The shockwaves sent through the economy, labour market and children’s education by the pandemic must be addressed in order to repair social mobility, according to the Resolution Foundation.
In its report Social Mobility in the Time of Covid, the think tank says deteriorating returns of unemployment, the knock-on effect to earnings and careers, and the sustained interruption of children’s education are all problem areas that need to be targeted with focused policies.
The report also highlights how the unique shocks of the pandemic are different to those of previous recessions. There is less sectoral change, but instead structural issues with the economy, skills mismatch and geographical differences have caused imbalance in the costs of housing and transport, all of which contribute to social immobility.
Previous recessions caused workers to be unemployed for long periods, such as the recession of 1981, which was in part caused by a shift away from manufacturing to a services-based economy. The loss of employment was prolonged, affected the lower paid and damaged incomes and careers for decades after.
This recession is different, says author of the report Andrew Eyles, Research Economist at the Centre for Economic Performance at the London School of Economics. “It’s a weird aggregate shock, but not as structural to the economy, so there are grounds for optimism that this won’t be as bad as previous recessions in that sense. However, policymakers need to make sure unemployment is as brief as possible,” he says.
There has been a rise in those who have been made unemployed becoming self-employed over the past two years, with self-employed people now representing 15.3% of workers, up from 12% in 2000. Some are also retraining and moving sectors, he explains, which is encouraging for people’s resilience to economic shock.
Getting back into work will be hard for many, though, cautions Eyles, and the experience of unemployment has been very unequal.
“People who have worked from home during the past two years have accumulated savings, so the wealth divide has increased between those working from home and the unemployed. This is quite an important factor when it comes to house prices,” he says.
“Those who need to move for work, particularly those moving to London or who don’t have savings, will find it more difficult as housing is more expensive and the cost of living is rising.”
“This means people will be less geographically mobile, which can lead to less social mobility. The ease at which you can move up the salary scale is related to where you are in the country,” he adds, with the best-paid jobs and opportunities clustered around London and a few other metropolitan areas.
“These problems with mobility have been going on for a long time and may get worse as prices in general are going up. Even people on middle incomes will not see their wages rise in real terms,” he says.
The pandemic has undoubtedly caused disruption to children’s education, which also has a knock-on effect on social mobility.
“If you look at school closures, in some cases kids from less affluent families have done almost no work for a year and a half. That could be due to a lack of computer, for example, or lack of space to study in the house,” says Eyles.
“But from the day schools closed, kids in private schools tended to have better access to a computer and smaller online lesson groups. That educational gap is going to be difficult to close.”
The government has done some small things, like the national tutoring programme for disadvantaged children to make up the difference for the lack of schooling, but the amount of money put into it is nowhere near what it needs to be, he says.
Getting a degree is more important than ever for social mobility as it allows greater access to better pay and prospects, so it is important that this educational gap is addressed by policymakers.
Any policy change should aim to prevent the decline in social mobility and allow those from less affluent backgrounds to catch up on the loss of education during the pandemic.
“There is evidence, though, that the direct effect of income is not as strong as you might think,” Eyles explains. “There are myriad differences between average household environments across the distribution of income and not all of these differences relate to market purchases such as extra tuition. Falls in income might not necessarily be as disastrous for social mobility, but may be if greater financial stress impedes an individual’s ability to parent effectively.”
As regards the macro perspective, reports from the Office for Economic Co-operation and Development on skills mismatching show that the UK is not great at matching the jobs that need doing to the skills workers actually have, says Eyles.
Many existing economic problems are due to low productivity – it has been stagnant for the past 20 years and that has meant no change in average wages, according to the Resolution Foundation report.
“There are too many university graduates – about 43% of young people go to university now, but only one third of employers need a degree,” Eyles says. This surplus of degrees to posts does not necessarily negate the need for prospective jobseekers to have a degree to access them in the first place.
There are, however, shortages of paid apprenticeships and trade training. “There are large gaps in skilled trades, IT and the education sector,” Eyles continues. “Getting those skills is difficult as the training can be expensive, often beyond the reach of working class families, and it’s not transparent.” There needs to be more awareness and access to trades and professions that fall outside the university route, he explains.
With this in mind, the government has introduced the National Skills Fund with about £500m of resources to make some vocational training free for people. “The government is cognisant of the fact that young people are struggling through the pandemic, and they need skills they don’t have to get back into the labour market. It isn’t obvious whether its skills fund is going to be enough yet,” he cautions.
It is difficult for governments to change the economy with levelling-up schemes to try to make certain places more affluent, says Eyles. “Cities, such as Manchester and Liverpool, have done quite well with employment growth, but then house prices have grown in a corresponding way. Because of rising house prices, people are going to move to cheaper areas such as the North East.”
In provincial cities, housing costs are lower, but transport links might be poor. “This is the big opportunity to improve – it’s a real conduit for economic mobility,” says Eyles.
According to the Resolution Foundation report, policymakers should:
This article was first published by ICAEW. You can read the original article here.