Responding to economic shocks: What does the evidence tell us?

By Corin Egglestone


06 07 2020


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Since arriving in the UK, coronavirus has had a profound impact on public health, the economy and our way of life. Although the trend in new infections is – thankfully – heading in the right direction, the economic aftershocks are likely to be with us for some time to come. Our analysis of labour market data released on 16 June found the largest increase in claimant unemployment since records began in 1922, and we project that the unemployment rate is likely to pass 10 percent by the end of the year. The economic hit from the virus is also likely to exacerbate regional inequalities, with more jobs lost in regions with higher pre-existing levels of unemployment.

Government is now trying to find a way to balance re-opening the economy with protecting public health. However, even with a rapid economic recovery – which is far from certain – there is a strong risk of a sustained increase in both long-term adult and youth unemployment, with corresponding and enduring negative impacts on the life chances of those affected. It is notable that after the last three recessions it took between three and seven years for employment to recover in the UK, with a substantial increase in long-term unemployment on each occasion. There are also some big uncertainties ahead, with the end of the furlough scheme, transition to a new trading relationship with the EU and any re-emergence of the virus all having the potential to cause further economic shocks.

It is notable that after the last three recessions it took between three and seven years for employment to recover in the UK, with a substantial increase in long-term unemployment on each occasion.

With a rumoured package of measures to be announced this week, what does the evidence say the Chancellor should do to support people to get back to work? Our 2019 evidence review on responding to local economic shocks identified several key findings on the success of different approaches in this area. Although different groups of jobseekers are likely to need different types and levels of support, effective approaches can include:

  • Assistance in identifying and applying for jobs as soon as possible after someone loses their job may in some circumstances be just as effective as training.
  • Training programmes – including generic employability training and retraining for specific sectors or roles – are generally effective for displaced workers, but the benefits tend to accrue over the longer term with limited short-term impacts. Programmes designed with employers, such as sector-based work academies, can be as effective in the right circumstances.
  • Outplacement services, or taskforces, can increase the earnings of workers made redundant over the longer term, particularly for younger workers.
  • Hiring subsidies can produce large increases in employment but there is often substantial deadweight, where employers would have taken on individuals in absence of the subsidy.

Although there is limited evidence on how to effectively link demand and supply side interventions, available evidence points towards the importance of well-resourced, effective partnership working, links between training providers and employers, and the role of job brokerage services.

It’s also vital for specific actions to be taken to reduce the risk of young people becoming NEET (not in education, employment or training). Our 2020 evidence review on  supporting 15 to 24-year olds at risk of becoming NEET found that, although evidence in this area is limited, there are several approaches that have been shown to have a positive impact:

  • Approaches that include flexible and tailored support can be particularly effective in acting as a mechanism for positive outcomes in attainment, employment, progress and engagement for at risk young people. This can include, for example, mentoring and counselling.
  • Targeting specific transition points, such as Key Stage 4, at-16 and at-18, can support diversion from NEET and improve attainment. Interventions that develop personal skills and aspirations have been found to be most effective for these groups.
  • Supported work experience and vocational training has also been found to work well, particularly for more vulnerable young people.
  • Group based learning communities and interventions designed to target motivation and confidence can also support young people to sustain engagement in further learning.

In addition, the experience of the Future Jobs Fund shows that creating transitional jobs can help people in long-term unemployment to gain the employability skills, confidence and networks that can help to secure permanent work. Launched at the height of the last recession, the fund supplied grants to organisations willing to create jobs that would last for at least six months and meet a minimum set of quality criteria. An evaluation of the Future Jobs Fund by the Centre for Economic and Social Inclusion (one of L&W’s founding organisations) estimated that 43 percent of participants gained a positive employment outcome. Learning from the impact of mass job losses at Longbridge also emphasises the importance of taking rapid, multidimensional responses that considers both sector and spatial based factors to establish effective back to work support.

Evaluation of the Future Jobs Fund


Interventions are likely to be more effective when tailored to local skills demand and engaging employers can support the development of relevant interventions and timely responses. Partnership working can also be key, with specialised local partners able to deliver combinations of different interventions to support economic recovery.

Of course, drawing from existing evidence is a key tool in our decision-making box, but the impact of Coronavirus means that good evidence from the past can’t necessarily act as a ‘blueprint’ for a post-pandemic world where we will now live and work in very different ways. Opportunities to design pilots, undertake experiments and test new approaches that support the economic recovery are going to be challenging in the coming months and years when solutions are needed now.

How then do we ensure that policy and practice decisions made at speed are informed by good evidence? Now more than ever we must think differently and creatively, bringing new ideas about how to overcome the economic challenges presented by this public health crisis.

Local area pilots may be one answer, where rapid test and learn evaluation could support local and national governments to invest in larger programmes based on promising findings. We should also aim to tease out short and long-term impacts from new policy and practice approaches in order to understand which approaches can give a short-term economic boost and what is needed for a sustained impact. It’s vital that we continue to build a strong culture of evidence-based decision making so that we can learn about what works to get Britain back to work.

Corin Egglestone, research manager, What Works Unit for Learning and Work