Older workers and Londoners are at greatest risk of long-term unemployment as the UK leave scheme closes on Thursday, with economists predicting a modest rise in unemployment because laid-off workers will not necessarily be able to fill vacancies areas where there are large shortages.
The job retention scheme supports about 9 million workers at the height of the crisis, an unprecedented state intervention that prevents major job losses and supports household expenses – at a cost of almost £ 70 billion. As a result, the unemployment rate was only 4.6 percent on the latest official score.
But 1.6 million people were still partially or completely depleted at the end of July, with surveys suggesting that about 1 million – concentrated in industries such as aviation, tourism and the cultural sector where activities have not fully recovered – could still be closed on the scheme .
Uncertainty about the dropout of workers as subsidies end is the main reason why policy makers at the Bank of England have raised interest rates, despite evidence that price pressures are rising and inflation will rise beyond the target in the short term.
Andrew Bailey, Governor of the Bank, this week said it was’ a big mystery ” to see such high vacancies while so many people were still unemployed or out of work – adding that different explanations would have ‘very different’ implications for growth and inflation.
One possibility is that employers are gathering a lot of people because they still expect demand to recover. This may mean that most workers will return to their previous job if they have not already found another job elsewhere, as permitted under the terms of the scheme.
Samuel Tombs, at the consultant Pantheon Economics, believes it could still leave many workers unemployed if their employers bring them back in shorter hours. “We still think the end of the CJRS will hurt,” he said.
A second possibility, however, is that workers who have expired find that they do not have a job to return to and do not fit open jobs in sectors where employers struggle to recruit – because they live in the wrong place or cannot erect easily. This could lead to higher unemployment at the same time as labor shortages and faster wage growth.
The latest independent forecasts, published by HM Treasury, unemployment will rise to 5.2% in the fourth quarter of 2021.
The Institute for Fiscal Studies on Thursday warned that Londoners are among those most vulnerable to long-term unemployment, as the capital – which is still affected by the slow return of office workers – has higher interest rates and lower vacancies than elsewhere in the country.
“There needs to be a major joint effort by the government to stop London from becoming the UK’s unemployment capital,” said Nick Bowes, chief executive of the Center for London.
Older workers also appear vulnerable – more than the young people hardest hit at the start of the pandemic, the IFS warned, noting that only a third of those over 50 who lost their jobs during the pandemic managed to to find a new one within 6 months.
Trade unions and charities have accused the government of letting workers down by ending wage subsidies at the same time as ending the temporary abolition of benefits – while households face higher energy and tax bills. But Chancellor Rishi Sunak said the end of Furlough “in no way means the end of our support”, with policies still in place to help young people work, upgrade adults and run smaller businesses to fund apprenticeships.