Policy makers’ focus must shift immediately from welcoming record employment to tackling rising unemployment

New measures must be introduced immediately to limit the rise in unemployment, and cushion the income shock for those who will unavoidably lose jobs, the Resolution Foundation said today (Tuesday) in response to the latest ONS labour market data.

The Foundation says that the challenge facing the UK labour market today is a world away from that shown in pre-pandemic economic data where employment is at joint record levels of 76.5 per cent, and unemployment at just 3.9 per cent.

Instead, the UK and many other economies are on course for a significant recession this year following the escalation of the coronavirus pandemic. With the nature of this shock likely to feed through particularly quickly to job losses in sectors like hospitality, the Foundation says that the government will need to take further action to support individuals that go far beyond those announced in the Budget.

The Foundation notes that across the UK there are currently 5 million workers in retail, 2.5 million in hospitality, and 1 million workers in arts, entertainment and leisure. These relatively low-paying sectors could be swiftly and profoundly affected by the UK’s response to the coronavirus, as will other sectors of the labour market in the weeks and months ahead.

For workers who need to self-isolate or take time off sick, the Foundation says that the government should urgently extend Statutory Sick Pay (SSP) to the two million low-paid workers who earn less than the £118 earnings threshold needed to qualify.  This is essential as workers in low-paying jobs like cleaning, sales and security work, along with caring and leisure, are less likely to receive occupational sick pay (37 and 43 per cent respectively) than those in professional occupations (63 per cent) and are therefore more reliant on SSP.

But the income losses from wider economic damage of lost jobs and hours of work will eventually dwarf those from sickness itself. Government action must therefore go well beyond extending the reach and generosity of SSP (from its current value of £94.25 a week).

The Foundation says that the government should also immediately strengthen the safety net for those hit by the crisis, significantly uprating all working-age benefits – including Universal Credit to support those losing their jobs – to help cushion the income shock for the many households who may find themselves receiving benefits for the foreseeable future.

Now is also the time to urgently look at more radical measures to help firms keep workers on their books and ensure fewer are left relying on the benefits system in the months ahead. Further Resolution Foundation analysis, with costings of a policy package to help low-income households through the current economic shock will be published later this week.

Nye Cominetti, Senior Economist at the Resolution Foundation, said:

“Today’s ONS figures are a stark reminder of how swiftly the world is changing. While the last few years have been spent discussing record employment, the focus for policy makers now must be rising unemployment. The absolute priority is much stronger action to cushion the living standards blow from a sharp economic shock.

“The shock to family incomes will go much broader than that driven by actual sickness itself, so the government should urgently build on welcome measures announced in last week’s Budget to support smaller firms, by ramping up the level of support for those losing or at risk of losing their jobs.”