Two million people face uncertainty over end of leave and benefit cuts, economists warn Business News

More than 2 million people face uncertainty in the workplace next month with the “double whammy” of the end of holidays and the theoretical reduction in universal credit, economists have warned.

At the end of July, government data showed 1.9 million workers were still on leave and 200,000 were considered economically inactive, suggesting that more than 2 million face an uncertain future in October, according to a study by the Institute for Public Policy Research (IPPR) think tank.

The Treasury pushed the UK economy onto life sustaining with the leave program last year, but economists noted its shape has changed as the country moves in and out of lockdowns. And while GDP, the main measure of economic activity, has recovered somewhat, the sectors that support many workers have changed or declined in many cases.

This effect is particularly marked in the hospitality sector, where a combination of staff reductions and employees on leave can leave nearly four workers chasing each job offer in the sector, according to IPPR calculations. , which are based on the most recent official figures. . This could leave nearly 300,000 hospitality workers with no clear employment path to come once the leave ends.

According to the think tank, reports of shortages of workers, such as truck drivers and meat processors, may give the wrong impression of the overall state of the labor market.

“We’re still not out of the woods,” said Carsten Jung, senior economist at IPPR. The independent. “The news about labor shortages makes the job market look hot, but it’s important to say it’s not.

The government is expected to “maintain and modify” the holiday program beyond the end of September until the economy is above its pre-pandemic level, Jung and his co-author of the report said. IPPR, Finlay Collings. This would mitigate the impact on workers in low-wage sectors such as retail and hospitality, which are still “on the rise”.

There is also a need to better understand what full employment means in the modern economy, they said, as so many workers are “hidden” from the employment figures by underemployment in precarious part-time jobs, which do not pay enough. make ends meet.

Without renewed government intervention, the end of the holidays is likely to push more workers into precarious, low-paying jobs and depend on benefits, Jung said. It comes as the universal credit scheme is set to be cut on October 6, removing what is known as a ‘raise’ equivalent to £ 20 per week.

“Low wages will be hit by a double whammy of being more at risk of unemployment and the withdrawal of increased universal credit,” Jung said.

The impact of the pandemic on employment has also widened the gap between high and low wages, which the sudden end of support measures such as holidays will strengthen. Taking into account all job vacancies shows that for “all three jobs still affected by the pandemic in sectors below the living wage, there is currently only one vacant position”, according to the IPPR – more than double the disparity found in the highest paid sectors.

This difference in future opportunities risks worsening the impact of the pandemic itself. As Covid-19 struck, the number of roles for business professionals in some high-paying jobs increased, while the number of hours worked by people in low-paid jobs “collapsed,” said the IPPR.

The report also noted survey data collected by the UK Chamber of Commerce indicating that among companies still using the time off program, one in five are considering layoffs, while one in four may reduce employee working hours. after the program ends this month. New figures on the number of workers still on leave are expected to be released by HMRC next week.

A Treasury spokesperson said: ‘We have deliberately extended our support to bring certainty to people and businesses over the summer, and that support continues with reduced rates for businesses and reductions in VAT. in place until March 2022, and the leave plan in effect until the end of September.

“The increase in universal credit has always been designed as a temporary measure to help households weather the pandemic, but we continue to support people and make sure they have the skills and opportunities they need to get good jobs, ”they added.

The spokesperson also noted that the government had invested “billions” in its Jobs Plan, which aims to boost employment and skills, and that some programs for businesses, including the payback loan program , remain in force.