The damaging effects of Covid-19 on employment and earnings for young people from less affluent backgrounds is revealed in a stark new report on the economic and social fallout from the pandemic.
The study – a collaboration between the Resolution Foundation and the London School of Economics and Political Science – finds that young people from less wealthy backgrounds were more than twice as likely to have left work during the first 12 months of the pandemic than those from richer households.
The effects, it argues, would further widen the pay gap between those from rich and poorer backgrounds, and so damage social mobility.
Published for The Economy 2030 Inquiry and funded by the Nuffield Foundation, the study also finds that between April 2020 and March 2021, those aged 25 and under who were in work before the pandemic were almost three times as likely to leave work than those aged 26 and over.
It found that 41% of young people from the poorest fifth of households left work, compared with 16% of young people from the richest fifth of households. This, the report says, has resulted in deteriorating financial security for many young people from poorer backgrounds.
The proportion of young people saying that their financial situation was “all right” or “comfortable” fell from 64% pre-pandemic, to 54% earlier this year.
In contrast, levels of financial security among young people from richer backgrounds rose from 79% to 94%.
“The economic impact of the pandemic has fallen heavily on young people, and those from less-affluent backgrounds have been at the epicentre of this crisis,” said Andrew Eyles, research economist at the Centre for Economic Performance at the LSE.
“While young people have returned to work in droves during the post-lockdown jobs recovery, the legacy of that earlier unemployment risks scarring their wages for years to come. This could risk worsening social mobility in Britain, as the pay gap between those from rich and poor backgrounds could widen over the course of the 2020s.”
Previous Resolution Foundation research has shown that young people losing their jobs during a recession can subsequently face wage penalties of between 13% and 21% up to the age of 42, largely as a result of not working, or working in jobs that they are over-qualified for, during the crucial early phase of their careers.
The report also finds that children from poorer backgrounds are likely to have been disproportionately affected by Covid’s economic hit to the labour market. It shows that their parents are twice as likely to have lost their jobs at the start of the year compared with parents from richer households. This is likely to cause a knock-on effect on families’ financial security, which is known to affect children’s subsequent performance and attainment at school.
“The pandemic has exacerbated existing inequalities and risks a decline in social mobility over the coming years,” said Alex Beer, welfare programme head at the Nuffield Foundation. “This research highlights the importance of effective catch-up in schools, and the need for greater opportunities for adult training and reskilling.”
A report by the National Audit Office (NAO), and a separate one by a group of peers, highlighted concerns over the Kickstart scheme, launched by Sunak in September 2020, which offers government-funded “high-quality” job placements for 16- to 24-year-olds who are on universal credit and at risk of long-term unemployment.
The NAO, which monitors value for money on public spending, said the Department for Work and Pensions had only “limited assurance” that the scheme was working as intended.
Private sector firms that received state subsidies to hire young people might well have done so anyway, the NAO said, because the economy was reopening just as the scheme began to ramp up.
The report also found that there was relatively little early take-up for Kickstart due to successive lockdowns depressing demand for workers.
Labour said its own analysis had found that the scheme was heavily weighted towards the south, with as many jobs created there as in the north and Midlands combined, despite higher youth unemployment in those regions.
The government says its plans for jobs is working with the number of young employees on payrolls back above pre-pandemic levels.