Unemployment rate in the UK hits its highest levels in three years
As Covid-19 continues to put a strain on the UK’s labor market, the unemployment rate in the country has risen to its highest level in three years. In the three months leading up to August, the unemployment rate rose 4.5%, compared with 4.2% previously. According to the Office for National Statistics (ONS), redundancies also soared to their highest peak since 2009. “Overall employment is down about half a million since the pandemic began and there are particular groups who seem to be most affected, young people in particular,” said Jonathan Athow, deputy national statistician for economic statistics at the ONS.
IZA World of Labor author Francesco Pastore has found that young people experience worse labor market outcomes than adults worldwide but the difference varies greatly internationally. In his IZA World of Labor article he concludes that: “Young people are the most affected by adverse economic conditions. One of the main reasons for this is that firms prefer to fire the most recently hired workers when layoffs are called for. They do this for both social and economic reasons: young people have fewer family commitments, which allows them to transition into new work situations more easily, and they possess less firm-specific human capital, thereby minimizing the firm’s losses when laying off employees.”
Jonathan Athow adds that of those out of work, “[currently] about 300,000 are aged 16–24, so about 60% of the fall in employment... that's really disproportionate.” According to him, large numbers of redundancies have been made in sectors such as hospitality as well as in travel and employment agencies. In addition, figures from the ONS show that about 1.5 million people did not have a job between June and August, and the recorded redundancies were around 227,000. And, in September the number of those claiming work-related benefits rose to 2.7 million, which was an increase of 1.5 million since the beginning of March.
Experts foresee the number of people claiming work-related benefits to rise as a result of the government’s new scheme which aims to support wages. This is due to the fact that the program is less generous than the furlough scheme that was previously in place. According to figures from Citibank, the unemployment rate could rise to 8.5% in the first part of 2021, which is a rate that has not been seen since the early 1990s. Chancellor Rishi Sunak said that “[…] we would unfortunately not be able to save every job.” However, he said that those that do lose their job would be able to apply for apprenticeships, traineeships, and a £2bn Kickstart scheme, in addition to extra work search support.
Read Francesco Pastore’s article Why is youth unemployment so high and different across countries?