Higher-wage areas experienced significantly larger job falls during the pandemic than lower-wage areas

Higher-wage areas of the UK have experienced significantly larger job falls during the pandemic than lower-wage areas, according to new Resolution Foundation research published today (Thursday).

Levelling up and down Britain – the latest report for The Economy 2030 Inquiry – a collaboration between the Resolution Foundation and the Centre for Economic Performance at the LSE, funded by the Nuffield Foundation – examines how the labour market recovery from the Covid-19 pandemic varies across the UK so far.

While all places experienced a labour market shock from the pandemic, some areas have been slower to recover than others.

High-wage areas across the UK have seen some of the largest falls in employee jobs since February 2020. In June 2021, Westminster (the UK’s highest-wage area) had seen jobs fall by 3.6 per cent, while in Leicester (the UK’s lowest-wage area) the number of employees had actually increased by 1.0 per cent.

This trend is also seen outside of London, with high-wage areas like Edinburgh and Aberdeen experiencing large job falls of 2.2 and 3.5 per cent respectively.

This geographic trend comes despite Resolution Foundation research showing that lower-wage workers have borne the brunt of the pandemic’s labour market impact. It is likely therefore that it is low-paid workers in high-wage areas that have experienced the bulk of this job fall.

Areas which are more reliant on either tourists or commuters were initially the hardest hit by the pandemic. In February 2021, the two highest furlough rates were in South Lakeland (26 per cent of workers) and the London Borough of Newham (23 per cent) – areas which predominantly cater to tourists and commuters respectively.

However, these areas have seen very different paces of recovery. By June 2021, as many restrictions eased, furlough rates dropped to 7 per cent in South Lakeland, but in Newham they still stood at 11 per cent.

London’s labour market in particular has struggled to recover, with employee jobs still more than 3 per cent below their pre-crisis level, while several areas including Cornwall and Isles of Scilly, Gwynedd, and the Causeway Coast and Glens are already at or above pre-pandemic levels.

Levelling up and down Britain finds that commuter areas have bounced back less than tourist areas, suggesting people are more willing to go on holiday than start commuting again.

While the long-term structural changes which arise from the pandemic are still far from certain, the Foundation notes that if the shift towards home working continues then it will have serious implications for the geographic shape of demand, jobs and living standards across the UK – creating new job opportunities for some people, but new challenges for local labour markets too.

Charlie McCurdy, Economist at the Resolution Foundation, says:

“Low-paid workers have borne the brunt of the labour market impact of the pandemic, but those same workers in high-wage areas of the UK appear to have been hit hardest during the recovery, with those places experiencing significantly higher job falls than low-wage areas.

“In the early part of the crisis, city centres and coastal areas were especially hard-hit because many jobs in such places depend on demand from people outside the area. Since England’s reopening in June, jobs in many tourism-reliant areas have bounced back to pre-pandemic levels, but some cities – and particularly London – have struggled to return to life.

“The summer ‘staycationing’ boom has brought a much-needed boost to many, but a structural shift towards more home-working could have a lasting impact on the geography of the UK labour market, further hindering the living standards recovery for Britain’s low-paid workers.”