We’re about to see some unprecedented convulsions in the labour market because of the after-effects of two external shocks to the system – Covid and Brexit – and the interplay between them
Farewell, then, furlough, and thanks for all the jobs. Around 11 million jobs saved, that is, or helped to be saved by the Coronavirus Job Retention Scheme. Indeed, two jobs in particular, those of Boris Johnson and Rishi Sunak. Without their decision to embark on this bold scheme, and spend the £70bn it cost to run, the economy would have surely collapsed under the weight of the pandemic and its lockdowns, and they would have been swept away in the political storm that would have followed. We have much to be grateful for in modern economics, as well as in modern medicine during the Covid crisis. It seems only fair to give the government some credit for the things they got right.
As the vaccine programme has progressed and as the economy has recovered, the furlough scheme has been wound down, with about one million people finally exiting it today. It is, though, a risk, because there are significant sectors of the economy which are far from recovered – travel and aviation, for example, and entertainment. A mini-version for those sectors could and should have been retained for longer, until travel and crowd restrictions were lifted.
There is, then, a risk of those people being unemployed, even though there is a roughly equivalent number of job vacancies, and, as we know only too well, shortages of workers in haulage, social care and hospitality. Theoretically, those made redundant after the furlough scheme ends will be able to retrain and fill the available vacancies. Except, of course, the labour market doesn’t work like that.
We’re about to see some unprecedented convulsions in the labour market because of the after-effects of two external shocks to the system – Covid and Brexit – and the interplay between them. The one thing we can be sure about is that there will be pain. As in similar periods of protracted economic dislocation, in the 1930s and 1980s, run-down areas of high unemployment and increasing poverty will co-exist, uneasily, with regions that are booming and short of staff. The new jobs will be in the wrong trades in the wrong places and arise at the wrong time in peoples’ lives. Moving house and uprooting families is never easy, and the disruptions in the UK housing market make mobility even worse than it should be. It is certainly not a matter of laziness or over-generous benefits.
These structural dislocations will take time to work through, but we can sense them already. Covid has hugely accelerated modest trends towards working from home and e-commerce, with all that that implies for city centres, bricks-and-mortar retail, commuter rail lines and office rents. Brexit is closing down certain industries, such as Scottish shellfish, but not yet stimulating many others, and manufacturing will slowly lose markets and jobs as UK concerns continue to lose EU market share.
In some areas, such as road transport, Covid and Brexit have combined to cause chaos and labour shortages. In the short term this will mean more jobs; but in the longer term the shortage of labour may well be remedied by increasing automation – autonomous lorries requiring no drivers at all, for example. Farming will go through similar painful adjustments when UK markets are lined up with Australian and American production, and rural communities will change forever as city-dwellers no longer tied to the office move out to the counties.
Artificial intelligence and robotics will be given an unexpected boost by Brexit and Covid; new jobs will be created as well as lost in the process. The major infrastructure programmes promised by the “levelling up” slogan should create new skilled jobs, and if we ever get serious about the climate crisis there should be new green jobs too. Both main parties seem to be taking a protectionist approach, and diverting public spending to UK destinations as a matter of policy (whether that represents best value or not).
In every trade and profession, from law to car making and from pharmaceuticals to the buses, Covid and Brexit have forced change, and the effects of these twin disruptors will reverberate through the 2020s and beyond, and uniquely so in Britain. The furlough scheme, along with the rest of the financial support, have merely delayed a little the momentous changes that will soon overcome us. We can only hope that our political institutions and civic society can withstand the pressures.