Londoners face quadruple whammy of challenges as furlough scheme ends
During the pandemic, Londoners have suffered from higher rates of redundancy. They have also experienced lower rates of re-employment after redundancy. Additionally, there has been lower growth in vacancies.
Additionally, data shows they were still more likely to be furloughed this summer. This is higher than in other parts of the country. These challenges compound to heighten the risk of longer-term unemployment in the capital.
These are among the key findings from new research. It was published today as a pre-released chapter of the 2021 IFS Green Budget. The budget is funded by the Nuffield Foundation and in partnership with Citi.
As the furlough scheme ends, 1.6million people have been left worrying about their future.
Workers in London accounted for 16% of the redundancies made during COVID-19. This is compared with just 12% in the three years before the pandemic.
Two groups stand out as facing particular difficulties as the furlough scheme comes to an end. They are Londoners and workers over the age of 60.
About trends in the capital:
Many of those already made redundant will be competing for jobs with those made redundant when the furlough scheme ends.
Additionally, only 44% of Londoners made redundant during COVID-19 had found new work within six months. This is compared with 58% of workers in the rest of the UK.
Before the pandemic, six-month re-employment rates of redundant workers were much higher. The rates were 64% in London and 66% in the rest of the UK. This worrying drop in re-employment rates adds to concerns. There is a risk of rising unemployment at the end of the furlough scheme.
Londoners accounted for 19% of those furloughed in July 2021, despite comprising only 14% of total employees.
They stay over-represented even after excluding industries that have benefited most from the relaxation of COVID restrictions over the summer. These include hotels and restaurants. As a result, especially vulnerable to redundancy once the furlough scheme winds down.
Vacancies in London grew by 8% between mid-September 2019 and mid-September 2021, compared with a UK-wide average of 24%.
One reason for this is that due to the increase in office workers working from home. There has been a reduced demand for some services in central London. These services include food and entertainment.
Besides those living in London, the report suggests that older workers also face difficulties. This is particularly true for those over the age of 60.
Key findings include:
7% of workers aged 60+ were furloughed in July 2021: the highest rate of any age category.
This indicates a change from last summer when the youngest workers were most likely to be furloughed.
Only 35% of workers aged 50 and older had refound work six months after being made redundant during the pandemic. In comparison, 64% of workers aged 18–49 had refound work.
While older workers have a harder time refinding employment after redundancy, this discrepancy is much larger now. It is bigger than it was during the three years before COVID.
58% of employees aged 60 or over who were made redundant during the pandemic were neither in paid work. Nor were they searching for paid work. This was the case six months later. This compares with just 38% in the three years prior.
Concerningly, it seems that increased numbers of older workers are exiting the labour force altogether.
In contrast, younger workers were especially hard hit at the beginning of the pandemic. Nonetheless, their labour market prospects look to have considerably improved. For instance, those who left full-time education during COVID-19 initially struggled to find work. 9–12 months after leaving education, their employment rates are in line with pre-pandemic cohorts. Given that, plus the extensive pipeline of Kickstart jobs for young people. Any extra government resources and attention be better focused on supporting other groups. This includes older workers and those living in London.
Adam Salisbury, a Research Economist at IFS and an author of the report, said:
‘We are used to the labour market in London doing well. It is the highest-paid region and had considerably higher employment growth between 2007 and 2019 than the national average. But despite the protection of the furlough scheme, the pandemic has hit London hard. London had higher-than-average furlough rates this summer, higher redundancies and lower chances of finding new work after redundancy. It has also not seen the very large rises in vacancies seen in most parts of the UK. All this combines to leave Londoners at higher risk of longer-term unemployment. The national level picture is a lot better than expected at the beginning of the year.’
Jonathan Cribb, a Senior Research Economist at IFS and an author of the report, said:
‘Recessions always create risks for older workers. This is particularly true because if older workers lose their jobs, there is a risk they never return to work. Unfortunately, there is evidence that be happening now. The chances of over-60s finding new work within six months of redundancy have plummeted. The majority of those older workers that lost their jobs during the pandemic were not actively searching for work. Given this, the government should consider opening its ‘Restart’ scheme to all people out of work. This should include not just those on universal credit.’
Mark Franks, Director of Welfare at the Nuffield Foundation, said:
‘In-work poverty was on the rise even before the pandemic. The furlough scheme and £20 per week Universal Credit uplift have played a vital role in supporting vulnerable working households. They have been crucial over the last 18 months. With this support now coming to an end, some workers will face precarious financial circumstances. This is particularly worrying because a large proportion of those still on furlough are the sole earners in their household. Even with high overall vacancy levels, the process of matching displaced workers to new jobs will be slow. It will also be difficult. It is important that the government understands which groups will be most affected by the withdrawal of the furlough scheme. The government must know which individuals will be most affected. The government must make sure support is in place for those needing to find new work.’
Jonathan Cribb and Adam Salisbury
