The coronavirus pandemic has caused unprecedented economic damage.
In the United States, Donald Trump has claimed that the economy is “roaring back.” Yet more Americans are currently unemployed than at any point since World War II.
Globally, too, the fallout from the pandemic has been dire. In contrast to the United States, many European countries have adopted large-scale economic relief programs designed to prevent mass unemployment. But as countries begin to emerge from lockdown, governments are beginning to wind down those job-retention schemes – a situation that could lead to a spike in layoffs.
Many jobs that people had before the pandemic are “not coming back,” Boris Johnson said recently. “We face a real, real crisis.”
Overall, the unemployment rate in Britain could surge to almost 15% – one of the highest in Europe – according to a new report from the Organisation for Economic Cooperation and Development.
The number of job losses across Europe, the United States, and other developed countries has been 10 times greater than during the first months of the 2008 financial crisis, the OECD stated.
“In a matter of a few months, the Covid-19 crisis wiped out all improvements in the labour market made since the end of the 2008 financial crisis,” Stefano Scarpetta, the OECD’s director of employment, labor and social affairs, said in a news briefing.
Young people – just as they enter the workforce – have been particularly hard hit by the economic impact of the pandemic, but the scale of the long-term impacts on them is only just starting to emerge.
Over the last decade, young people have increasingly occupied low-paid professions, especially in the hospitality and retail industries. These jobs have been among those most affected by the pandemic, according to a report released last week from the Institute for Fiscal Studies, a London-based think tank.
The economic repercussions are likely to last long after lockdown restrictions are lifted, the report found, disrupting the career growth of many young people and preventing them from earning higher wages.
“Even a normal recession can be especially damaging for young workers as, for example, hiring freezes disproportionately affect those coming into the labor market and those who would otherwise be climbing the jobs ladder,” said Agnes Norris Keiller, a research economist who co-authored the Institute for Fiscal Studies report.
“The recession associated with the Covid-19 pandemic threatens to be doubly bad for early-career workers.”
The OECD report similarly highlights the challenges that young people are likely to face in the coming months and years. Not only are this year’s graduates entering a rocky job market upon leaving school, but their older millennial peers are having to weather their second major economic upheaval, on top of the 2008 financial crisis that was already so damaging to their economic prospects.
That crisis accelerated structural changes in the economy that had been growing for decades. As Michael Hobbes wrote in HuffPost in 2017 about the plight of millennials:
“Salaries have stagnated and entire sectors have cratered. At the same time, the cost of every prerequisite of a secure existence – education, housing and health care – has inflated into the stratosphere. From job security to the social safety net, all the structures that insulate us from ruin are eroding. And the opportunities leading to a middle-class life – the ones that boomers lucked into – are being lifted out of our reach. Add it all up and it’s no surprise that we’re the first generation in modern history to end up poorer than our parents.”
Across developed countries, almost one in 10 jobs held by people under 30 years old were destroyed during the financial crisis, and many young people are still suffering the consequences: financial insecurity, ruinous amounts of debt, low-paying jobs, declining benefits, inability to get on the housing ladder.
Now, the coronavirus pandemic stands to compound these problems even further.
“Young people risk, once more, being among the big losers of the current crisis,” the OECD report stated.
On Wednesday, Chancellor Rishi Sunak unveiled a series of economic measures designed to support young job-seekers, as well as the hospitality and tourism industries that employ so many of them.
The centrepiece of Sunak’s proposal is a £2 billion programme through which the government would subsidise six-month job placements for young people under age 25.
“Young people bear the brunt of most economic crises, but they are at particular risk this time because they work in the sectors disproportionately hit by the pandemic,” Sunak said. “We also know that youth unemployment has a long-term impact on jobs and wages and we don’t want to see that happen to this generation.”
The chancellor also announced that employers who had taken advantage of the government’s job-retention program would receive a £1,000 bonus for every worker they continue to employ at least until January. The job-retention program will start winding down in August and will end in October.
Sunak warned on Wednesday that “hardship lies ahead,” but insisted that no one will be left “without hope.” He told members of Parliament that the government will do “all we can” to keep people employed.
“Our message to business is clear: If you stand by your workers, we will stand by you,” Sunak said.
Coming from a Conservative government, the billions spent on reviving the economy will be a boon to many. According to the Institute for Fiscal Studies, government borrowing for the 2020-2021 fiscal year is on track to surpass £300 billion, easily the highest as a share of national income since World War II.
Yet critics say it is still far less than what’s needed.
Renters who may soon face eviction say the lack of any government support for them has left them out in the cold. Older workers, too, say that the focus on young people ignores their own plight. Economists and business leaders argue that the measures still won’t be enough to stave off a wave of layoffs.
“The new measures look to be badly timed and could precipitate a rapid increase in unemployment,” said Garry Young, deputy director of the National Institute for Economic and Social Research, a think tank in London.
“If you’re asking me ‘can I protect every single job,’ of course the answer is no. ‘Is unemployment going to rise, are people going to lose their jobs?’ Yes, and the scale of this is significant,” Sunak told the BBC on Thursday.
“We are entering one of the most severe recessions this country has ever seen. That is of course going to have a significant impact on unemployment and on job losses.”
Similar debates are taking place around the world as countries grapple with the fact that the pandemic is not simply a momentary economic disruption but a long-term challenge that will likely require continuing government support.
Whether political leaders will rise to the challenge remains to be seen. European leaders are set to meet next week to finalise the details of a €750bn economic recovery plan, but sharp differences remain over what form economic aid should take.
In the United States, the expiration of additional unemployment benefits at the end of this month could leave millions of Americans struggling to pay their bills, the end of eviction moratoriums in many states could force people out of their homes, and the reopening of businesses despite surging coronavirus cases around the country means that many workers must make the impossible choice between getting a paycheque and protecting their health.
Meanwhile, Democrats and Republicans in Congress remain divided about what form any additional economic aid should take.
Any progress will have to wait, however. Last week, lawmakers left Washington on a two-week recess.