COVID and the claimant: reworking future loss

The current world of employment is shrouded in uncertainty and concerns over instability. As just two examples, ONS data from November 2021 projected hospitality vacancies to reach a “record high” over the Christmas period, while youth unemployment had recovered to pre-pandemic levels.

Less than four weeks later, in December 2021, the Scottish Hospitality Group warned of an “immediate threat” to jobs in the sector due to the spread of the Omicron variant, whereby Government support would be needed to protect jobs and keep businesses afloat.

While COVID is foremost in people’s minds and how this will affect future employment, it is important not to forget recent events which would also have affected the market.

COVID and the employment market

The effect of COVID on earnings is evident in the 2021 edition of the Annual Survey of Hours and Earnings (ASHE), a database that virtually all personal injury lawyers will be familiar with from loss of earnings schedules. ASHE 2021 is an anomaly insofar as the mean and median earnings for full-time Scottish employees declined compared to the previous year – even in the aftermath of the 2008 financial crisis, earnings grew overall. When looking at specific occupations, however, the implications become even more notable.

The average earnings for scaffolders, stagers and riggers in Scotland declined by some 31.5% between 2020 and 2021. This can be explained by construction work being halted during lockdowns, as well as reduced activity in the oil and gas sector, which employs a significant number of riggers in Scotland. However, with significant planned infrastructural investments on the horizon, and the Government placing the construction industry at the centre of the COVID recovery, Scotland is projected by the Construction Industry Training Board (CITB) to need an additional 26,250 construction workers by 2025.

This suggests that this decline in earnings is very likely to be an anomaly; indeed, ONS data indicate that earnings in construction have already seen significant growth, rising by 15% in May 2021 alone, the month after ASHE 2021 was conducted. Using the 2021 ASHE figure would therefore be misleading in this case if assumed for a projection of career loss of earnings.

Conversely, due to lockdowns and travel restrictions, the pandemic sharply accelerated rising trends in online shopping and e-commerce. With that, demand for postal workers, mail sorters, messengers and couriers has risen, and so too have their salaries, on average by some 28.6% in Scotland. While online shopping is unlikely to fall to pre-pandemic levels as consumer habits change, the reasons for this significant rise in earnings are unprecedented, and unlikely to apply permanently. As such, using 2021 ASHE data to project career earnings for couriers is likely to overestimate any potential loss dramatically.

With the national living wage set to increase by some 6.6% in April 2022 in response to rising living costs, the traditional categorising of earnings by job title may no longer apply.

Some business groups, including the British Chambers of Commerce and the British Retail Consortium, have expressed concerns that the sharp increase will exacerbate inflationary pressures. Some smaller businesses, already facing financial difficulties because of the pandemic, may struggle to cope, and regarding employment, rising business costs could see fewer staff being engaged.

Whether there will be a further increase in zero-hour contracts remains to be seen, as employers worry about sector or market instability. Zero-hour contracts have increased by 13% since the start of 2021 and the indicators suggest they are likely to continue to rise.

Wider economic uncertainties

On top of COVID, other wider processes such as Brexit and the energy transition are leaving employment, and therefore possible future earnings, across different sectors in a state of flux. Starting with Brexit, while its immediate aftermath is currently difficult to assess, both due to how recently it passed and the effects of COVID quickly overshadowing it, some impacts on employment and earnings are already emerging.

A fall in EU workers removed many from Scotland’s service sector which, as the major COVID restrictions were lifted in April 2021, created a vacuum and a skill shortage.

In December 2021, UK Hospitality Scotland reported a shortage of up to 48,000 hospitality staff due to COVID and post-Brexit immigration rules which have “unfairly” classified many hospitality roles as below the minimum required skill and salary levels. Last year some Highland hotels were forced to close early, and they have expressed concerns over shortages increasing this coming summer if Brexit regulations are not adjusted.

In terms of earnings, competition between businesses for staff is pushing up wages, with the Scottish Hospitality Group reporting that some businesses are facing a 20% increase in wage costs.

Another prominent example is Brexit’s impact on the supply of HGV drivers. With an outflow of thousands of EU citizens who had previously lived in the UK and worked in freight, the Road Haulage Association estimates a UK shortage of up to 100,000 lorry drivers, while the Scottish Wholesale Association suggests the shortage is resulting in a 30% reduction in goods reaching northern Scotland.

Wages have inflated as a result, with many lorry drivers currently receiving premium “signing-on” payments, and reports of salaries up to 40% above typical rates. In response to the shortages, the UK issued temporary visas for 5,000 HGV drivers and established a free 16-week “skills bootcamp” programme to train HGV drivers. As the supply of HGV drivers increases and returns to the point of equilibrium, it is highly likely that wages will return to pre-shortage levels. Thus, in a vocational assessment as to earnings calculation, using current market rates to calculate a medium to long-term projection may be misleading.

Another process likely to reshape the interregional dynamics of employment and earnings in Scotland is the transition from oil and gas to renewable energy sources such as wind. For example, home to thousands of high-paying oil and gas jobs, Aberdeen has historically recorded earnings above the Scottish average. However, employment in oil and gas is closely tied to investment, and therefore also to the market value of Brent (North Sea) oil. This means, as illustrated in figure 3 (above), that earnings in Aberdeen are also closely tied to the price of oil, raising questions as to the effects of the energy transition on local earnings in the long term. Meanwhile, regions with high concentrations of planned offshore wind infrastructure, such as the Moray Firth and Firth of Forth, may in turn see average earnings rise as a result.

Projecting for the future

With the uncertainty of COVID intertwined with the processes of Brexit and the energy transition, formulating future earnings calculations presents numerous complex challenges.

Following the financial crisis of 2008, it took some nine years for unemployment in Scotland to return to pre-crisis levels. After rising dramatically in the 1980s, the UK unemployment rate would not recover to the 1979 level until 2000. While unemployment levels have, since COVID, remained below the levels seen following the financial crisis, they are contained to an extent by the furlough scheme, a surge in part-time workers and a high number of workers engaged on zero-hour contracts.

Employers, concerned about further lockdowns and redundancies, may also prefer to adopt a flexible approach in their hiring, preferring a transient workforce to a full-time permanent one. As such, we may see insecure working further exacerbated as a result.

What can be predicted in an uncertain future is that those with a work-related disability or who are marginalised, for example the long-term unemployed, will face the greatest challenges. The number of unemployed disabled people in the UK was 25% highee period. To put this into perspective, the number of unemployed people not qualified as disabled under the Equality Act increased by only 3% in this time.

What then, does all the above mean for future loss of earnings calculations? COVID has had a clearly uneven impact on earnings across different occupations, raising important questions over how we calculate future loss. A case-by-case model is therefore most appropriate going forward; however, this also raises questions over consistency and fairness. This means that projections must be supported with in-depth evidence and expertise, where shortsightedness is avoided, and the sector-specific nuances and medium to long-term trends carefully considered.