Despite widespread economic turbulence, unemployment may not reach the crisis levels predicted last year. But issues such as underemployment, a hiring slowdown and inclusion look set to impact economic growth. Dr Deborah Talbot talks to Tony Wilson, Director of the Institute for Employment Studies, about economic and employment trends, and what a holistic employability strategy might look like.

Dr Deborah Talbot: Unemployment has been a huge source of concern over the past year. What are the macro trends currently?

Tony Wilson: The good news is that we’ve almost certainly avoided an unemployment catastrophe. Last year many of us were fearing unemployment levels of above three million, maybe even reaching five million, which would have been devastating. Largely because of the job retention scheme, the latest forecast for unemployment is suggesting that it’s going to peak at about 2.2 million, which is still 800,000 higher than it before the crisis, but far, far below what it could have been especially because given GDP shrank by 10% in 2020 – the biggest contraction on record.

However, there are three big warning signs at the moment. One is that long-term unemployment is rising because people who became unemployed or started to look for work last summer have had very little chance to get back into work. The second issue is that there are signs that the crisis may be causing existing inequalities in the labour market to widen, with black and Asian young people, those with disabilities and lone parents faring worse. And thirdly, there are growing signs of job insecurity and underemployment, and people being stuck in work that’s a lower occupational level than their skills. In any recession there’s a growth in what you call ‘second choice jobs’ – jobs you take because you need the money – and we need in the longer term to help people find the right job for their skills level.

Deborah: Brexit has caused difficulties with trade, although some say it is only temporary. How will that affect unemployment?”

Tony: It is a risk, yes, particularly if we were to look at what was missing from the budget. The budget retained the job retention scheme and that’s welcome. But the main challenge for the year ahead is not the firing but hiring. If we don’t get hiring up to well above pre-pandemic levels, we won’t reduce unemployment, we won’t improve job security and job quality and so on. And both the pandemic and Brexit look likely to affect hiring decisions.

We all know that once the economy opens up, we’re going to see more people out spending money, travelling around, seeing people and taking domestic holidays, so there is a lot of pent-up demand and a lot to be optimistic about. But the budget is gambling on a strong private- sector jobs recovery in the second half of the year, and that may not happen. Brexit will be one of the big factors which hold that back, alongside the spare capacity in the labour market as people come back to work from furlough.

There is much that the budget could have done to help hiring: reducing the national insurance burden for employers, introducing a hiring subsidy for employing unemployed people as examples.

Deborah: The government has many initiatives around skills at the moment. What do you think the strategic underpinning of these policies are and what does that say about where they’re taking the economy and the Plan for Jobs?

Tony: To the government’s credit they have introduced an enormous range of measures in their Plan for Jobs to support employment and skills. The government moved far quicker last summer than we did during the 2008-09 recession and they invested a lot more than we did back then as well.

Within three months of the crisis, we’d had a pretty comprehensive Plan for Jobs and significant investment, and we will see the benefits of that with more work coaches in Jobcentre Plus, and through the Restart programme and Kickstart jobs. In time, I think we’ll see improved access to apprenticeships and traineeships for younger people too.

What’s missing is how all this hangs together, and how we make sense of this for individuals, employers, service providers and local communities. Government initiatives can be quite rigid and quite difficult for employers to access; for example, if you’re not prepared to release somebody for a full Level 3 course or you’re not prepared to take on an apprentice, there’s relatively little for you so far.

On the broader labour market planning, there is a risk that we end up with a lot of provision and delivery but strategic confusion about who’s looking after the individual, who’s working with that employer, who’s supporting local growth in that area or industry. So we’ve advocated for a better joined-up approach at the local level, and by that I mean local economic areas (cities and regions).

Deborah: Is it an issue of how well we tie labour market demand into skills training, that is, use good data?

Tony: I think labour market data is a major issue, and there are a few projects that have been in development for a while although they haven’t evolved quickly enough to be directly useful to this crisis. For example, the LMI for All21 initiative and work by the National Endowment for Science, Technology and the Arts (Nesta) have both been looking at how to make better use of data to support local labour markets. And, of course, there’s now a pretty vibrant private market providing labour market insights.

Useful though this is, we need more central coordination and management so we can get a consistent and single version of the truth that can be used to support all areas with the insight that they need. And our funding systems, our public policy, don’t really incentivise having really good labour market intelligence (LMI). Unlike the US, our skills system is not outcome-led in terms of jobs; its success is measured in enrolments and qualifications. That’s not a criticism, and there are strengths to taking that approach, but it means that there just isn’t the same demand for good-quality LMI within public services as you see in some other places.

Deborah: It’s likely that there will be a significant restructuring of the economy post-pandemic and because of Brexit. What sectors do you think should be prioritised to either help them survive or grow that would most benefit the UK’s economy and culture?

Tony: It’s clearly crucial for any economy to have an industrial strategy, and the fact that we wound up the Industrial Strategy Council is a worry as it means that we are once again revisiting and reinventing what the UK approach should be.

For me though, any strategy needs to be focused on how we can maximise employment opportunities, support job growth and reduce disadvantage, so it needs to try to take a ‘whole economy’ view and not just focus on specific favoured industries, many of which ultimately don’t employ a lot of people.

One positive that we can definitely build on, though, is that employment grew by four million in the 10 years before the crisis, and over 3.5 million of those jobs were in highly skilled work. I think the challenge therefore is how we help more people get from lower skilled to higher skilled work quickly.

Deborah: The ladder of progression.

Tony: Yes, exactly.

Deborah: If there was one policy that you think would make the most difference to employability, what would it be?

Tony: I think the most important policy would be one-to-one personalised individual support for people who are unemployed or underemployed to improve their lives. That won’t always be about a rapid re-entry into employment; it might be about social connections, it might be about learning, it might be about helping to address a health condition or other things that might be making their life hard.

Deborah: Functions that, for example, the Sure Start Centres used to perform for parents.

Tony: Exactly.

Deborah: What does the IES have planned for 2021?

Tony: Our first priority is evidence-based practice around labour market recovery and improvements to employment policy. Our second area will focus on how to make work better, particularly as we move to hybrid forms of working, and in particular thinking about how we ensure that supports health and wellbeing, productivity and inclusive growth.

And then the third area for us is to support a more inclusive and diverse labour market. I don’t think anyone could have lived through the last year and not been impacted personally and professionally by the Black Lives Matter movement and in the past month the death of Sarah Everard. These events have been a wake-up call for all of us, I think, in looking at how we recognise and promote diversity and inclusion in our lives and in our workplaces too.

Deborah: That sounds very inspiring. Thank you so much for joining us.