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COVID-19 and employment – will 2021 be kinder to the UK job market?

Updated: Nov 5, 2020

With hard hitting repercussions on all walks of life, governments from around the world have had to take drastic measures to slow down the spread of the Covid-19. Whilst these governments have taken different approaches in dealing with Covid-19, one of the underlying effects that has impacted everyone across the globe is the effect of this silent killer on the employment and more widely, the knock on effects of Covid-19 on the economy.

According to the Office of National Statistics, in the week of April 6th to 19th 2020, 23% of businesses had temporarily closed or paused trading as a direct or indirect result of Covid-19, with around 60% of businesses that continued to trade reported a fall in revenue. It is estimated that around 7.6 million jobs, or 24% percent of the UK workforce, are at risk because of COVID-19-related lockdowns. Understandably, while from a social and healthcare perspective, a lockdown of some sort may be a necessity, it may mean unthinkable consequences for the UK job market. Four weeks after the UK first went into lockdown in March 2020, there were a staggering 1.4 million new applications for social assistance through the inverses credit system which is just one illustration of the type of effect that Covid-19 can have on any given country.

Having briefly outlined Covid-19’s immediate effect in the United Kingdom, different COVID-19 strategies have had a range of different impacts with many of them not fairing much better than the strategies employed by Johnson’s government. Our European neighbours in Germany experienced the largest decline in employment since German reunification. According to Destatis, the last time a year-on-year decline in jobs was almost 17 years ago, which highlights how devastating the Covid-19 impact has been on the labour market. Sweden were one of the countries that attracted international attention for not imposing a strict lockdown after the initial outbreak of COVID-19. They refrained from closing schools and shutting down businesses or shops. At the end of August 2020, a total of 475,000 people were registered as unemployed at Sweden’s national employment agency. According to the agency’s new data, that’s around 126,000 people more than the same month last year.

For the first time in 11 years, the United Kingdom is in recession. What does that mean exactly? In normal times, a country’s economy will continue to grow meaning the value of goods and services it produces will increase. However, sometimes the value of goods and services produced will fall and a recession is defined when this happens for two quarters in a row. If a recession carries on for an extended period of time, it is known as a depression. Fortunately, we are not there yet! The UK’s economy, which is measured by the value and volume of goods and services it produces is still 11.7% smaller than it was in February, before lockdown was implemented. Figures show that growth in July was also slower than the 8.7% expansion seen in June. UK economist at Capital Economics, Thomas Pugh, suggests that the reopening of restaurants and pubs has had a good impact. Reopening meant the accommodation and food services sector rose by 140.8% between June and July, which has a knock-on effect for the alcohol industry which grew by 32.7%, so we are far from another depression thankfully!

With the way Covid-19 has adversely affected the UK job market in 2020 and the ambiguity surrounding the imposition of various tiers of lockdowns around the country, it is unlikely that 2021 will be kinder then 2020 to the UK Job market.

Politically Defined is a political podcast creating conversation about political affairs from around the world.

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