Recession Research Shows Who's Hit Hardest

The overall unemployment rate has already doubled, and things are likely to get worse before they get better according to ISER’s Professor Richard Berthoud, who has examined earlier UK recessions to predict what impact the current downturn will have and who will be most affected by it.

One important conclusion is that it is not just the unemployed who are affected by the business cycle. The research suggests that for every rise of 100,000 people who say they are actively looking for work, there will be a further 27,000 increase in the number who give other reasons (such as motherhood or disability) for not having a job, but have nevertheless been affected by the weak labour market.

Main findings include:

• The proportion of Pakistanis and Bangladeshis out of work - already high at 47% - would rise by nearly 7 percentage points.
• The number of 20-24 year-olds without jobs would soar by a quarter, compared with those aged 55-59 who would see a rate rise of just 1 in 25.
• Under qualified people – already seriously disadvantaged – would see an increase of between 4 and 5 percentage points, compared with an increase of about 2 percentage points for those with good qualifications.

Commenting on his findings, Richard Berthoud said: “These results are based on the assumption that the unemployment rate doubles in the current recession – which has already happened. Given that the rate peaked at more then 10 per cent in the recessions of 1983 and in 1993, a further substantial increase in joblessness may well take place before the tide turns. If so, all the outcomes will be worse than those predicted in this research.”

Making use of the General Household Survey to look at the impact of recession, the research is based on a complex analysis of information collected from more than 360,000 individuals between1974 and 2005. The employment fluctuations observed in previous recessions are projected to the labour market conditions of the late 2000s.

Contrary to expectation, however, other disadvantaged groups with poor underlying job prospects, such as disabled people and mothers, are not expected to face severe additional problems if jobs are scarce. Richard Berthoud points out that more than half of the most disadvantaged people are out of work in any case and so are relatively unaffected by a recession.