Yahoo Finance Unemployment to hit 15pc if second wave strikes
Unemployment could surge to close to 15pc by the end of this year if the coronavirus returns with a second wave, rivalling the worst years of the Great Depression.
Even without another spike in infections, the UK is already on track for an unemployment rate of 11.7pc by the end of the year due to the pandemic and its lockdown, according to the Organisation for Economic Co-operation and Development (OECD).
That is far worse than the 8.1pc peak in the financial crisis and takes joblessness back to a level not seen since the 1980s.
It means the UK will go from a "jobs miracle" with unemployment at its lowest level since the 1970s at the start of the year to a crisis on a scale not seen for more than three decades by Christmas.
The self-employed, young workers, women and those on low pay are typically the worst affected, the OECD said, with more vulnerable and less stable employment, while higher earners are more likely to be able to work from home.
Across the rich world “the initial impact of the Covid-19 crisis ... has been 10 times larger than that observed in the first months of the 2008 global financial crisis”, the OECD said.
“Unlike during the global financial crisis of 2008, OECD countries reacted quickly to put in place, from the very first stages of the crisis, an unprecedented set of fiscal and monetary policies.
“Despite these measures, the immediate impact on OECD labour markets has so far been multiple times greater than during the first months of the global financial crisis and much more severe than what unemployment statistics in some countries may suggest so far.”
Those measures include the job retention scheme which at its peak put more than 30pc of workers on furlough. This has so far cost the Government £27.4bn, with the self-employment support package for 2.7m workers costing another £7.7bn.
New data from the Treasury showed more than 1m bounce back loans of up to £50,000 had been approved to help small businesses weather the pandemic, worth a total of £30.9bn, on top of more than £2.5bn of loans for larger firms.
About a quarter of workers were on similar schemes across the developed economies, ranging from almost none in the US and just over one-in-20 in Canada to two thirds in New Zealand.
Despite the job retention help, the group warned it could take years for the harm to the jobs market to be undone, with unemployment across its members to remain at 7.7pc at the end of next year, compared to 5.3pc at the start of 2020.
Over time, the schemes should be cut back to encourage businesses and workers to return to normal, the OECD said.
“This would reduce the pressure on public budgets and also the risk that job retention schemes become an obstacle to the recovery by curbing job reallocation towards more viable and productive firms,” the report said.
“Concerns about potential abuse, which were already raised in the early phase of the crisis, may also become more prominent as some firms continue to claim support for shortened hours even after workers have resumed their normal schedules.”
This could include time limits on the scheme, steps to make employers bear more of the cost, or targeting it to give more support to industries which are still forced to stay closed while cutting help for those that can reopen.
Jonathan Portes, professor of economics and public policy at King's College London, called on the Chancellor to switch from the furlough scheme to a regime of subsidising new employment in his announcement on Wednesday.
“The point of the furlough scheme was to preserve jobs that were temporarily non-viable during the period of lockdown,” he told a webinar hosted by the Wales Institute of Social & Economic Research, Data and Methods.
“If, as lockdown is removed, those jobs turn out not to be viable, then it does not make sense from an economic ... or social point of view for the Government to carry on paying companies that may no longer be viable, to pay for people not to do jobs that may no longer be viable.”
Meanwhile, a majority of voters support the Government penalising businesses that make furloughed workers redundant, according to a Portland poll. Half of voters agree it should take action, while only 23pc disagree and 26pc are unsure.
Conservative MP Huw Merriman said he supported the Government recovering funds from businesses that sacked workers in June, urging the Treasury to prevent staff from losing their jobs.
