The end of the furlough and the new social divide

“It’s begun,” said Resolution Foundation chief executive Torsten Bell, as the increase in unemployment fed through into the labour market statistics for the first time. He also reminded employers that there were 45 days to go until the end of the Job Retention Scheme, so consultations for any large scale post-furlough redundancy programmes would need to start now.

Until recently, the ONS labour market releases have had a slightly out-of-time look to them. Employment was still shown as being at record levels when we knew it wouldn’t be for much longer. The claimant count was rising but the employment numbers barely moved. The time-lag in labour force data and the furlough keeping many people employed, at least on paper, concealed the extent of the Covid-19 impact on jobs. (The Resolution Foundation did an excellent explainer a couple of months ago on why the employment figures seemed to be giving conflicting messages.)

Most commentators seem to agree that the employment situation is about to get quite a lot worse. Rising redundancies, falling vacancies and figures from HMRC that indicate a drop in the number of employees suggest that the labour market outlook will start to look a lot grimmer as we go into the autumn and the furlough comes to an end. No doubt newspapers already have their Halloween Horror headlines ready to roll when the Job Retention Scheme ends on 31 October.

There is already evidence that the lower paid sections of the workforce were most adversely affected by the lockdown. They are likely to be hardest hit by the coming employment contraction.

Source: Resolution Foundation, The Full Monty, 29 June 2020.

The speed at which organisations were able to make changes during the lockdown has whetted the appetites of some senior executives for further rapid and radical restructuring. Changes that would otherwise have taken years were implemented in weeks.  My data for this is anecdotal but I sense that a certain amount of ‘opportunistic restructuring’ is likely. Now that the initial shock the pandemic has subsided and managers are no longer as focused on simply keeping things going, some are looking at ways the crisis might give them an opportunity to re-design their businesses. This is perhaps borne out by the latest CIPD Labour Market Outlook, which shows an increase in the number of companies expecting to cut staff.

Meanwhile, many of those in managerial and professional roles are planning for a future in which they spend a lot more time working from home than they did before the pandemic. The reluctance to go back to the workplace is particularly strong in places with long commutes which are dependent on public transport, like London and New York. Some financial and professional services firms are preparing to make working from home the norm.

Recent data suggest that, even though the furlough is unwinding and people are returning to workplaces, many of those who have been working from home are not in any hurry to go back to their previous commuting patterns. Before the lockdown, only 7 percent of UK employees worked from home. Companies are now reporting that close to 40 percent of their employees are working remotely and that figure hasn’t fallen by much even as the lockdown has eased.

Chart by Resolution Foundation

In its April report on the economic impacts of the coronavirus, the Resolution Foundation divided the workforce into four sections:

• Key workers in public-facing roles;
• Workers in shutdown sectors;
• People working outside the home – in other words, people who carried on working but couldn’t do their jobs from home;
• People working from home.

That third category has been the least remarked upon throughout the crisis. We clapped the NHS staff and other frontline workers but there were many who were less visible, working to keep things going. The effort from manufacturing and distribution was particularly impressive. After the initial panic buying, we rarely ran short of much. Companies increased production to restore the supplies of food, soap, toilet paper and other products to the supermarket shelves.

It now looks as though this divide will solidify. It is unlikely that we will have any permanent solution to Covid-19 for some time. Frontline workers will continue to be at risk, many office workers will avoid returning to work and some of the shut down sectors will remain shut down. It may be that the Resolution Foundation has identified the new social divide of the 2020s.

Last autumn I participated in a number of discussions about the future of work, which tended to look at it in terms of changes over the next five to ten years. Now it is difficult to envisage what workplaces and employment might look like a year from now. The Covid pandemic has changed our assumptions and, as Edgar Schein told us, when assumptions change, culture and behaviour changes. As a result, some parts of our economy will not go back to normal. Some of the jobs that people used to do that we thought of as part of everyday life will no longer exist. It’s difficult to see how this will play out but the divide identified by the Resolution Foundation may be an indicator. By next year, we might have settled into a pattern  – the frontline workers, the workplace workers, the home (and occasional commute) workers  and the displaced. The implications of all this for the management of people, social cohesion, living standards and, for some, basic survival, are subjects I will return to as this story unfolds. As ever, though, it is likely that, whatever the re-ordering of work looks like, it will bring most pain to those at the lower end of the income distribution.