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UK must invest more and ‘keep and tweak’ furlough scheme until economy passes pre-pandemic levels, says IPPR 

A hidden ‘jobs gap’ of up to 2.1 million threatens to derail hopes for a smooth transition to a full-employment labour market as the economy revives, according to new analysis by IPPR. 

Despite almost 1 million current vacancies alongside shortages of workers in some key occupations, many people face a future of insecure work, low pay and ‘underemployment’ – not being able to secure as many hours of work as they seek to - says a report published by the think tank today. 

It says those in mid and low-paid roles are most at risk from the planned end to the furlough scheme, which is still supporting nearly 2 million people in their posts but is due to wind up this month. Although many will return to their jobs, a large number might become unemployed, particularly those whose roles were in hotels, restaurants and service industries where demand is still not back to normal. 

This will be a key factor in the potential ‘jobs gap’ uncovered by the IPPR report, which identifies: 

• 1.9 million furloughed employees at the end of July, the most recent figure available 
• 200,000 fewer employees on firms’ payrolls than before the pandemic, with part-time work 9 per cent below pre pandemic levels 
• 412,000 more ‘economically inactive’ people than before the pandemic, some or all of whom may want to return to the labour market 
• Twice the risk of unemployment for low-paid workers than for those in higher paid sectors, with only one vacancy for every three jobs still hit by the pandemic in sectors that tend to pay below the ‘living wage’  
• Up to four workers at risk per vacancy in some of the hardest-hit industries - including accommodation and wholesale and retail which, on average, offer the lowest weekly pay, and below the UK living wage. 

The paper argues for a new understanding of what is meant by ‘full employment’ within the economy, which it says should include jobs being better paid and offering more security. To help overcome the ‘jobs gap’ and to deliver this better labour market, IPPR urges the government to take action in four key areas: 

• Increase public investment to spur the growth of well-paid jobs, as part of a new understanding of what ‘full employment’ should mean in a modern economy. The government should aim to ‘boost it like Biden’, the paper says, by raising public investment from 3 per cent to 5 per cent of the economy – equivalent to £50 billion a year. 
• Keep and tweak the furlough scheme until the economy has surpassed its pre-pandemic level, to help those in the many low-paid industries that are still in the process of recovering. It should be extended beyond the end of September and adjusted to encourage part-time work, through a 10 per cent wage subsidy for hours worked part time. 
• Target new skills training and transition support on jobs in future-proof sectors, including new roles and industries needed as the UK adjusts to a net-zero economy. 
• Boost labour standards, by bringing forward the delayed employment bill and using it to strengthen employment rights. A new minimum wage, 20 per cent higher than the standard rate, should be set for all uncontracted hours, to reduce employers’ unnecessary use of zero-hours contracts. 

Carsten Jung, IPPR senior economist, said:  

“While there is some positive news about the labour market, we still have a long way to go before we reach full employment. Low-paid workers are still at a high risk of redundancy and face poor opportunities. If the government does not boost it like Biden, we risk going back to the poor jobs economy we had before the crisis. 

“We should keep and tweak the furlough scheme until the labour market has genuinely recovered, rather than put the lowest earners at an unnecessary risk.” 

Carsten Jung, IPPR senior economist, is available for interview  

CONTACT 

• David Wastell, Head of News and Communications: 07921 403651 d.wastell@ippr.org  
• Robin Harvey, Digital and Media Officer: 07779 204798 r.harvey@ippr.org  

NOTES TO EDITORS 

The IPPR paper Full employment and good jobs for all: Why the UK is seeing a lopsided jobs recovery and what to do about it, by Carsten Jung and Finlay Collings, is available for download at: http://www.ippr.org/research/publications/full-employment-and-good-jobs-for-all 

The paper calculates the jobs gaps as follows: The latest HMRC data shows that at the end of July, there were still 1.9 million furloughed employees.Additionally, there are still about 200,000 fewer employees on firms’ payrolls than before the pandemic. Amongst this, part-time work – a key source of income for many with caring responsibilities – is still 9 per cent below pre pandemic levels (HMRC 2021a). For context, we juxtapose this with recent vacancies which are about 1 million. 

The figure below breaks this down by industry. It shows that, in all but two industries, the jobs gap is still significantly bigger than available vacancies. This is most pronounced in industries where average pay is low; in particular, in hospitality and retail where in the average pay is below the living wage. This means that in those lower-paid industries people are at higher risk of redundancy than in higher-paid ones.  

FIGURE 1: In nearly every industry a gap has emerged between workers that need a job and jobs available Number of workers and vacancies (000s)

Source: ONS vacancy survey released 17 August 2021, HMRC PAYE RTI (seasonally adjusted) released 17 August 2021, HMRC CJRS released 29 July 2021 
Notes: The numbers of vacancies are three-month averages. We omit from this chart the industry of forestry & fishing 

Recent IPPR reports connected with this subject include:  

• Rescue and recovery: Covid-19, jobs and income security (August 2020): see https://www.ippr.org/research/publications/rescue-and-recovery 
• Boost it like Biden: Why the UK needs a stimulus about for times the size of that currently planned (February 2021): see https://www.ippr.org/research/publications/boost-it-like-biden 
• The Chancellor’s challenge: Delivering a stimulus for a post-pandemic recovery (November 2020): see https://www.ippr.org/research/publications/chancellors-challenge

About the authors: Carsten Jung is senior economist at the IPPR Centre for Economic Justice. He previously worked at the Bank of England. Finlay Collings worked as a Q-step summer intern at IPPR and is an economics student at the University of Manchester.

IPPR is the UK’s pre-eminent progressive think tank. With more than 40 staff in offices in London, Manchester, Newcastle and Edinburgh, IPPR is Britain’s only national think tank with a truly national presence. www.ippr.org