Questions and answers about coronavirus and the UK economy
Questions and answers about coronavirus and the UK economy

Unequal effects

From the start, the pandemic’s impact has been felt unequally across the UK. Lockdowns have brought some industries to a standstill while others have been able to let their staff work from home. Smaller firms and the jobs of young people seem to have been hit hardest.

Newsletter from 23 April 2021

The lockdowns and social restrictions that have been necessary to control the spread of Covid-19 have affected some businesses and their staff far more than others. These unequal effects, felt throughout the pandemic, have been the central theme in several Economics Observatory articles this week.

The stay-at-home economy?

Whether or not you’re able to work from home has defined the experiences of many of us over the past 13 months. Around 40% of working adults are doing so from their home studies or kitchen tables rather than their offices. At the same time, many others have been unable to do their jobs at all for much of this year, as non-essential shops, restaurants and hotels have been forced to close their doors.

As Jonathan Haskel of Imperial College Business School and the Bank of England explains in an Observatory article this week, the likelihood that working from home will be adopted permanently after the pandemic is very industry-dependent. Unsurprisingly, few businesses in the retail or food sectors plan to use remote working – see Figure 1.

Figure 1: Percentage intending to use increased home-working as a permanent business model

Source: ONS Business Insights and Conditions Survey data

Perceptions of how productive workers are when they’re at home play a key role in firms’ decisions. They are less likely to support allowing their staff to work at home in cases where productivity is seen to have decreased during the pandemic. The information and communication sector is a striking exception, reporting that the productivity of their employees has gone up during the pandemic – albeit minimally – while firms in all other industries report a decline.

As we emerge from the latest lockdown, it is likely that levels of remote working will drop but they could still remain higher than in pre-Covid-19 times, though only in certain sectors.

Jobless youth

The same jobs that can’t be done from home are also those that young people are more likely to do. Without opportunities to work in pubs, cafes and shops, job prospects for young people across the UK have been highly uncertain. In a new data piece released this morning, Stuart McIntyre shows how unemployment among 16-24 year olds has increased during the pandemic: from 11% at the end of 2019 to 14% a year later.

Figure 2: UK unemployment rate, 16-24 year olds

Source: Office for National Statistics

As Figure 2 shows, this is still lower than the years following the global financial crisis of 2007-09, but the furlough scheme is currently protecting around 4.7 million jobs and it is likely to be keeping unemployment a fair way below what it would otherwise be.

As with the rest of the population, there are substantial regional differences in the youth unemployment rate, ranging from 17.7% in the North East to 5.5% in Northern Ireland. These variations may arise from differences in where particular sectors are geographically located, as well as different rates of economic inactivity around the country.

Lost and grounded

Two other Observatory pieces this week have focused on the effects of the pandemic on businesses that have been particularly hard hit.

Corrado Macchiarelli (National Institute of Economic and Social Research) explores the impact on the travel and tourism industry as business trips and holidays have ground to a halt. The figures are staggering: international tourist arrivals declined by 70% globally between January and October 2020 compared with the previous year (see Figure 3) and airlines’ revenues have dropped by around 60% from 2019.

Figure 3: January to October 2020 international tourist arrivals (year-on-year percentage change)

Source: United Nations World Tourism Organisation (UNWTO), December 2020

This has already had devastating effects on employment in the tourist industry. It is estimated that if the pandemic continues for several more months, around 75 million jobs could be lost worldwide.

Reference to the travel and tourist industry may bring huge airline companies to mind, but it also comprises family-run B&Bs or local tour guiding companies. Small businesses – predominantly in the sectors that have been shuttered during the pandemic – make up 95% of all firms in Northern Ireland.

As highlighted in a piece by Karen Bonner and Steven Pollard, many small businesses and entrepreneurs in Northern Ireland have been particularly affected by lockdowns and social distancing. This applies to both their top line – as they have less access to finance and fewer cash reserves on which to draw – but also the mental health of owners, with 75% reporting declines in their wellbeing.

Next week, we will be posting a series of articles on the economics and economic history of the island of Ireland to mark 100 years since partition. John Turner of Queens University Belfast (QUB), who is one of our lead editors, has put together a fascinating collection of pieces on topics ranging from lessons from the Great Irish Famine to the lasting legacy of the Troubles.

In case you missed it

The Royal Economic Society (RES) has made three keynote addresses from their recent annual conference available on its YouTube channel – you can also watch them below.

RES past president Nick Stern  of the London School of Economics (LSE) renewed his long-standing calls for urgent action to address the threat of climate change. He stressed the need to meet the many challenges of global warming alongside the recovery from the pandemic, focusing on sustainable low-carbon investments and radical technological change.

The effects of social media and smartphones on our lives were the focus of Matthew Gentzkow  (Stanford). His research finds that these new technologies have real addictive qualities and while they are designed to connect us, they can be unfulfilling compared with many in-person activities, as well as leading to greater social divisions.

Finally, Rachel Griffith of the University of Manchester and another of our lead editors addressed the acute issue of rising obesity among both adults and children in the UK and its links to poverty. This matters not just because of the immediate health consequences, but also because of the knock-on effects of malnutrition on children’s learning and future earnings. Later this spring, we will be publishing a series of articles that Rachel is putting together on this and related issues around the economics of food. Keep an eye on our Twitter feed for updates.

We also published an piece in the Economics Network’s newsletter, which gives a broad overview of how our articles and data might be used as teaching resources. We are collecting examples from teachers and lecturers who have already deployed them in the classroom – please get in touch at office@economicsobservatory.com to share your experience.

Finally, to mark Earth Day yesterday, we shared a thread of some of our energy and climate change articles. Ahead of COP26 we will be publishing lots more on green issues so if you have any specific questions you would like answered, please submit them on our website.

Observatory news

On Tuesday, we launched our first auto-updating charts, focusing on the latest UK labour market data. This is the first in our new Data Hub series and we will be adding other measures in the coming weeks. The charts in the Data Hub are interactive and automatically update as new data become available, enabling us to track the UK economy and recovery from the pandemic in real time.

This week we also took part in a joint roundtable event with the International Public Policy Observatory (IPPO), focusing on the role of adult training, skills development and job matching in the UK’s recovery from Covid-19.

On Wednesday 26 April (9am), we will be running a special session at the Scottish Economic Society conference exploring whether devolution has led to different outcomes during the crisis. We have a great line-up of speakers including Observatory lead editors Tim Besley (LSE) and Graeme Roy (Glasgow), as well as Graham Brownlow (QUB), Andrew Henley (Cardiff), Helen Simpson (Bristol) and Tanya Wilson (Glasgow). The session is open to all and doesn’t require pre-registration. Please do come along and share the details with your colleagues.

Lastly, a reminder that our first hard copy publication will be coming out next month. If you would like to receive a copy, please send us your details here.

Author: Ashley Lait
Photo by Hedgehog Digital on Unsplash
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