We have seen poverty start to increase again in the UK, experts say
‘It seems like people in sectors involved with furloughing or even in less secure positions are going to be in serious trouble’
London — The UK has record-high employment and the lowest jobless rate since the 1970s. But the labour market — and many workers — are more vulnerable to the economic fallout from the coronavirus than those headline numbers suggest.
For one, pay growth has lagged other major economies and wages are barely higher than they were before the financial crisis. Many more people now work for themselves and almost one-million are on zero-hour contracts, with no guarantee of hours from week to week. Charities report continued problems with debt.
That’s the flip side of figures showing Britain created more than three-million jobs over the past seven years, defying the headwinds since the 2016 Brexit referendum.
One figure last week starkly illustrated the pressure on households as the shutdown of the economy wreaks havoc on jobs and incomes. Almost one-million Britons have claimed universal credit welfare payments in the UK in the past two weeks, up from the 100,000-count normally expected in that many days.
“The last 12 years have been characterised by record numbers in jobs, but there are these other dimensions, like very, very weak real-wage growth,” said Stephen Machin, director of the London School of Economics Centre for Economic Performance. “It seems like people in sectors involved with furloughing or even in less secure positions are going to be in serious trouble.”
The disease is still spreading, and even Prime Minister Boris Johnson has been hospitalised with it. Here’s a look at why many households will struggle, despite the tens of billions of pounds being spent by the government to help workers through the crisis.
Employment stood at a record high of 76.5% before the virus outbreak. One argument goes that companies chose to hire rather than invest in equipment because workers are easy to let go in a downturn.
About 8% of workers in employment a month ago have already lost their job due to coronavirus, and for those still in work, the expected probability of job loss in the next four months is more than 30%, according to research from the University of Oxford.
A feature of the last decade has been the rise of self employment, including gig economy workers. About 15% of workers now work for themselves, most of them operating alone. Many earn little and lack access to the traditional safety net including sick pay and the national minimum wage. The self employed have suffered more than employees in terms of real-income losses, LSE research shows.
Britain has had the weakest pay growth of any Group of Seven (G7) countries since the financial crisis, a reflection of feeble productivity growth. Looking further afield at 35 OECD countries, only Mexico and Greece have fared worse. UK workers were only just starting to recover from the longest pay downturn in more than two centuries before the virus outbreak.
The lockdown is having the biggest effect on the young, low-paid and female workers, according to new research from the Institute for Fiscal Studies.
Many low-income households will struggle to make ends meet. Citizens Advice — a charity that provides guidance on jobs, welfare and debt management — had more than two-million website views between March 22 and March 28, its busiest week ever.
Their most-visited page across that period? Advice on what to do if you can’t pay your bills due to coronavirus.
Insecure employment may suit those who want flexibility, but many have little choice. The proportion of part-time workers who want a full-time job but can’t find one remains higher than before the financial crisis.
“I’m sure if anyone was asked that now, there would be a huge spike in the numbers,” Machin said.
A generation ago, poverty was largely confined to pensioners and the unemployed. No longer. More than half of those seeking advice from the debt charity StepChange in 2019 were in some form of work.
Wage stagnation, rising housing costs and government spending cuts have exacted a heavy toll. Even before the virus outbreak, StepChange was fielding the equivalent of one call every 49 seconds, while the average client had just £89 left at the end of each month.
“We had seen poverty start to increase again, and in particular for workers,” said Dave Innes, head of economics at the Joseph Rowntree Foundation, an anti-poverty organisation. “We’re heading into this in a far-from-ideal situation across society.”