Up to 350,000 young people aged 19 to 24 face losing their jobs and “being scarred by recession for years to come” as furlough is wound down in coming months, the Institute of Fiscal Studies warns.
The IFS says 19- to 24-year-olds are likely to be the hardest hit by the removal of the job support scheme which has protected them more than any other group from the economic ravages of the pandemic.
In a new research report, the IFS says the age group saw the biggest increase of any age group in the numbers not working any hours, including those who are furloughed.
The number rose by 25 per cent, or around 400,000 people, from the last quarter of 2019 to the first quarter of 2021 – a significantly higher increase than those seen in older age groups.
The vast majority of those jobs have, so far, been saved by the furlough scheme, with only 50,000 additional 19- to 24-year-olds without any job at all in early 2021 compared with pre-pandemic.
Proportion of workforce on furlough leave
But this means the 19- to 24-year-old age group is especially vulnerable as the furlough scheme is wound down.
At the same time, unlike for older workers, earnings growth among younger employees (aged 19 to 34) who have continued to work has been lower than prior to the pandemic.
This may not have large immediate consequences, but if this ground is not regained then the longer-term effects on their incomes will be significant, said the IFS.
Xiaowei Xu, a Senior Research Economist at IFS and co-author of the report, said: “Young adults have been especially likely to be furloughed during the crisis, though relatively few have completely lost their job.
Moving back in with parents
“Many have responded to this by staying or moving back in with their parents – providing temporary protection for their living standards.
“But we know that shocks early on in people’s careers can have negative effects on their future job prospects. Without effective support, there is a risk that young people today will bear the scars of the recession for years to come.”
It follows previous research by the IFS which found that young workers are twice as likely as older colleagues to have lost their jobs, although graduates were less than half as likely as those without degrees to have fallen out of work.
By the autumn, the number of graduates in paid work had fallen seven per cent, a drop of about 800,000 people, but the number of non-graduates was down by 17 per cent, or 1.5m, showing the much more severe impact on those with less education.
Cost of furlough: £64bn bill
That group was already in a worse financial state before the pandemic. Those who have been to university typically earn about 60 per cent more than those without degrees.
The new study showed that despite losing their work, either through furlough or being laid off, there was no evidence yet of increasing deprivation among the young people.
The IFS cited as an example the use of food banks in the last month by young adults, which fell from six per cent pre-pandemic to three per cent in April–May 2020 and one per cent in early 2021.
There had also only been a small rise, of one per cent from 16 to 17 per cent, in the number of 19- to-24-year-olds who lived in a household where no one was working, a pointer suggesting many were still living at home.
Excluding full-time students, the share of 19- to 24-year-olds who live with their parents has increased from 45 per cent to 50 per cent during the pandemic. Including students, it rose from 61 per cent to 71 per cent.
The IFS said this highlighted the support that many parents were able to provide to their adult children to help them through the pandemic.