Long-term furlough and unemployment ‘scarring’ workers

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Ongoing support for sectors affected by restrictions would minimise the impact of job losses, the think tank said
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Workers who have been on furlough or unemployed for long periods due to the pandemic need greater financial and job-seeking support from the government, according to a report from the Resolution Foundation.

Almost two million workers have been out of work or receiving furlough for six months, it said.

The think tank found that 700,000 workers had been unemployed for at least six months in January, and a further 500,000 had been fully furloughed for the same period.

Adding in the number that had moved between full furlough and losing their job over that time increases that figure to 1.9 million.

The Resolution Foundation found that the January lockdown has not had as stark an impact on the labour market as the initial shock of new restrictions in Spring 2020.

Official figures show that the number of workers claiming Coronavirus Job Retention Scheme support during the current lockdown is around 4.5 million, half of the 9 million peak last year. They also show that employment and unemployment rates – despite a sharp rise in redundancies last autumn – have not changed drastically over the winter months.

However, the Resolution Foundation warns that despite some economic green shoots, there could still be severe consequences for those who have been on furlough long-term.

The think tank’s report, Long Covid in the labour market, says that while people on long-term furlough have had financial support and can potentially get back into work through their current employer, they still face challenges as they have missed out in terms of skills development and earnings growth.

They are also more likely to fear for their job security, it found. Around 8% of workers who are still in employment either expect to lose their jobs in the next three months or have been told they will be made redundant, the Resolution Foundation said. This figure rises to 21% of those who have been furloughed for at least six months.

Job insecurity remains high, particularly among those who have spent long periods not working, or who are currently furloughed” – Nye Cominetti, Resolution Foundation

It added that there could be a ‘scarring effect’ of long-term unemployment, in that potential employers may perceive people negatively. One in seven of those in employment are already looking for new work, and a further 10% is expected to do so in the next three months. Only 14% are confident of finding work within the next month, while 37% worry that they won’t find a new job in the next year.

The Resolution Foundation is urging the chancellor to set out a gradual roadmap to come out of furlough, by phasing support out in a way that reflects specific challenges faced by certain sectors and is sensitive to public health restrictions.

It wants the Treasury to keep full furlough in place for “several months” after public health restrictions have been lifted so employers can bring staff back gradually, and remain in place longer for sectors subject to ongoing restrictions, such as hospitality. The government should then slowly increase the minimum hours required of workers in order for support to be provided, it recommends.

The Foundation has also called for the government to extend the Kickstart Scheme, which incentivises businesses to take on 16 to 24 year-olds, into next year, and for employers to take long periods of furlough into account when deciding who to take on such schemes.

This week the Institute for Fiscal Studies warned against a blanket extension of furlough beyond the end of April, claiming it could “choke” economic recovery.

It said the chancellor needed to “strike a balance between continuing support for jobs and businesses harmed by lockdowns, and weaning the economy off blanket support”.

Nye Cominetti, senior economist at the Resolution Foundation, said: “While the UK’s economic prospects are finally looking up, job insecurity remains high, particularly among those who have spent long periods not working, or who are currently furloughed.

“The chancellor must use his Budget to set out his own roadmap for phasing out the furlough scheme gradually and in a way that acknowledges where the risks of rising unemployment are highest – in sectors like hospitality.

“This would keep a lid on rising unemployment and encourage firms to bring back existing workers, while tax breaks on hiring could help more people to move jobs too.”