The Covid economic crisis risks worsening social mobility in Britain over the coming decade, as young people from less affluent backgrounds were more than twice as likely to have left work during the first 12 months of the pandemic than those from richer households, and face wage scarring as a result, according to new research published today.
The report, published for The Economy 2030 Inquiry – a collaboration between the Resolution Foundation and the LSE, funded by the Nuffield Foundation – examines the social mobility implications of the Covid economic crisis.
While the social mobility debate has tended to focus on how the disruptions to education have disproportionately affected young children from less affluent backgrounds, the report finds that young adults in the workplace from less affluent backgrounds have also been disproportionately affected by the crisis.
The research finds between April 2020 and March 2021, young people (aged 18-25) who were in work before the pandemic were almost three times as likely to leave work than those aged 26 and over (16 per cent and 6 per cent respectively).
This unemployment hit was heavily concentrated on young people from less affluent backgrounds. 41 per cent of young people from the poorest fifth of households left work, compared to 16 per cent of young people from the richest fifth of households.
This has resulted in deteriorating financial security for young people from poorer backgrounds. The proportion of young people saying that their financial situation was ‘alright’ or ‘comfortable’ fell from 64 per cent pre-pandemic, to 54 per cent earlier this year. In contrast, levels of financial security among young people from richer backgrounds rose from 79 to 94 per cent.
The author notes that while many of these young people will have since returned to work – young people have been at the heart of the post-lockdown hiring surge in summer 2021 – the legacy of their earlier unemployment risks scarring their pay for years to come.
Previous Resolution Foundation research has shown that young people losing their jobs during a recession can subsequently face wage penalties of between 13 and 21 per cent up to the age of 42, largely as a result of not working, or working in jobs that they are over-qualified for, during the crucial early phase of their careers.
This means that the pay gap between young people from rich and poor households could widen over the course of the 2020s.
Finally, the research notes that children from poorer backgrounds are also likely to have been disproportionately affected by the Covid economic hit to the labour market.
Their parents are twice as likely to have lost their jobs at the start of the year compared to parents from richer households (18 and 9 per cent respectively), which is likely to have had a knock-on effect on families’ financial security, something that is known to affect children’s subsequent performance and attainment at school.
Andrew Eyles, Research Economist at the Centre for Economic Performance at the LSE, said:
“The economic impact of the pandemic has fallen heavily on young people, and those from less affluent backgrounds have been at the epicentre of this crisis. Two-in-five young people from poorer backgrounds were out of work during the lockdown earlier this year – more than twice the share of those from richer households.
“While young people have returned to work in droves during the post-lockdown jobs recovery, the legacy of that earlier period of unemployment risks scarring their wages for years to come.
“This could risk worsening social mobility in Britain, as the pay gap between those from rich and poor backgrounds could widen over the course of the 2020s.
Alex Beer, Welfare Programme Head at the Nuffield Foundation, said:
“The COVID-19 pandemic has exacerbated existing inequalities and risks a decline in social mobility over the coming years. This research highlights the importance of effective catch-up in schools, and the need for greater opportunities for adult training and reskilling.”
