A new report from the Resolution Foundation (RF) shows that while recessions have lasting impacts on the UK labour market, each has a different legacy such as high unemployment or stagnant pay.  However, the scale of the Covid-19 crisis, its cause, and the speed at which it hit, have all been different from previous crises.

While Covid-19 has brought new challenges it is unlikely to result in high unemployment following government intervention and the introduction of the Job Retention Scheme (JRS) which protected over 11 million jobs. However, remote working and changes to different industry sectors has altered the way that we work and will work in future.

Unemployment will be less of a post-pandemic challenge than expected.  While the UK labour market was hit hard there has been a swift recovery with a record number of job vacancies now being advertised.

Despite the record number of vacancies across all industry sectors, organisations are struggling to recruit in what has become an increasingly tight labour market as, at present, there are only 1.3 unemployed people per vacancy, the lowest level since records began in the early 2000’s.

This hiring boom means we are not seeing the rise in unemployment and poor- quality work that has characterised most recessions. Unemployment peaked at 5.2% last winter, just 1.2 % above its pre-crisis level, and as of Q3 2021 was just 4.3%.  Additionally, long-term unemployment has been falling since spring 2021, and youth unemployment is now just below its pre-crisis level.

Despite a strong recovery, labour market disruption over the past 20 months has disproportionately affected the youngest, oldest (age 55 to 64) and ethnic minority workers, as the first year of the Covid-19 crisis has led to a larger fall in labour market participation among working-age adults than any other crisis in the last four decades.

Additionally, the pandemic has led to big sectoral changes.  It has not only changed the amount of work people are doing – it has changed the types of jobs being done in the economy too, and this change has been unusually rapid. From the very start of the crisis, the pandemic has been sectorally uneven, as lockdowns and social distancing restrictions closed customer facing sectors like hospitality while demand ramped up in sectors such as health and care.

While new entrants to the labour market are moving into growing sectors, people leaving shrinking sectors have either become unemployment or economically inactive.  Concerns about job quality therefore remain.

While sectors like hospitality and leisure have reopened, workers are moving into occupations that do not match their skill level. The share of workers who are in a higher-skilled job than a year earlier has fallen back to levels last seen in 2012.  Moves into lower skilled jobs have increased, while the share of people who are over-educated compared to the average level of educational attainment for the occupation they are in, has reached a record high.

As the recovery continues to take hold and a wider range of opportunities become available, policy makers need to support workers to move into jobs that match their skills and experience as this would be a fairly easy way to boost productivity.

To see the full report and additional commentary from the Resolution Foundation, click here.