U.K. Unemployment Could Hit 1980s Highs as Jobs Disappear

(Bloomberg) -- Britons leaving education could face the kind of difficult job market last seen in the 1980s as they enter the workforce for the first time.

People starting their careers in the midst of an economic downturn suffer negative effects as many as eight years later, according to Laura Gardiner, research director at the Resolution Foundation. Analysis of previous crises by the think tank found that they are more likely work in lower paid occupations and be stuck with depressed real wages, even when they had higher levels of education.

The current restrictions on activity likely won’t be the last, according to a separate report by the Institute of Economic Affairs published Wednesday. The coronavirus pandemic could last for two years, coming in a series of waves of which the second could cause most damage, it said. The impact will include a significant economic contraction, a debt crisis and retreat from globalization.

U.K. unemployment peaked at almost 12% under Margaret Thatcher in 1984, a rate that is set to be rivaled this year if the lockdown to stop of the spread of virus drags on, economists say. Some of the largest employers have canceled or delayed recruitment programs, as companies across the nation are forced to furlough or fire the staff they already have.

For young job seekers, the damage could prove worse than during the financial crisis just over a decade ago, when many firms chose to cut pay rather than jobs. By contrast, low-skilled and entry-level roles are now being destroyed by measures to tackle the pandemic, Gardiner told a webinar organized by the Confederation of British Industry Tuesday.

“We thought we’d got rid of huge unemployment increases after the last recession but we could be going back to the eighties, particularly when we consider the jobs young people tend to start their careers in are exactly those not available at all at the moment,” she said.

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For some of those affected, the most rational solution would be to try to remain in education longer and “ride out the storm,” Gardiner said. However, the costs of doing so mean that option will only be more open to those from affluent backgrounds and risk exacerbating inequalities.

©2020 Bloomberg L.P.