The UK is at risk of returning to the high unemployment levels of the 1980s, according to the Bank of England’s chief economist.
Andy Haldane said Britain would need to find a way to reabsorb the large numbers of workers who will lose their jobs due to the coronavirus pandemic, as the country faces the prospect of the high unemployment experienced decades ago.
“The very reason I got into economics and the reason I got into public policy was because of the scarring experience of the early 80s unemployment, which peaked at three and a bit million – and we’re going back to that basically,” he said in an interview with the Sunday Telegraph.
“Those fears are going to be cast over a much wider cohort of the workforce, maybe as much as half of them. We need to find a way of reabsorbing all of that labour as quickly as possible in good jobs.”
Earlier this month the Bankwarned that the unemployment rate could more than double to 9% by the end of spring, the highest since 1994, as the coronavirus causes the deepest recession in more than 300 years.
Haldane said the outlook for jobs could be worse due to a “dread risk” where joblessness spirals because of a self-fulfilling expectation among households and companies that the economy will decline further still.
He pointed to the current figures: more than 7 million workers furloughed under the government’s wage subsidy scheme, an estimated 2 million who are newly unemployed, and about 1.3 million who were already unemployed, as well as millions more who are working shorter hours.
“Add all that and you’ve got anywhere between a third and a half of the workforce either unemployed, under employed or working shorter hours, and at least some of them might have a fearfulness about future incomes and about their jobs,” he said.
As well as the stimulus measures put in place by the Bank – including record low interest of 0.1% – and government measures, the “levelling up” agenda would be “even more important”, he added.
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