By Fred Robinson, Professorial Fellow , Policy&Practice, St Chad’s College, Durham University
We are now in a deep economic recession and we don’t know how long it will take to recover. It’s clear this won’t be a ‘V-shaped’ recession. Although the economy has recently bounced back rather more strongly than expected, the recovery will be curtailed by the latest Covid-19 restrictions — which are expected to last for six months. The current second wave of the pandemic will inevitably hit consumer confidence and spending as people realise the crisis is far from over and the future remains very uncertain.
The next few months will be tough and anything like a full recovery is a long way off. Commentators are still talking about the worst recession in a hundred years and the Chancellor promises a long, hard winter.
There will certainly be a big increase in unemployment this winter as businesses cut back or close, the furlough scheme ends and redundancies increase. The Chancellor’s new Job Support Scheme, further grants for the self-employed, and tax cuts will help save some jobs, but unemployment is still going to rise substantially.
The big unknown is the Covid-19 pandemic. We might manage to control and reduce the current second wave of infections; we might get a vaccine sooner rather than later; we might have a test and trace system that works properly. Let’s hope so. But even if those things do come right, and the economy starts to recover more strongly, a lot of economic damage will have been done, businesses will have closed and many jobs lost.
So whatever happens, we are going to have a period of high unemployment. What will that be like? The North East has had a lot of experience of unemployment but this is likely to be on a scale not seen for the past 40 years. We have to go back to the 1980s to get a sense of what might be in store.
There are similarities and also differences between the 1980s and 2020. Then, as now, the Conservatives were in power — but Boris Johnson isn’t much like Margaret Thatcher. In the 1980s inflation was considered the key problem, with monetarism and public spending cuts the answer. Today, there’s very little inflation, interest rates are around zero and the Conservatives seem to have temporarily converted to Keynesianism, with public spending considered essential to stimulate demand and growth.
But what could well be the same is the unemployment rate. In 1983 UK unemployment peaked at over 3 million, a rate of nearly 12%. Mass unemployment like that hadn’t been experienced since the Hungry Thirties. It’s predicted that unemployment could again reach equivalent levels this winter, having doubled in just a few months. There will be also places with much higher unemployment; in the 1980s unemployment peaked at nearly 20% on Teesside.
Unemployment is very destructive. People lose their livelihoods and are forced to survive on meagre benefits. They also often lose their sense of purpose and self-esteem — in a society that judges people on what they do for a living. Despite what some in the media say, life on the dole is difficult. As we know all too well from experience in our region, unemployment brings poverty, poor health and multiple disadvantage.
In the 1980s, unemployment stemmed from deindustrialisation, which hit the North East very hard. Then, male manual workers in heavy industry were thrown out of work. This time, it looks like young people and also some older workers will be most affected, as jobs in sectors such as hospitality, leisure and retail disappear. There will be some dramatic closures — a bit like the closure of Consett steelworks 40 years ago — but most job losses are going to be smaller scale, across a great many businesses.
Places that had big job losses and high unemployment in the 1980s took decades to recover; some areas – like the Durham Coalfield – have never properly recovered. This time, the people likely to carry the enduring ‘scars’ of the Covid Recession are likely to be the present younger generation, and generally the least skilled, those in precarious employment and the already disadvantaged. The places with the most visible scars may be desperate town centres.
In the 1980s Margaret Thatcher’s government was determined to reduce inflation and restructure the UK economy, and considered that unemployment was an unfortunate consequence. She is remembered – especially in our region — for her tough approach. There was government action to tackle unemployment; famously, Nissan was persuaded to come here and there were unemployment schemes like the Youth Training Scheme and the Community Programme. Even so, unemployment stayed high in the former industrial regions through the 1980s, while London and the south east grew much more prosperous.
And this time? Chancellor Rishi Sunak has reduced the impact of the lockdown by sustaining household incomes, but much of the pain may only have been delayed. After the furlough scheme ends in October the Government’s subsequent support schemes will save some jobs – at least for a while – but not others. Spending on infrastructure projects, the ‘kickstart’ scheme subsidising work placements for young people, training schemes and tax breaks will help to boost demand and increase employment. This government is not as brutal as Thatcher’s government, but its capacity and willingness to intervene in the economy are limited.
High unemployment will no doubt bring people together in adversity – the current crisis has reminded us how much latent community spirit and solidarity there is. But high unemployment brings dangers. In the 1980s, unemployment and poverty generated unrest – such as the inner city riots in 1981 and the Miners’ Strike in 1984. Now, the UK is more economically and culturally divided than ever and it could prove even more difficult to respond to grievances and manage tensions. In the 1980s the sense of unfairness fomented tensions that proved hard to control; in the coming months the ‘left behind’ places and people will need convincing that the government cares about them and really is committed to ‘levelling up’. Government will have to develop not only competence – but also compassion.
This article was first published in the Northern Echo on 30th September 2020: https://www.thenorthernecho.co.uk/