The economic impact of Covid-19 has created a precarious financial situation for many. With lockdown forcing the closure of many employment sectors, job uncertainty reached an all-time high during the peak of the pandemic.

Following the government’s decision to ease almost all restrictions in June, Boris Johnson has now revealed planned measures to increase National Insurance contributions. The aim is to reduce the huge backlog in the NHS and to increase funding for the Covid-weakened social care system.

While the government insists upon the necessity of this fiscal scheme and reassures us of the benefits it will bring to social welfare, there has been widespread criticism of the impact tax increases will have on younger workers.


A burdensome tax hike

It is estimated that this National Insurance tax hike will hit new graduates hardest. From April 2022, graduates earning more than £27,295 will pay a marginal tax rate of 42.25 per cent once student loan repayments are included (20 per cent income, 13.25 per cent National Insurance, 9 per cent loan repayments). This marks the highest tax burden for decades on British graduates.

What seems to be overlooked, however, are the existing social inequalities among graduates and therefore, the disproportionate effect tax increases will have on young university leavers from different backgrounds. Undoubtedly, the rise in National Insurance contributions will make life more difficult for graduates who come from working-class families than for their more privileged peers.

The reality that graduates’ earnings are dictated (at least in part) by their socioeconomic background is a fact that often goes unacknowledged within public discourse. Government social mobility policies usually focus on increasing access to higher education, which, when achieved is usually portrayed as something of a social equalizer. It’s true that there has been a major expansion in the number of students going on to study at university over the last few decades. However, stark inequalities persist between students from wealthy and disadvantaged backgrounds and often remain post-university, spilling out into the graduate sphere.

The myth of meritocracy

When we speak of the benefits of being university-educated, meritocracy is most certainly a myth. Graduates from disadvantaged backgrounds, unlike their more privileged peers, often lack the social and familial connections, as well as the self-confidence needed, to obtain higher-paid jobs and to fast-track their professional careers. In addition to this social capital, working-class graduates are also less likely to have parents who can afford to assist and/or support them financially.

Alongside the government’s proposal of a rise in National Insurance tax, there also came the revelation that Universal Credit (which had seen an increase of £20 since March 2020) would now be cut down to its pre-pandemic rate. The UN’s Poverty Envoy, Olivier De Schutter, condemned the government for this decision, alleging that the UC reduction was based on a very ill-informed understanding of its impact on claimants.

De Schutter has a point. The post-lockdown reopening of the economy hasn’t resolved the financial difficulties many continue to face. While much of the criticism surrounding the Universal Credit cut has (rightly) been targeted towards the detrimental impact it will have on families, it is likely that working-class graduates will also suffer under these reforms. Since the pandemic began, more young people have been claiming Universal Credit straight out of university than ever before. The pandemic has made it harder for all graduates to gain employment following university, with many entry-level roles now being snapped up by people with years of experience who were made unemployed by the lockdowns. This in turn has left graduates who come from disadvantaged backgrounds, and who lack the financial and social family capital, to rely on social welfare payments such as Universal Credit.

Making matters worse, these tax rises and welfare cuts are being introduced at a time when wages remain stagnant and the housing market has become over-inflated beyond affordability.

The economic disparity between graduates who come from wealth and graduates who don’t has always placed the latter at a disadvantage. The effects of the current economic climate suggest that this disparity is set to get worse. A reality faced by many working-class graduates is one of fewer opportunities and increasingly unstable living conditions in the years to come.