There is growing evidence that economic consequences of the COVID-19 pandemic are particularly negative for young people. On the eve of the coronavirus outbreak, workers aged below 25 were more likely than other workers to be employed in sectors that have been effectively shut down as part of the UK lockdown and they are more likely to have lost their jobs since then. This note shows that the economic repercussions of the pandemic threaten to severely disrupt the career progression of young workers, which suggests negative economic impacts on this age group may last well beyond the easing of the lockdown.
- Over the last decade, young people starting out in the labour market have increasingly been working in occupations that are relatively low-paid. For example, people born in the 1980s are more likely than those born in the 1970s to start their careers in low-paying occupations such as customer service assistants and nursery workers, and less likely to start in mid-paying occupations such as jobs in metal manufacturing and secretarial work.
- As bad luck would have it, many of these low-paying occupations are in sectors hardest hit by the COVID-19 crisis: for example, hospitality and non-food retail. In 2007 around 19% of all people aged between 22 and 25 working in their first full-time job after leaving education were employed in sectors that were essentially shut down during lockdown, while by 2019 this had increased to 22%. By contrast, the share of all employees working in shut-down sectors had fallen slightly from 17% in 2007 to 16% in 2019.
- The growing importance of those ‘lockdown sectors’ as employers of workers at the start of their careers is primarily due to an expansion of the accommodation and food industry. The share of workers starting their careers in this sector increased by about 50%, from 6% to 9%, between 2007 and 2019.
- As other sources of wage growth have dried up, young workers have become increasingly reliant on moving into higher-paying occupations as a source of early-career wage growth. Around 28% of wage growth over the first five years of the careers of workers born in the 1970s could be attributed to moving into a higher-paying occupation. This had risen to around 50% among men born in the 1980s and women born between 1980 and 1984, and to 60% among women born between 1985 and 1989.
- The COVID-19 pandemic has severely dented the career prospects of young people and threatens to have a prolonged negative economic impact on them as a result. Sharp contractions in shut-down sectors will make it harder for young people to take their first step onto the career ladder, while reduced job opportunities will make it harder for them to move into higher-paying occupations.
Coronavirus and the economic impacts on the UK
Below are the main point from surveys carried out during the pandemic which captures businesses’ responses on how their turnover, workforce prices, trade and business resilience have been affected. These data relate to the period 7 to 20 September 2020.
- The arts, entertainment and recreation industry had the lowest percentage of businesses currently trading, at 70%, compared with 86% across all industries.
- Wave 15 (21 September to 4 October 2020), 48% of businesses experienced a decrease in turnover; since Wave 12 (10 to 23 August 2020), the trend has flattened compared with a previously steady decrease.
- In Wave 15 (21 September to 4 October 2020), 9% of the workforce were on partial or full furlough leave, unchanged from Wave 14 (6 to 20 September 2020).
- The accommodation and food service activities industry had the highest percentage of businesses with no cash reserves, at 7%, and had the highest percentage of businesses with a severe risk of insolvency, at 17%.
- Of businesses not permanently stopped trading, 36% of the workforce were working remotely instead of at their normal place of work.
- Across all industries, 6% of the workforce that were still on partial or furlough leave returned from leave in the last two weeks.
- The accommodation and food service activities industry reported the highest percentage of businesses reporting their risk of insolvency was severe to moderate, at 23%, compared with 11% across all industries.
- The arts, entertainment and recreation industry reported the largest percentage of businesses indicating that operating costs had exceeded turnover, at 40%.
- The arts, entertainment and recreation industry had the highest percentage of businesses reporting they had issued credit notes or vouchers to customers for postponed or cancelled bookings, services or events, at 52%.
- Of businesses not permanently stopped trading, 53% reported having outstanding invoice payments due to them.
- Of all responding businesses, most industries reported 90% or more of businesses as currently trading, and as having been, for more than the last two weeks.
- Of businesses that have temporarily paused or closed trading, 6% intended to close some sites in the next three months, compared with 3% of businesses currently trading.
- Across all businesses currently trading, 29% reported that operating costs were greater than, or equal to, turnover.
- The arts, entertainment and recreation sector reported the largest percentage of businesses indicating that operating costs had exceeded turnover at 42%.
- The arts, entertainment and recreation sector reported the highest proportion of the workforce returning from furlough leave in the last two weeks, at 25%, followed by the accommodation and food service activities sector and the construction sector, at 17% and 10% respectively.
- Of businesses that have not permanently stopped trading, 32% had postponed or cancelled bookings, services and events.
- The accommodation and food service activities sector reported the largest percentage of businesses starting to trade within the last two weeks after a pause in trading, at 33%.
- The accommodation and food service activities sector reported the highest proportion of the workforce returning from furlough leave, at 18%, followed by the arts, entertainment and recreation sector and the construction sector, both at 15%.
- Of businesses continuing to trade, the wholesale and retail trade sector had the highest percentage of businesses reporting that their turnover increased, at 22%.
- 38% of businesses continuing to trade reported that capital expenditure had stopped or was lower than normal because of the coronavirus (COVID-19) pandemic.
- Of businesses in the UK who have temporarily closed or paused trading, 16% reported they expect to restart trading in the next two weeks and 9% expect to start trading again in the next two to four weeks (from the point of completion of the survey).
- At a UK level, 62% of all businesses continuing to trade reported their turnover had been lower than normal between 4 May and 17 May 2020.
- Of businesses intending to restart trading in the next two weeks, from the point of completion of the survey, 12% of the workforce are expected to return from remote working, while 33% are expected to return from furlough.
- The two most common measures that businesses indicated they intend to implement when they restart trading were social distancing and personal protective equipment (PPE), at 89% and 82% respectively.
- Of all businesses who have not permanently stopped trading, 42% reported they had cash reserves to last less than six months, of which there was little difference between businesses with different workforce sizes.
- Of businesses in the UK who responded they were continuing to trade between 20 April and 3 May 2020, 6% responded they had restarted trading in the last two weeks.
- Of businesses continuing to trade, 61% of businesses reported a decrease in turnover outside of normal range in England, compared with 66% in Wales, 65% in Scotland and 63% in Northern Ireland between 20 April and 3 May 2020.
- The accommodation and food services activities sector had the largest proportion of the workforce furloughed across businesses who have not permanently stopped trading, at 78%, in the period 20 April to 3 May 2020.
- The most popular government schemes applied for by businesses who have not permanently stopped trading between 20 April and 3 May 2020, were the Coronavirus Job Retention Scheme and the Deferring VAT Payments Scheme, at 76% and 59% respectively.
- Of all businesses who have not permanently stopped trading, 4% reported they had no cash reserves at all.
- Of the 6,171 businesses responding to the Business Impact of Coronavirus (COVID-19) Survey (BICS), 24% reported they had temporarily closed or paused trading for the period 23 March to 5 April 2020, 0.3% reported permanently ceasing trading, while 75% were continuing to trade.
- Of all those businesses responding within the arts, entertainment and recreation sector, 82% reported a temporary pause to trading.
- Two-thirds (66%) of all businesses that were continuing to trade indicated their financial performance was outside of their “normal” range, with 93% of these saying their turnover was lower than “normal”.
- Of those businesses whose turnover was outside of their “normal” range, the accommodation and food services activities sector had the highest proportion of businesses that responded their turnover was substantially lower than “normal”, at 87%.
- Of those businesses that continued to trade or had paused trading, 94% indicated that they have an interest in at least one of the government schemes on offer to them; the scheme that was declared of interest most often was the Coronavirus Job Retention Scheme (CJRS), having been selected by 80% of responding businesses.
- Of all responding businesses continuing to trade, 60% were confident that they had sufficient financial resources available; only 6% did not feel confident they had the resources available.
Sources from Office of National Statistics and Institute for Fiscal Studies