The Pandemic’s Impact on The Labour Market

Jeremy Poole

It’s been clear throughout that certain sectors have suffered more than others through the pandemic. Whilst some industries all but shut down, and workers were furloughed, some continued almost as usual.

We’ll take a look into the impact the pandemic has had on the labour market in this blog post, exploring the different ways that workers and sectors have been affected.

Good news?

The government released the labour market statistics for May-July 2021 on 14th September 2021. The stats suggest a continued recovery for the UK labour market, with several labour market indicators now returning to pre-pandemic levels. With employment levels rising and unemployment levels falling, isn’t it all looking rosey?

Well, not quite. To date, the effects of the pandemic have been skewed to more markedly target the younger and older sectors. These sectors have been most likely to have left employment, and are also most likely to have become economically inactive through the impact of the pandemic.

It’s also worth bearing in mind that the falling unemployment levels are unlikely to last, as increases in unemployment are forecast when the furlough scheme finally comes to a close at the end of September.

Looking into the period from July to September 2020, this report saw that 1 in 6 members of the workforce were out of work or working fewer hours by September.

Different sectors weathering the storm

Work disruption and recovery levels have obviously worked differently for different sectors and industries. ‘Shutdown’ sectors have inevitably been heavily impacted by the pandemic, as have jobs in relatively low paying work. Employment levels have fallen most in the industries like food services, food manufacturing, residential care, and construction.

Skilled trades seem to have been better protected from job losses throughout.


Although we could posit the stability of more highly paying jobs

in a positive light, it’s important to remember that this could widen already existing inequalities in the labour market. Ethnic minority groups, especially, are more likely to lose their jobs in shrinking sectors and are least likely to find new jobs in growing sectors.

Some specific employees will be disproportionately affected by the coronavirus outbreak when it comes to work. Women, the young, those from an ethnic minority, those on low pay and also those who are disabled have seen the biggest negative financial impact.


Sectors on the up

Growth is being seen in the service industries. In particular, we’re seeing jobs in public services (where there’s been an increase of a quarter of a million jobs), finance, and tech. There are also more jobs in medicine – but in the admin and managerial side, likely due to the bureaucracy surrounding the delivery of COVID services like Test and Trace. Employment of health professionals has actually fallen slightly. There are more highly skilled professional jobs in business available.

The future for the labour market…

It’s likely that we’re still only just beginning to see the impacts of the coronavirus pandemic on the labour market, as the effect of labour market suppression is probably still being muffled by the government’s job retention measures. On top of that, some of the employment growth we’ve seen has been down to emergency public spending to tackle the pandemic.

Four potential priorities are outlined in this employment studies report:

1. Support for the disadvantaged

We need to focus in depth on how the labour market has seen

disadvantages targeting specific groups, such as ethnic minorities, the disabled, those with long-term health conditions, the older population, and women. We then need to come up with policy to tackle these disadvantages.

2. Account for the impact of the pandemic on the lowest paid

Those in the lowest paid, least secure and lowest skilled work have borne the brunt of the crisis. The Job Support Scheme should better support those working reduced hours who aren’t furloughed.

3. Support the movement into growing sectors

Those affected by the crisis should be encouraged into growing sectors and occupations, and offered retraining support.

4. Measures to support hiring in the new year

As the Job Retention Scheme reaches its end and public, pandemic-related spending is scaled back, we should see measures introduced to reduce hiring costs for employers, and even the possibility of hiring subsidies targeting employers who take on those who were previously unemployed.

Overall, as this article from Economic Observatory states, the recession caused by the coronavirus has not acted like a ‘normal’ recession.

The usual metrics we expect to see noticeably affected haven’t been, but instead we’ve seen higher absences from work, a big rise in short-time working, and hiring freezes – where we might usually expect wage cuts and mass job losses.

As much of this is likely due to the governmental support we’ve seen throughout, we’re likely to see a bigger impact when this

comes to an end – and indeed, when we can look back on this period with a few years’ hindsight, we may be able to better understand the damage done and changes initiated by this unprecedented period.