Written by Nick Litsardopoulos (Research Economist), IES.
The tendency to invoke hyperbolic metaphors like “black holes” and frame the fiscal situation in dramatic, apocalyptic terms is a common political tactic, regardless of party affiliation. It helps create a sense of crisis and justifies harsh austerity measures. There has been a growing anxiety about the state of the UK labour market and the business activity of the country, and reading Rachel Reeves’ speech on Public Spending: Inheritance, it is hard to avoid hearing echoes that of the past, with the emphasis on fiscal responsibility, blame shifting, and foreshadowing of painful policy decisions.
However, the underlying economic realities and policy challenges the UK faces are complex, with roots that often predate any single government. Simplistic narratives can obscure these nuances. The issue of fraud and error in the COVID-19 employment support schemes contributing to the perceived “black hole” in public finances is a significant problem the UK government is grappling with. Several parliamentary committees, such as the Public Accounts Committee examine the value for money of Government projects, programmes and service delivery, and initiate inquiries drawing on the work of the National Audit Office (NAO) to examine the efficiency and effectiveness of public spending. Economists and sociologists studying the outcome of exogenous shocks often call manifested phenomena such as those that were experienced during this pandemic “puzzles”; wage-growth puzzle, unemployment puzzle, productivity puzzles, and so on and so forth. Yet, as more data become available the so called “puzzles” become easier to solve.
One of the most high-profile cases of public spending effectiveness has been the case of the employment support schemes in response to the COVID-19 pandemic, of which a big chunk was the Coronavirus Job Retention Scheme (CJRS), known more widely as the furlough scheme. The furlough scheme was launched by the UK government to support businesses in paying their employees during the pandemic lockdown. By the end of the scheme on 30 September 2021 the scheme had supported about 1.3 million businesses and over 11.6 million jobs. However, while millions of people managed to keep their jobs, even at a reduced salary, millions of pounds were lost in errors and trickery of people and/or businesses who did not actually qualify for it, but somehow were included amongst the groups that received it.
The ONS reports that hundreds of people who were previously self-employed changed their job status to wage-employees during the pandemic without actually changing their job. People will always try to find ways to exploit opportunities and take their chances, in whichever way they perceive it serves their interests best at the time. In this occasion it was the money transfers from the furlough scheme. The ONS remarks that the furlough scheme explains a large part of the growth in average earnings for employees during the coronavirus pandemic.
Regardless, this was an extraordinary period for the UK labour market with the effects of the pandemic and the following lockdown measures that were implemented (Abubakar et al., 2023). The Adzuna Intelligence Portal allows us to examine the extraordinary environment of the jobs market during this period. To get a better understanding of the how the conditions in the jobs market changed at the outbreak of the pandemic after the first Covid-19 case was reported on the 31srt January 2020, along with the changes after the first national lockdown was announced on March 23, 2020. We plot the number of job vacancies advertised together with the unemployment claimant count, noting the date of the first covid case with a grey doted line and the data of the first lockdown with a black doted line.
What we see is that the lockdown resulted in a large increase in the number of unemployment claims which found a plateau just above 265,000. This high level of claimant count persisted until May 2021 after which the reduction becomes visually identifiable. The vacancies data paint a slightly different picture where while the reduction in the vacancies is evident after the first national lockdown was announced, it was short-lived, and the number of job advertisements shows to increase from Jun 2020 onwards. The increase in the number of vacancies reaches its peak in September 2021, and it has been decreasing since then.
What the Adzuna data show is that for about 12 months when the claimant count remained elevated at around 265 thousands, the job vacancy advertisements had been increasing. However, the number of claimants did not drop from these high levels until the number of vacancies had returned to their pre-pandemic levels. Interestingly, the peak of the job vacancy advertisements coincides with the end of the UK Job Retention Scheme. Another interesting fact is that during the first year of the pandemic the UK saw an increase in the number of new business start-ups.
This increase may indicate that even in an extremely challenging business environment such as during a pandemic with a nation-wide lockdown, certain people see opportunities for a business. Indeed, we know that several companies that had a strong online presence expanded their operations during the pandemic, while new companies sprung up to fill in the gaps created by the lockdown and to satisfy the needs of the increasing demand for healthcare equipment and services. Nevertheless, what the Adzuna data reveal is that the health of the UK economy has yet to return to its pre-pandemic state with vacancies at a lower level and claimant count at a higher level.
IES is an independent, apolitical, international centre of research and consultancy in public employment policy and HR management. It works closely with employers in all sectors, government departments, agencies, professional bodies and associations. IES is a focus of knowledge and practical experience in employment and training policy, the operation of labour markets, and HR planning and development. IES is a not-for-profit organisation.
Read more: