Begin again?

Think tank: Resolution Foundation

Author(s): Mike Brewer; Charlie McCurdy; Hannah Slaughter

November 23, 2021

This report from UK think tank Resolution Foundation assesses the permanent implications of Covid-19 for the UK’s labour market.

The scale of the Covid-19 crisis, its cause, and the speed at which it hit, have all been different from previous crises. The highly unequal impact on different sectors, the scale of behavioural change – with reduced travel and the shift of spending online – and the very unusual policy response – including the Coronavirus Job Retention Scheme (JRS) – also mark this out as not just any old recession. From remote working to changes in the size of different sectors, Covid-19 has also changed the way that we work. This report, part of the Economy 2030 Inquiry, considers the nature of these labour market developments with an eye on the longer-term changes, and the resulting challenges for policy makers over the rest of this decade. First, it is now clear that fears of rising unemployment have been largely unfounded. Instead, participation has taken a hit – particularly through younger and older workers leaving the labour force, something which could leave a permanent hit to GDP. Second, the labour market is still in flux, and the frictions and mismatch that have already emerged means that the Covid-19 crisis will hit productivity in the short run. Finally, although full-time homeworking looks set to end, hybrid working models are expected to stay, particularly for highly-paid workers. Too many people are focused on the lifestyle changes for professionals; the longer-lasting impact of homeworking will be disruption for lower earners, who need to find new jobs in new places as demand shifts.