After 18 months, £70bn and nearly 12m jobs, today marks the end of the Coronavirus Job Retention Scheme. For the past few months it has felt like the furlough scheme belonged to a different crisis, as fears of mass unemployment have given way to a record number of job vacancies, albeit with the flip side of widespread worker shortages and supply chain disruption. But even through the summer, official statistics told us that there were still 1.5m people in the UK receiving wage support, including a quarter of a million hospitality workers and around half of all of those working for airlines or travel agents.
So as the curtain falls on furlough, will this week see the start of another wave of job losses as the furlough scheme runs out of road, or might it help ease the current recruitment crisis as hundreds of thousands furloughed workers get back to work?
The least likely outcome, thankfully, will be that we’ll see further significant job losses. A simple look at Google search data tells us this: even in the last week, with the end of the scheme nigh, fewer people searched for information about redundancy than would have done in a typical week before the Covid crisis. This tallies with notifications from employers planning job cuts and the latest official estimates of actual redundancies: all show that job losses are if anything settling below pre-crisis levels, as firms hold onto workers and more people choose to stay put. The last-minute easing of international quarantine rules will also help the beleaguered travel industry, although may come too late to save all of the jobs at risk.
On vacancies, in principle, the end of furlough may help to meet employer demand. For example, in hospitality and retail, which account for a quarter of all job openings, there were as many jobs still fully furloughed at the end of July as there were vacancies. At a more granular level, there were nearly 200,000 jobs fully or partially furloughed in bars and restaurants alone, and nearly 50,000 in “land transport” companies (such as road haulage). If these massed ranks include HGV drivers, bar staff and chefs working for firms that hadn't yet reopened, then in theory the end of the scheme should help to ease the current pressures across these industries as people return to work—either for their previous employer or for new ones.
However, in practice this data needs to be taken with a very large pinch of salt. First, because many of these furloughed workers may already be back in the labour market; and secondly because many may well not return to work at all—not least as a quarter of all of those still on furlough were aged 55 or over. We can get a clearer idea of the “real” level of furlough in the Labour Force Survey, conducted by the Office for National Statistics and which reports every month. The latest data, for the month of July, suggested that the number of employees currently not working but with a job to go back to was 200,000 above pre-crisis levels, so just a quarter of the 800,000 jobs that at that time were fully furloughed.
So the end of furlough is unlikely to make much difference to either unemployment (which will not only not rise, but likely continue to fall) or vacancies (which will remain high).
However, it does neatly illustrate a wider challenge, which is that we simply don’t have enough workers. My institute’s analysis suggests that since the onset of the Covid crisis, labour market participation—the number of people who are either in or looking for work—has fallen by around 1.2m compared with pre-Covid trends, comfortably the biggest fall that we have seen in 30 years. Furlough accounts for likely a fifth of this fall, and we probably can’t blame lower immigration for more than a further quarter.
By far the biggest factor driving lower participation is fewer people aged over 50 in work or looking for work, which we estimate is now half a million below pre-crisis trends (with the fall larger for women than for men). This bucks a trend of pretty much uninterrupted growth since the 1980s. Back then, public policy and funds consciously sought to induce older people (mainly men) to retire early; this time round it’s happened inadvertently (and mainly for women).
The final piece of the puzzle that explains why we are missing so many workers has been a large rise in the number of students, as young people have sat out the crisis and stayed in (or returned to) education. As a result, youth participation in education has reached its highest-ever level in the UK, while labour market participation has hit its lowest (down by around 200,000, to just 60 per cent of all young people). Many of these young people will join the labour market better equipped to succeed in it, but in the meantime those firms that have relied on young workers will be struggling to fill the gaps.
Addressing these challenges, then, requires us to fundamentally rethink our approach to labour market policy, or at least our approach for the last few years. We have all been gearing up to tackle high unemployment at a time of low demand—including at the end of the furlough scheme—but instead face the exact opposite. So we need to do far more to bring (back) into the labour market those people who could work but right now aren’t looking: older people, disabled people, those with health conditions, students and parents.
For firms, this will mean thinking much more about how they advertise and recruit, but also how they design their roles in ways that can give people the security, flexibility and support that they will need in order to get into and stay in work. And for the government, it means taking long-overdue action on childcare, training and employment support for those with health conditions (where we spend less in a year than we do in a single week of the furlough scheme).
As the end of the furlough scheme arrives, it is time that we stop preparing for an unemployment crisis that won’t now happen, and focus on addressing the participation one that has already hit.
