Resolution Foundation

Wishful thinking will not close Britain’s inequality gaps

Optimism helps get us through tough times, and this pandemic has had plenty of those. The recent reopening of the…

Optimism helps get us through tough times, and this pandemic has had plenty of those. The recent reopening of the economy has provided grounds for optimism, with firms hiring at a swift pace. But wishful thinking can be dangerous, and when it comes to the economic legacy of this crisis there’s far too much around.

The pandemic has cost tens of thousands of lives and everyone understands its negative health effects will last – from long Covid to an overstretched NHS. But on the economy, despite driving the deepest downturn for 300 years, people seem desperate to say the crisis will help the UK overcome some of its deep-rooted challenges. Apparently it will help us level up by closing regional gapsgive low paid workers the respect – and pay – they deserve, and save the local high street.

Much of this wishful thinking rests on futurology about home working. Everyone being able to work wherever they fancy will apparently mean people can earn London salaries, while living in Lincolnshire. The shift of spending power, from where offices sit to where homes are concentrated, will drive a rebirth of the high street. Home working won’t just spread the jobs out – it’ll spread the Prets out too.

What is becoming increasingly clear however is that hybrid working, with around three office days a week, will become the norm. That might mean some people commuting further, but more people living in Tunbridge Wells won’t do much for the North-South divide. And while home working professionals have helped posh bakeries in some high-income neighbourhoods boom, the Covid-19’s real legacy has been the acceleration of the decline of high street retail with record store closures.

Indeed, the main way the pandemic has helped to narrow economic gaps is by levelling down rather than up. London’s economy, reliant on commuting and foreign tourists, is recovering much slower than the rest of the country. By July it had only recovered around half the 6 per cent fall in employees lost during the crisis, while the North of England had actually seen an increase.

The sheer scale of focus on working from home of course reflects the types of work done by economists and commentators pondering our economic future. But among low earners home working is very rare indeed. While half of managers did some homeworking in 2020, fewer than one-in-twenty of those in elementary occupations did.

And because most low paid jobs can’t be done remotely, low paid workers have borne the brunt of this crisis. Alongside facing the highest health risks, they have been three times as likely as higher paid workers to experience a labour market hit, such as losing their job or being furloughed.

What have low earners had in exchange for this highly unequal burden? Wishful thinking. At the start of the pandemic everyone recognised that it was low earners who kept our economy and health service running. They were clapped from our doorsteps and told that greater dignity for such work would follow.

It hasn’t. Low earners still have no minimum notice period for their shifts (over one-in-threeworkers recently surveyed were given less than a week’s notice of their work patterns) and no right to a contract reflecting the hours they actually work. Worse, the government recently decided not to extend sick pay to low earners – something it previously favoured.

We’re now told that current hiring difficulties will suddenly deliver lots of bargaining power for low-paid workers  – automatically leading to surging pay and better-quality work. But data from jobs site Indeed shows that it’s higher earning roles, in transport, manufacturing and construction that are currently seeing fast increases in advertised wages. The increases for lower aren’t hugely beyond the 20p rise in the National Living Wage back in April (typical hourly wages advertised for cleaners and warehouse staff have increased by 20p and 11p respectively since March). Zero-hours contracts have not disappeared.

The pandemic has led to huge changes in how economic activity takes place. Some of those will last, some will be beneficial. But they are not silver bullets targeted at the big economic challenges the UK faces. If we want some positive change to come from the pandemic we need to make, not wish for it, to happen. The pandemic has highlighted the inequalities scaring our country, but also shown this Conservative government acting boldly can make a huge difference, as with furlough.

The insecurity at the bottom of our labour market can be tackled with new rights and proper enforcement to make them a reality. We can ‘level up’ by keeping the £20 a week uplift to Universal Credit that one-in-three working-age families in ‘Red Wall’ constituencies rely on. We can properly fund our further education colleges if we want to tackle disgraceful gaps in education.

Covid-19 has made us poorer. It has widened wealth gaps and educational inequalities. Almost everything important we need to achieve as a nation has been made harder, not easier. So, put the wishful thinking aside. Silver linings to Covid-19 won’t solve our deep-seated economic problems. We have to.

This article was originally published in The Guardian.