Workers in higher-wage areas of the UK have experienced significantly larger job falls than workers in lower-wage areas since the pandemic began, according to new Resolution Foundation research.
Levelling Up and Down Britain – the latest report for The Economy 2030 Inquiry – a collaboration between the Resolution Foundation and the Centre for Economic Performance at the LSE, funded by the Nuffield Foundation – examines how the labour market recovery from the COVID-19 pandemic varies across the UK so far.
While all places experienced a labour market shock from the pandemic, some areas have been slower to recover than others.
High-wage areas across the UK have seen some of the largest falls in employee jobs since February 2020. In June 2021, Westminster (the UK’s highest-wage area) had seen jobs fall by 3.6%, while in Leicester (the UK’s lowest-wage area) the number of employees has actually increased by 1.0%.
This trend is also seen outside of London, with high-wage areas like Edinburgh and Aberdeen experiencing large job falls of 2.2% and 3.5% respectively.
This geographic trend comes despite Resolution Foundation research showing that lower-wage workers have borne the brunt of the pandemic’s labour market impact. It is likely therefore that it is low-paid workers in high-wage areas that have experienced the bulk of this job fall.
Areas which are more reliant on tourists or commuters were also initially hardest hit by the pandemic. In February 2021, the two highest furlough rates were in South Lakeland (26% of workers) and the London Borough of Newham (23%) – areas which predominantly cater to tourists and commuters respectively.
However, these areas have seen very different paces of recovery. By June 2021, as many restrictions eased, furlough rates dropped to 7% in South Lakeland, but in Newham they still stood at 11%.
London’s labour market in particular has struggled to recover, with employee jobs still more than 3 per cent below their pre-crisis level, while several areas including Cornwall and Isles of Scilly, Gwynedd, and the Causeway Coast and Glens are already at or above pre-pandemic levels.
The report finds that commuter areas have bounced back less than tourist areas, suggesting people are more willing to go on holiday than start commuting again.
While the long-term structural changes which arise from the pandemic are still far from certain, the Resolution Foundation notes that if the shift towards home working continues then it will have serious implications for the geographic shape of demand, jobs and living standards across the UK – creating new job opportunities for some people, but new challenges for local labour markets too.
Charlie McCurdy, Economist at the Resolution Foundation, says:
“Low-paid workers have borne the brunt of the labour market impact of the pandemic, but those same workers in high-wage areas of the UK appear to have been hit hardest during the recovery, with those places experiencing significantly higher job falls than low-wage areas.
“In the early part of the crisis, city centres and coastal areas were especially hard-hit because many jobs in such places depend on demand from people outside the area. Since England’s reopening in June, jobs in many tourism-reliant areas have bounced back to pre-pandemic levels, but some cities – and particularly London – have struggled to return to life.
“The summer ‘staycationing’ boom has brought a much-needed boost to many, but a structural shift towards more home-working could have a lasting impact on the geography of the UK labour market, further hindering the living standards recovery for Britain’s low-paid workers.”
