The immediate public health crisis is nearing its end. The unemployment crisis is just beginning

As the job retention scheme winds down, new measures to support vulnerable workers are essential

June 01, 2020
Chancellor Rishi Sunak. Photo: Andrew Parsons/DPA/PA Images
Chancellor Rishi Sunak. Photo: Andrew Parsons/DPA/PA Images

Ending the Job Retention Scheme was always going to be harder than setting it up. The chancellor won universal praise back in March for throwing a life raft to more than eight million workers so that they could ride out the lockdown. But as I’ve written before with Jonathan Portes, winding down the scheme is fraught with challenges, and will need to happen alongside a ramping up of employment and skills support for the unemployed.

It’s clear from the weekend press that government ministers understand this too, briefing that work is underway on a stimulus package for infrastructure investment and job creation. But while this is welcome, it’s just one piece of what needs to be a three-part plan to respond to what is likely to be the highest unemployment that we will have ever faced. So alongside fiscal stimulus to support a return to growth, we need investment now in measures to help those out of work and at risk of redundancy to prepare for and find new jobs; and to start putting in place the services that we will need come the end of the year, when long-term unemployment will be taking off.

Right now, though, we need to deal with an immediate unemployment crisis. This month’s “claimant count” data told us what we already knew: that unemployment has already risen faster than at any point since the winter of 1947, when Britain froze and the country ground to a halt. This time however, the snows won’t melt next month. With two million claimants unemployed in April, a million more claims to Universal Credit in the last month and at least half a million people unemployed but not claiming benefits (mostly younger people), unemployment is already above three million. This is the highest since the 1990s, and in the next few months it will reach the highest that it has ever been—higher even than during the Great Depression.

Way back in March, the hope was that unemployment would fall as fast as it rose, as we exited the crisis and things returned to normal. But if this crisis didn’t start like any other recession, it is fast turning into one—with lasting impacts in the real economy (in particular through our reduced ability to move labour and products between places), loss of consumer and business confidence affecting consumption and investment, and this all feeding through into big shifts in demand (with hospitality, the arts, transport and construction all most obviously affected). And as my institute said back in early April, in recessions unemployment rises fast but falls slowly—taking at least seven years to come back to earth in each of the last three downturns.  So the first priority must always be the immediate one—to help the many millions who are unemployed and who want work to find the jobs that want people.

More than two months on from this unemployment crisis beginning, we have lost a lot of time in getting that job preparation, seeking and matching support in place. However, we can fix this quickly if we start right away. First, we have something like 11,000 employment advisers working in Jobcentre Plus. While some are still helping to deal with new Universal Credit claims (which remain at more than double the levels pre-crisis), I understand that most are now back at their posts. We will need many more people than this—likely around 8,000 to 10,000 more. However, the good news is we are currently paying tens of thousands of staff in recruitment agencies not to work through the Job Retention Scheme, so if we act immediately then we could start paying them to help the unemployed instead.

Putting this support in place could be done remarkably quickly and easily. Under European law, it would take two weeks to run a procurement process and less than a month to have suppliers in place (as the government’s own procurement guidance sets out). So we could easily design a simple specification for remote support covering job preparation, jobseeking, careers advice and then matching and brokerage into work. We could invite recruitment and employment services to bid, have a number of approved suppliers in each part of the country who can do this at scale, and a simple, online portal where any jobseeker can register and then choose who to go to. We could have had this in place already, but if we start now then we can definitely have it in place during July. And it would cost hundreds of millions, rather than £100bn, to do.

Right now, clearly, much of this help would be to prepare for when the recovery comes, with my institute’s analysis of real-time vacancy data showing that vacancies are three fifths lower than before the crisis began  However even now new jobs are being advertised (75,000 more in the last week), and in London and the south east there are as many vacancies per jobseeker right now as there were in many other parts of the country before the crisis began. As the recovery gathers pace, we will see hiring pick up and job creation return—and these jobs will be far more diverse and numerous than anything that will be created through fiscal stimulus (at least in the short term, given the time it takes for projects to get off the ground and the major disruption to labour and supply chains).

It is imperative that this employment support is in place before the Job Retention Scheme starts tapering out in August, which will inevitably lead to another wave of unemployment. We may yet need to delay the winding down still further, if we have not suppressed the virus and the economy is not recovering by then. There may also be a case for proceeding slightly slower for some industries, with our analysis of Office for National Statistics data suggesting that at least two million workers in retail, hospitality or the arts are likely to be at risk. However, Portes and I set out last month some of the problems with this: if underlying demand has now changed, then it is imperative that we shift to supporting individuals to find new work, rather than supporting jobs that are no longer viable.

Either way, we need to be in a position where we can say with certainty, before the scheme starts winding up, that anyone who is unemployed or at risk of redundancy will have access to high-quality, one-to-one help to prepare for and move back to work. And for the JRS in particular, we need to ensure that all potential redundancies are notified to employment services, and that we have the resources locally to co-ordinate employment, careers and training support (for all of those out of work).

The final pillar of our response, then, must be to start work now on the services that we will need for the long-term unemployed. This wave will start to break in the autumn, and it will be bigger than any rise in long-term unemployment that we have ever seen—bringing with it lasting damage to individuals and communities. Alongside 12 other organisations and experts, the IES set out proposals for how to prepare for this in the “Help Wanted” report two weeks ago. This will take time to set up, and we don’t know what the jobs market will look like in six months’ time. But what we know for certain is that we will need to tilt the scales in favour of the long-term unemployed and disadvantaged, and that this will need to involve all parts of local and national government, our skills and training system, employers and local services. It will also need to include the guarantee of a good job for all young people who find themselves in long-term unemployment.

As we near the end of the immediate public health crisis, then, the unemployment crisis is really just beginning. But if we act fast, and follow the evidence, we can meet the challenge. We must not delay.