A new report published reveals that record vacancies and a recovery in the labour market hides a significant jobs gap which is most likely to impact people in mid to low-paying roles. 

A new analysis by thinktank Institute for Public Policy Research (IPPR) warns that a hidden jobs gap could derail the transition to a full-employment market, a term used to describe a labour market which has better paid jobs and offers more security.

The report recognises that whilst staff shortages are currently rife, leading to claims that the labour market is struggling to fill roles, this may not be the full picture as 2 million jobs which have been hit by the pandemic have not returned.

In light of this, many people currently face a future of insecure work, low pay and ‘underemployment’ – not being able to secure as many hours of work as they desire.

This is only set to be exacerbated by the phasing out of the furlough scheme at the end of the month (September) which, by the close of July, was supporting 1.9 million employees.

While many may return to their previous jobs once the scheme is phased out, the research predicts a large number may become unemployed, particularly those whose roles were in hotels, restaurants and service industries where demand is still not back to normal.

This will be a key factor in the potential jobs gap aforementioned alongside the over-saturation of the labour market.

The research shows that there are currently almost a quarter of a million (200,000) fewer employees on firms’ payroll compared to pre-pandemic figures.

Additionally, there are almost half a million (412,000) more ‘economically inactive’ people than before the pandemic, some or all of whom may want to return to the labour market.

Within this, low-paid workers are at twice the risk of unemployment compared to those in higher paid sectors. Similarly, in some of the hardest hit industries including accommodation and wholesale and retail, there are up to four workers at risk per vacancy.

As such, the thinktank have made several recommendations in an attempt to alleviate the potential jobs gap:

  • Increasing public investment to spur the growth of well-paid jobs, as part of a new understanding of what ‘full employment’ should mean in a modern economy.
  • Retaining and tweaking the furlough scheme until the economy has surpassed its pre-pandemic level, to help those in the many low-paid industries that are still in the process of recovering. The thinktank believes it should be extended beyond the end of September and adjusted to encourage part-time work, through a 10 per cent wage subsidy for hours worked part time.
  • Targeting new skills training and transition support on jobs in future-proof sectors, including new roles and industries needed as the UK adjusts to a net-zero economy.
  • Boosting labour standards, by bringing forward the delayed employment bill and using it to strengthen employment rights. A new minimum wage, 20 per cent higher than the standard rate, should be set for all uncontracted hours, to reduce employers’ unnecessary use of zero-hours contracts.

Carsten Jung, IPPR senior economist, stated:

While there is some positive news about the labour market, we still have a long way to go before we reach full employment. Low-paid workers are still at a high risk of redundancy and face poor opportunities.

We should keep and tweak the furlough scheme until the labour market has genuinely recovered, rather than put the lowest earners at an unnecessary risk.


*This research has been documented in the IPPR’s new report Full employment and good jobs for all: Why the UK is seeing a lopsided jobs recovery and what to do about it, by Carsten Jung and Finlay Collings.