Almost two million people have not worked for at least six months, showing the scale of damage to the UK labour force caused by coronavirus.
Research by the Resolution Foundation has found that long-term furlough has become a widespread consequence of the pandemic.
Almost two million workers were unemployed or fully furloughed in January, and had been for at least six months, said the think tank, which is calling for the damage to be addressed in the Budget.
Its study found that the number of workers on the Job Retention Scheme (JRS) has risen to around 4.5 million during the current lockdown, half the nine million peak during the first lockdown.
This indicated that its impact on the labour market has been less severe as firms have adapted to operating through the pandemic.
Instead, the cumulative impact of the crisis is causing the biggest challenges, said the report.
The foundation said that around 700,000 workers had been unemployed for at least six months in January, while a further 500,000 workers had been fully furloughed and not working any hours.
Because some people have moved between unemployment and full furlough in recent months, the total number who were unemployed or fully furloughed in January, and had been so for at least six months, was 1.9 million.
While those on long-term furlough have had greater financial support, and have an easier route back into work than those who have lost their jobs, they face many of the same challenges in terms of a loss of skills and missing out on earnings growth, the report warned.
While the outlook for the economy has improved, many workers remain concerned about their own job prospects, said the think tank.
The report calls for the full JRS to remain in place for several months after public health restrictions have been lifted to give firms time to bring staff back.
Nye Cominetti, senior economist at the Resolution Foundation, said: “Ten months into the crisis, almost two million people have now been affected by long Covid in the labour market, having not worked for at least six months.
“While the UK’s economic prospects are finally looking up, job insecurity remains high, particularly among those who have spent long periods not working, or who are currently furloughed.
“The Chancellor must use his Budget to set out his own road map for phasing out the furlough scheme gradually and in a way that acknowledges where the risks of rising unemployment are highest, in sectors like hospitality.
“This would keep a lid on rising unemployment and encourage firms to bring back existing workers, while tax breaks on hiring could help more people to move jobs too.”
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