How has the pandemic affected industries and labour in the UK?
Industries in the UK are experiencing the effects of the pandemic in different ways, but common to all industries is an increase in job vacancies.
Economic inactivity has increased over the pandemic, due mainly to illness and people staying in or entering education.
For the first 18 months of the pandemic, economists feared that high unemployment rates would be an economic legacy of the coronavirus, especially after the end of the furlough scheme. The expected spike in unemployment never occurred, however, and rates are nearly back to pre-pandemic levels.
Now economists are turning their attention to a rise in economic inactivity – people who are not in work and not looking for work – as an effect of the pandemic on the labour market.
This Insight tracks the increase in economic inactivity and the reasons behind it at each stage of the pandemic. It explores what happened to the economic activity of men and women and different age groups.
Employment levels have been slowly recovering since the end of 2020, but remain below pre-pandemic levels: from October to December 2021 employment was 527,000 below the level in January toMarch 2020.
At the same time, unemployment has been recovering quickly and was only slightly above January to March 2020 levels in October toDecember 2021.
The reason unemployment is falling while employment is slow to recover is because fewer people are in the labour market. This is mainly due to a rise in people becoming economically inactive.
Economic inactivity for 16 to 64-year-olds increased by 302,000 between January to March 2020 and October to December 2021. This has reversed the trend of the past decade.
The main reasons for being economically inactive since the start of the pandemic were due to long-term illness or being a student, as shown in the chart below.
Notably, the only category that decreased during the pandemic is those ‘looking after family/home’. This has been mostly driven by women being more likely to enter or stay in the workforce because of increased flexibility or to make up for a partner losing income.
The chart below shows that different reasons were prominent in different stages of the pandemic.
Evidence early in the pandemic suggested mothers were leaving the labour market to educate their children. According to the Institute for Fiscal Studies, by May 2020 mothers were 1.5 times more likely than fathers to have lost their job or quit since the start of the lockdown.
Overall, however, the number of economically inactive men has increased far more than inactive women over the pandemic: between January-March 2020 and October-December 2021, inactivity for men aged 16-64 increased by 8.7%, while inactivity for women did not change. This means that women now make up over 49% of the workforce, a record high, and up from 47% in 2019.
The Resolution Foundation says this is partly because the sectors demanding more labour have been ‘female-heavy’ sectors like public administration, IT and communications, and professional and other services. Meanwhile, ‘male-heavy’ sectors like construction and manufacturing have had a decrease in the employment.
Evidence suggests that women with caring commitments have increased their economic activity over the pandemic, because of more flexibility and options to work from home. The Resolution Foundation finds that 10% of mothers aged 25-44 in a couple said remote working meant they could enter work or increase their hours since February 2020.
The age groups with the biggest percentage increase over the pandemic were young people and 50 to 65-year-olds. By contrast, inactivity has decreased among 35 to 49-year-olds.
The decrease in inactivity among 35 to 49-year-olds was entirely driven by women, as women with caring commitments entered the labour market.
As mentioned above, many young people have opted to enter or remain in education in the face of an uncertain labour market.
One potential reason for older people leaving the workforce could be for health reasons or fears of the virus, but the Resolution Foundation found that 55 to 65-year-olds are no more likely to have left for this reason than other age group, and that 18 to 24 year-olds are the most likely to say long Covid is affecting their work. This is partly because it is the youngest workers who are most likely to work in workplaces where the risk of getting Covid is high.
Another reason some might have retired early is because their savings increased during the pandemic. The Library briefing Coronavirus: impact on household savings and debt provides more information.
In November 2021, the Bank of England said it expected much of the fall in economic activity to be temporary, but noted a risk that the pandemic could accelerate the longer term trend of falling activity because of an aging population.
The Office for Budget Responsibility (OBR) expects the decline in participation among older workers to be permanent, but the Bank of England is more optimistic, expecting participation among older age groups to recover in the short term once there are fewer perceived health risks.
Both the OBR and the Bank of England expect the increased economic activity among people with caring responsibilities to be a permanent change.
UK labour market statistics, House of Commons Library
Coronavirus: impact on the labour market, House of Commons Library
Labour market statistics, January 2022, Institute for Employment Studies, 18 January 2022
Begin again? Assessing the permanent implications of Covid-19 for the UK’s labour market, Resolution Foundation, 23 November 2021
About the author: Brigid Francis-Devine is the House of Commons Library specialist on incomes and poverty.
Photo by Alex Motoc on Unsplash
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