Analysis suggests recent rise in employment will go into reverse over next six months
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Britain’s jobs recovery could be delayed until the end of 2023 as thousands of workers struggle to find employment as the furlough scheme is phased out this year, according to analysis by the Organisation for Economic Co-operation and Development (OECD).
A rise in the employment rate in recent months will go into reverse over the next six months before it regains momentum in 2022 and climbs back to its March 2020 level of 75.5%, the OECD forecast.
While many businesses say they are struggling to fill job vacancies and have called on ministers to tackle a shortage of skilled workers, the OECD said that ending the furlough scheme in September will force many businesses hit by pandemic-related restrictions to implement redundancies.
In a report examining the outlook for employment across all 38 OECD member countries, the Paris-based organisation said that to maintain a more consistent improvement in employment prospects, UK ministers should consider more flexible support for businesses and individuals that continue to be negatively affected by the coronavirus crisis.
The warning is likely to be leapt on by Labour, which has argued that the Treasury should bring forward schemes to protect industries such as hospitality and leisure that were already suffering before the furlough scheme was cut back this month.
Aerospace firms that have lost orders because of flying restrictions have also complained that without an extension of government support they could be forced into insolvency.
HMRC data shows that PAYE employment is more than 550,000 below pre-pandemic levels, hundreds of thousands of workers have reduced their hours and many self-employed people have lost work.
The OECD, which also includes the US, France, Germany, Chile, Israel and Australia among its members, said the number of hours worked in the UK fell by 25% in 2020 and the total was still 10% less in March this year than before the pandemic.
In April and May 2020, the furlough scheme supported 32% of UK employees, the fifth highest level of support across OECD countries.
The OECD said: “As economies roll out their recovery plans in coming months, it is essential to continue supporting families most in need and jobs that remain viable, while providing the right incentives for job creation and resuming work.”
Concerns that the withdrawal of government subsidies will also make income and wealth inequalities wider and weaken the job prospects of many low-skilled workers were supported by the OECD.
“All this suggests that the Covid-19 crisis risks amplifying the longstanding trend towards increasing economic inequalities in many OECD countries. In the decades before 2020, real household incomes diverged, having grown, on average, by 63% for the top 10% of households, and only by 20% for the bottom 10%, since 1985.”
It said the participation in training by those with less than secondary education was a third of that of highly educated adults. “Similarly, workers whose jobs are at high risk of automation are one half less likely to engage in adult learning than their peers in jobs with a lower risk,” it added.
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