This is the biggest employment crisis that we’ve faced – we now need to respond

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26 May 2020

Tony Wilson, Institute Director

Follow @tonywilsonies

So after perhaps the most extraordinary few days in our politics since the Hinduja affair, back to work.  Or at least, back to work for half of the country – with data released last week confirming what we had known for some weeks, that half of the potential workforce is now either out of work or on furlough. 

A week has rarely felt so long, but it was just last Tuesday that we learnt that ‘claimant’ unemployment had risen by 860 thousand in the month to 9 April, to just over 2 million.  Not since February 1947 have the unemployment numbers risen this steeply.  Back then, a combination of snow drifts and post-war privations brought the country to a halt – power stations went off, industries and transport networks closed, even the BBC was powered down.  But by the following month the snow had thawed, and by the summer unemployment was its lowest since the war (it wouldn’t top a million again until 1976). 

This time round, the snow isn’t going to thaw so quickly.  As we said in early April, it will take us years rather than months to repair this damage.  There has already been a further million claims to Universal Credit in the month since the claimant count date, meaning that unemployment is likely closer to three million now.  At the same time, the jobs market is showing few signs of coming out of its deep freeze: with our weekly analysis of Adzuna vacancy data for Joseph Rowntree Foundation finding that new vacancies are stuck at between a third and a fifth of the levels a year ago.  To make matters worse, many of those areas now facing the highest unemployment also have among the fewest vacancies – with around ten unemployed people for each vacancy in Scotland, Wales and the North East of England, and an incredible 17 unemployed per vacancy in Northern Ireland.  In London and the South East, the equivalent figure is less than three per vacancy (although it was less than one a month ago).

Faced with near three million unemployed, a dire hiring market, and the practical difficulties of maintaining services during lockdown, it would be tempting for government to conclude that there is nothing to be done (at least) for now.  Indeed three recessions ago, in the early 1980s, this is what happened – with employment support for the unemployed effectively switched off for three years.  The circumstances were very different of course, but the economic, fiscal and social consequences should be a lesson for all of us on why we need to act quickly this time.

So that’s why a whole host of people and organisations – including ourselves, Learning and Work Institute (L&W), Reform, Impetus, Youth Futures, the Association of Colleges, the Employment Related Services Association, the Recruitment and Employment Confederation, the Institute for Employability Professionals and more – have been working together for the last few weeks on proposals for how to get out of this jobs crisis. 

Last week we published our thinking in the Help Wanted report.  I won’t summarise those proposals here as my counterpart at L&W, Stephen Evans, has written an excellent piece for TES here.  Instead, I just want to address the three things that may stop us from doing this: whether we have the evidence, the money and the capacity to make this work.

On the evidence, we have a pretty good idea of what works in supporting those out of work.  Recent years have seen some really high quality evaluations of one-to-one ‘caseworker’ support for jobseekers in a number of different countries – Germany, Sweden, the Netherlands, Ireland – and virtually all have found large positive impacts, often enough to more than pay for the costs of the service itself.  And research from the US during the Great Recession found this even to be the case during times of very high unemployment.  For the longer-term unemployed, there’s a similarly rich evidence base, pointing to the importance of more intensive one-to-one assistance and then access to personalised support that might include work experience, pre-employment training, financial assistance, health support and so on.

On the money for this, the even better news is that active support to the unemployed – even including more expensive services for the long-term unemployed – would cost a small fraction of the £84 billion that we will spend on supporting wages through the Job Retention Scheme.  Clearly the JRS needs to remain in place in some form until the economy starts to recover, but as we phase it out if we can shift just one twentieth of that spending to active labour market policies, we would be able to guarantee that everyone unemployed or at risk of redundancy would get help to find a new job, and that everyone reaching long-term unemployment would have access to the work experience, training and wider support that they may need.

So the final question, then, is do we have the capacity to make this work?  The short answer is that if central government tries to do this on its own then no, we don’t.  With eleven thousand Jobcentre Plus ‘work coaches’ and likely around three million unemployed, the numbers just don’t add up for JCP alone to be providing one-to-one caseworker support.  And with DWP’s ‘contracted out’ employment market now worth around £200 million a year, just one sixth of what it was on the eve of the last downturn, simply ‘scaling up’ existing programmes would be nowhere near enough on its own.

The reality though is that central government has never had to go it alone in a crisis, and this time will be no different.  Discussions over the last month or so – with local government, recruiters, voluntary and community organisations, housing associations, trusts and foundations and employment services have shown that there’s the appetite and the goodwill to work together.  This makes fiscal sense too as in many cases the government is paying people who could be delivering employment support not to work, through the JRS – so why not pay them to work with the unemployed instead?

This isn’t to say that we can put everything in place quickly.  Even at full tilt, new programmes will take 9-12 months to hit their stride, and the labour market will look very different in 2021 to how it looks now.  We can say with some certainty that we will have exceptionally high long-term unemployment, but we may also be seeing a strong jobs recovery (or we may not, and we may have to navigate a difficult Brexit in the meantime).  So next year could look a lot more like the early 2000s than the early 2010s.  But short-term, immediate and lighter-touch help for the newly unemployed could be in place within a month.

So we have the evidence, the money and I believe the capacity to respond.  Mark Twain perhaps put it best: “The secret of getting ahead is getting started.  The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and starting on the first one.”  This has been a long week, but it’s been an even longer two months since this crisis began.  It’s time now to act.

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Any views expressed are those of the author and not necessarily those of the Institute as a whole.