recession leaves long term scars on workers’ careers. In particular they wanted to find out whether people are willing and able to move from the sectors worst hit by the pandemic to find work in areas that are expanding. 

As he explained: “We know from previous economic shocks that those who have been hit by recession can carry the scars for much of their future careers. The strength of the recovery, and how it affects individuals, will depend crucially on how well they are able to adapt to the changing work environment.” 

Using data from Understanding Society, the household survey which tracks the changing shape of Britain by regularly asking residents about their lives, researchers found that overall the British public has responded well to the changing jobs market. Those looking for work mainly targeted their searches in the expanding sectors – including professional, technical, administrative and non-frontline public sector jobs -  all of which can be done more easily from home.

They found net mobility - the extent to which people can change sectors (occupations and industries) – increased significantly during the pandemic, far more than in 2008,
 specially across industries. But while there was movement within both hard-hit and expanding sectors, workers rarely made the leap between the two. Employed people were generally more willing to consider a career change, but those who were unemployed tended to look for less well-paid jobs in sectors they had worked in before – making it harder for them to move way from badly hit sectors to find employment.

Job availability also had an impact on job seekers behaviour – with the number of people looking for work rising and falling in line with the number of jobs available. This finding has important implications for the current debate about labour shortages since it suggests workers search decisions are not based solely on lifestyle choices but rather react to the opportunities available in the economy. 

“Overall this research suggests that workers have responded to the changing nature of employment opportunities during the pandemic. However, this responsiveness does not hold for all workers and those at the margin of the labour market have struggled to transition into growing sectors and occupations, which is a key concern given the well documented scarring impacts of past recessions.

“We found the number of people looking for work in expanding sectors and occupations exceeded the number who actually made the transition to these growing segments of the economy, so while the current debate often emphasises a lack of willingness by workers to change jobs, our analysis suggests hiring policies and skill gaps may also be preventing mobility.

“Additional funding for adult education – as part of the National Skills Fund – may help to address this but it remains to be seen whether this will prove sufficient, or if additional retraining programmes will be needed to get people back into work.

“There had been fears the furlough scheme might deter people from finding new work, but that doesn’t seem to have been the case. We have seen a relatively strong recovery in the number of people changing jobs and reallocating sectors. This finding brings into question whether the furlough scheme should become a permanent part of the Government’s toolkit to counter rising unemployment during recessions,” added Professor Carrillo-Tudela 

The on-going research is funded by the Economic & Social Research Council (ESRC), as part of UK Research & Innovation’s rapid response to COVID-19. The researchers aim is to identify the best job retention and retraining programmes by developing an unemployment and inequality calculator which would enable the government to test the impact of any proposed new schemes before they were introduced.

The team included Camilla Comunello, Alex Clymo, Annette Jackle and David Zentler-Munro from the University of Essex and Ludo Visschers, from the University of Edinburgh.