Young people face economic ‘scarring’ from Covid, says top think tank
The coronavirus recession has dealt a double blow to young people in the UK, who are more likely to have lost their jobs amid the lockdown and now face bleak career prospects, a leading think tank has warned.
New research from the Institute for Fiscal Studies (IFS) today said the carnage in the hospitality and retail industries combined with the collapse of hiring is likely to “scar” young people’s careers.
It comes as the government promises to “build, build, build” its way out of the economic crisis caused by Covid-19. Chancellor Rishi Sunak is set to unveil plans next week to boost the economy.
UK GDP is expected to shrink by an enormous 10.2 per cent this year, according to the International Monetary Fund. The chief economist of the Bank of England this week said it could shrink by eight per cent.
The IFS said young people in particular will suffer from this drastic economic slowdown.
The think tank’s research showed that the young have become more likely in recent decades to work in low-pay sectors like hospitality and retail. The report was produced with HSBC and the data science-focused Turing Institute.
By 2019, 22 per cent of all people aged 22 to 25 working in their first full-time job after leaving education were employed in sectors effectively shut during lockdown, the IFS said.
Unemployment ‘very damaging’ to careers
Young people have also increasingly relied on getting new jobs to increase their earnings in recent decades, the report said. Therefore as hiring has dried up amid the coronavirus lockdown, their chances of wage growth have been severely curtailed.
Roughly 28 per of wage growth in the first five years of the careers of people born in the 1970s could be attributed to moving to a better-paid job as opposed to promotion. This had risen to 50 per cent or more among people born in the 1980s, the report said.
IFS economist Agnes Norris Keiller told City PM that technological change has been a key factor.
“In the past for workers at the start of their career quite a few of them went into say manufacturing, quite a few of them went into back office administrative work, which are the type of jobs that have basically just become much less common,” she said.
Norris Keiller said the big worry is that the pandemic causes a surge in youth unemployment.
“We know that unemployment at any stage in your career is very damaging,” she said. “But particularly at the early part of your career in normal times that’s when you see people achieving the fastest rates of pay growth.”
IFS says young people must be a priority
Government support schemes, such as the furlough programme, have helped many young people during the pandemic.
But the IFS, an influential think tank that analyses taxes and spending, said the Treasury should focus on young people in particular with its economic policies over the coming months.
The government did not respond to requests for comment.
Labour’s Cat Smith, shadow minister for young people, said the government has ignored young people in recent years.
“After a decade of austerity, young people are facing surging housing prices, stagnating wages, and rising student debt,” she said.
“The government must use next week to introduce a ‘back to work Budget’ which preserves those jobs, creates new jobs and provides job guarantees for young people to prevent long term unemployment.”
The IFS said that some jobs are bound to return as the coronavirus lockdown is lifted. But it said there is a great deal of uncertainty around the hospitality and retail sectors.
Norris Keiller said the crucial factor “is to do with people’s confidence in terms of how safe the general public are going to feel going out and going to these restaurants and cafes”.