Low-paid workers returning from furlough fastest, says think tank

But Resolution Foundation report warns ‘big risks’ still lie ahead for low earners, including expected rise in unemployment

Workers in low-paid industries are being brought out of furlough faster than any other group, a think tank has said, while cautioning that low earners are still likely to be paying the highest price for the coronavirus restrictions.

A report by the Resolution Foundation said workers in the hospitality and leisure sectors saw the steepest drop in furlough rates in April, with the percentage of workers on full or partial furlough in the hospitality sector dropping 10 percentage points, from 58 per cent at the end of March to 48 per cent at the end of April.

The report added that more than one in 10 workers who were previously furloughed (12 per cent) had found new jobs, with 7 per cent finding employment in a new sector.

Previously furloughed retail workers were particularly likely (14 per cent) to have found a new job in a different sector.

However, the three biggest low-paying sectors of the economy – retail, hospitality and leisure – also still accounted for more than half (55 per cent) of the 880,000 drop in furloughed employees during April this year.

Nye Cominetti, senior economist at the Resolution Foundation, said “big risks still lie ahead” for workers in low-paid sectors. “Low-paid workers are most at risk from the expected rise in unemployment later this year, which also risks causing greater job insecurity,” he said.

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The report found that, in March, the lowest-paid quintile of workers was three times as likely to have suffered a major labour market hit – by either losing their job, being furloughed or facing a cut to their hours and pay – compared to the highest-paid quintile (21 per cent compared to 7 per cent).

The report also projected that “high concentrations” of low-paid workers would remain on furlough, and that unemployment would rise when the scheme came to an end in September.

Historically, according to the report, low-paid workers have been worst affected by recessions. During the 2008 financial crisis, the proportion of low-paid workers in insecure work nearly doubled, rising from 13 per cent in 2008 to 24 per cent in 2013.

The foundation also suggested that rising unemployment could bring additional risks to workers’ job security. After the 2008 financial crisis, the proportion of low-paid workers in insecure work (such as zero-hours contracts or agency work) was almost one in four.

However, the report said further increases to the statutory national living wage could end low pay by the middle of the decade. A full-time worker could see annual wages increase by £2,500 by 2024 because of the national living wage, compared to just £1,400 without.

Separately, data from the Office for National Statistics found the percentage of businesses currently trading in the accommodation and food service activities industry rose from 61 per cent to 83 per cent during May 2021, as further relaxation of lockdown regulations allowed the reopening of indoor dining.

In general, the number of businesses currently trading increased to 87 per cent in May – the highest proportion since comparable estimates began in June 2020, when two-thirds (66 per cent) were trading.