Post-pandemic jobs market faces 'biggest change in a generation'

The remote work revolution will transform office life and open markets to staff further afield

Woman holding a box of her belongings
Many jobs have been lost to the Covid-19 economic crisis

Days after Britain went into full lockdown, adverts for thousands of new pandemic-proof jobs landed on recruitment sites. Listings for the likes of supermarket delivery drivers, warehouse workers, cleaners and nurses rocketed even as overall adverts slumped. Many jobs were lost to the Covid-19 economic crisis but new roles were being created by emerging demands.

The labour market’s transition to the “new normal” had begun in a matter of days and is set to accelerate when the furlough scheme ends this autumn. The post-pandemic world of work presents new opportunities but also the risk of a disruptive transition.

“I would categorise it as the biggest change in a generation,” says James Reed, chairman of online recruitment giant Reed. “Transition can be painful but it can also be very liberating. People might be worried or nervous but often when you look at periods of great change you think ‘I’m glad that happened’.”

Experts believe the world of work is undergoing tectonic shifts. The remote work revolution will not only transform office life but open up local jobs markets to workers further afield and turbocharge trends already well under way, such as e-commerce and delivery. However, the Covid disruption is also causing many sectors to shrink and with it a need for workers either temporarily or forever.

The UK economy was ripe for such a workplace revolution. Not only does it lean more heavily towards professional services based in offices than many other major economies but demand for home working appears to be strong. The Centre for Economics and Business Research found that a third want to make a permanent shift towards remote working.

At the height of lockdown just under half of Britons were working remotely but Morgan Stanley data suggests only 34pc of office workers have returned – far lower than the rest of Europe. The case for workers and employers embracing the shift is compelling. Employees spend less time commuting and have far more flexibility with their roles and their location. Employers could be able to slash costly office space if a proportion of the workforce is out of the office permanently.

The jobs market could also be opened up if the location of workers becomes less important. Prof Geraint Johnes, a labour market expert at Lancaster University, explains this will give employers “access to a greater pool of talent” if they embrace flexibility.

“People who may need to check in to the office once a month as opposed to having to go there every day can think about much longer distance commutes.”

That could eventually reverse brain drains to the South East and loosen London’s grip on talent but businesses are unlikely to initially back a complete move out of the office.

Changing work habits will also have a permanent, sometimes negative, effect on parts of the jobs market, however. Demand for some services, such as cafes and bars, will move from city centres to the suburbs, taking jobs with it.

Home working and consumer behaviour altered by the pandemic could mean more turn to e-commerce, destroying high street jobs but creating permanently higher demand for the likes of delivery drivers and warehouse workers. And other industries, including transport, commercial property and leisure, could also face disruption from new working patterns.

Experts say Covid accelerated many existing work and consumer trends but the biggest jobs market shifts could be highly disruptive.

“It is going to pose huge challenges we have never really faced before,” says Sher Verick of the International Labour Organisation. “One day tourism will probably be back to where it was but in between what are going to be the options?"

In many cases, demand for workers is shifting away from industries permanently or for at least several years. The need for jobs in tourism, hospitality and events is likely to be far lower until a vaccine is found, while other roles could remain high in demand long after the pandemic, such as in healthcare. Even if a vaccine is found relatively quickly, it will also take time for new businesses to emerge and create jobs if swathes of firms collapse.

“There is going to be some shake-out,” warns Johnes. “We could very well get something of a rise in unemployment that takes us back to the levels we saw in the Eighties recession.” Andy Haldane, the Bank of England’s chief economist, has warned of a return to a Eighties-style unemployment crisis as a “halcyon period” for the labour market ends.

Advanced economies were riding a jobs boom heading into the Covid-19 crisis. In the UK, unemployment had reached its lowest level in more than four decades, dropping below 4pc. The jobs market was a bright spot in a lacklustre post-financial crisis recovery until the pandemic struck.

“We haven’t seen significant redundancies but I think we will in the future,” warns Tony Wilson, head of the Institute for Employment Studies.

He warns there is a risk of a “significant reallocation” of workers out of some sectors as the jobs market faces challenges “certainly not seen in 20 years, possibly not since the Eighties”.

Rishi Sunak, the Chancellor, has repeatedly stressed he cannot save every job and nor should he, a growing number of economists believe. The furlough scheme saw almost 10m workers’ wages supported by the state, around a third of the private sector workforce, but some analysts fear extending the subsidy for too long is counterproductive.

Andrew Bailey, the Bank of England governor, has signalled his backing for ending the scheme, saying policymakers should not be “locking the economy down in a state that it pre-existed in”. Taxpayers could be propping up wages for jobs that will not exist and stop those workers finding new employment.

“Ultimately we should be looking to get workers out of unproductive industries into productive industries,” argues Kallum Pickering, UK economist at Berenberg.

Pickering says money should be spent on retraining and getting those workers “into the industries of the future where their incomes will be higher and everyone’s living standards would be higher”.

While the UK’s furlough scheme ends in October, many other European countries, including France and Germany, have wage support for workers into next year.

Economists are divided on how high unemployment will climb as the support winds down over the coming months. The jobless rate is currently at just 3.9pc but City forecasters say this will rise much higher when the subsidy is withdrawn. The Office for Budget Responsibility expects the jobless rate to peak at 12pc at the end of 2020, higher than during the financial crisis, while the Bank of England expects a much lower, peaking at 7.5pc.

How far will be important. Some economists worry the bridge to the other side of the crisis is being pulled away from British workers too soon, threatening to dampen the recovery by worsening scarring effects.

If redundancies do pile up, smoothing the transition for workers moving jobs will be critical to avoid many becoming long-term unemployed. Haldane has warned the natural level of unemployment in the UK could now be higher if there is a post-Covid mismatch between skills and jobs as sectors shrink and grow.

Last month the Chancellor set out a number of new programmes to train or reskill Britons in his “Plan for Jobs”, focusing on the harder-hit younger end of the workforce. It included billions of pounds for grants, wage subsidies, work coaches and a green jobs investment package.

Economists warn retraining efforts tend not to be as successful as hoped. But more support is likely to arrive in the autumn when Sunak will know whether winding down the furlough scheme triggered mass job losses.

The future of work has arrived early but the Chancellor will hope it is not too soon for Britain’s jobs market.