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Brace for a spike in unemployment

July 2nd 2020

Victoria Winckler, Director of the Bevan Foundation, says that recent job losses in Wales are just the tip of the iceberg – there is worse to come.

Over the last few days the news headlines have been filled with announcements about job losses: Airbus, John Lewis, Magellan, and Castell Howell Foods join BBC Wales, the Wales Millennium Centre and more in shedding jobs.

There are doubtless more to come.

Our analysis shows there is probably worse to come.

Nearly half a million workers in Wales are currently supported by the UK Government’s Job Retention Scheme or Self-Employed Income Support Scheme. Many of these workers are in low-paid jobs in industries that have either not yet re-opened or which are facing extremely challenging conditions when they are operating.  It is hard to see how businesses can retain staff, especially as the JRS begins to be withdrawn.

So we can expect many more bad news headlines over the summer and into the autumn as more and more firms let employees go as the Job Retention Scheme is withdrawn.

It’s not just employers

The decision about whether to recall employees from furlough is of course one for employers. But many employees may find themselves unable to return even if there is a job there. There is still great uncertainty about whether schools will return full time in September, and about the availability of child-care. Add to this the advice to avoid public transport and restrictions on capacity, and many more workers are likely to find they simply cannot get to their jobs.

20% unemployment?

We’ve estimated the impact on unemployment if half of people currently on furlough don’t return to work, and if half of those on the SEISS don’t restart their businesses. This figure could be wrong of course – it might be that as many as 75% return to their jobs or as few as 35% – we simply don’t know.

But taking these figures, and adding them to the number of people who were unemployed in December 2019 gives an eye-watering figure:  unemployment in Wales could rise to nearly 20%.  And that is not including young people entering the job market from school, college or university.

While some parts of Wales are hit harder than others, there is nowhere that is immune from what is likely to be a life-scarring rise.

What to do?

Our forecast could be wrong and I sincerely hope that it is. But even if we are out by several percentage points, the underlying message is no less important – there is a looming problem of unemployment and something needs to be done.

The Welsh Government should, we suggest, offer a jobs and learning guarantee, ensuring that nobody is left to languish on the dole. They have already committed to offer all over-16-year-olds advice and support to find a job – but this is a very different prospect when there are thousands of people chasing a few vacancies.

In recent days there have been calls for a four-day week, presumably to distribute a more limited amount of work amongst the population. But we have already seen the harsh effects of a 20% pay cut for those on the furlough scheme.  The least well-off on average lose £50 – £77 a week – a large chunk out of already stretched budgets. The reports of rising debt, rent arrears and lack of food and fuel point to just what a hit such a reduction can make. So unless there is a generous top-up of earnings frankly this is a non-starter for many.

 

Victoria Winckler is Director of the Bevan Foundation

 

 

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