Press Story

Extension announced on Friday does nothing to help workers in the majority of firms not under local lockdown

Think tank reveals 1.8 million viable jobs jeopardised under Chancellor’s Job Support Schemes

IPPR calls for Job Retention Bonus and Job Support Scheme redesign to save two million jobs for less than the cost of current schemes

New research from the IPPR think tank reveals the scale of the job losses under the Chancellor’s new Job Support Scheme and the Job Retention Bonus when the furlough scheme winds up at the end of the month. The think tank estimates that 1.8 million viable jobs, which could otherwise be preserved will be lost, at great individual and wider economic cost.

IPPR argues that the two government initiatives do not make it sufficiently profitable for firms to preserve viable jobs – jobs that would likely return once restrictions have lifted.

The Jobs Support Scheme extension announced by the Chancellor on Friday for firms forced to shut entirely due to strict lockdowns is welcome, but this reform does not change the estimated job losses that will occur in the majority of firms that do continue trading, according to IPPR.

The key flaw in the schemes identified by the research is that only a narrow set of workers earning between £625 and £987 a month would be expected to benefit. Those who fall below the lower bound do not qualify for the Job Retention Bonus and the bonus is too small to be an incentive to keep workers earning above the higher band. This means only about one in ten workers currently on furlough could benefit from the current job support schemes, according to IPPR.

The think tank previously predicted that two million viable jobs will still need protecting when the Job Retention Scheme (furlough scheme) winds up at the end of October. This suggests only 230,000 of these jobs will actually be preserved by the new scheme announced by the Chancellor in his Winter Economic Plan, according to IPPR analysis.

The IPPR report urges the Chancellor to redesign the Job Retention Bonus and the Job Support Scheme to preserve more viable jobs. Researchers say that this could be achieved by converting the deadweight one-off Job Retention Bonus payment into a monthly payment proportional to wages for hours worked part time (up to a ceiling of £2,500). The Job Retention Bonus should be targeted only at those firms that qualify for the Job Support Scheme and should be extended to align the time they are available for. IPPR says this redesigned scheme will act as a subsidy for part-time work and encourage work sharing, rather than layoffs, until demand recovers.

The report says that the savings generated from this redesign should be used to increase the generosity of the Job Support Scheme. IPPR suggests the government’s contribution to non-worked hours could be increased by 10 percentage points (from 33 per cent to 43 per cent), thereby reducing the employer contribution by the same amount. This will further boost job retention at struggling firms.

The repurposed and extended Job Retention Bonus together with increased government contribution would cost £7.4 billion, slightly less than the money set aside for the Job Retention Bonus (£7.5 billion). This is due to it being a proportional payment for firms that need it, rather than a blanket deadweight payment to every firm that furloughed staff during the pandemic, according to IPPR analysis.

Even with this more generous Job Support Scheme payment, the government would still save money under this redesigned scheme, according to the think tank.

IPPR argues that these reforms would prevent a surge in unemployment and bring long term benefits to workers and the economy. The think tank emphasises that this is a design issue and not a question of overall funding. If the Job Retention Bonus is repurposed, money could be saved, which could be used to support more viable jobs and encourage part-time work until the economy recovers.

Carsten Jung, IPPR Senior Economist, said:

“It is shocking how narrow the range of workers is who would benefit from the current government schemes. Overall, nine in ten jobs at risk will not be saved by the schemes, at great and wider economic cost.

“A design change to employment support schemes could save hundreds of thousands of viable jobs and hugely improve value for money. It would target resources at those firms that truly need it rather than paying out money to all firms that used job support schemes at some point – including those that are now doing fine or even profited from the pandemic.”

Responding to Friday's Job Support Scheme extension announcement, Clare McNeil, IPPR Associate Director, said:

“It is absolutely right for the government to bring health and economic measures in line with each other - recognising that businesses forced to close due to lockdown measures need compensation to do so and to protect jobs and incomes.

“But a far larger number of people are being abandoned by government due to the flawed design of the Job Support Scheme. We estimate that only one in 10 workers in viable jobs will be supported by this scheme. What we need is a part-time work subsidy that avoids mass redundancies while allowing more employees to keep their jobs on fewer hours.”

ENDS

CONTACT

David Wastell, Head of News and Communications: 07921 403651d.wastell@ippr.org

Robin Harvey, Digital and Media Officer: 07779 204798 r.harvey@ippr.org

Carsten Jung, Henry Parkes and Clare McNeil are available for interview

NOTES TO EDITORS

The IPPR paper, The Narrow Corridor by Carsten Jung and Henry Parkes is available for download at: http://www.ippr.org/research/publications/the-narrow-corridor
In August IPPR published its proposals for a Job Retention Scheme replacement based on short-time working principles – a Coronavirus work-sharing scheme. The report by Clare McNeil, Carsten Jung and Dean Hochlaf is available to download here: https://www.ippr.org/research/publications/rescue-and-recovery
IPPR is the UK’s pre-eminent progressive think tank. With more than 40 staff in offices in London, Manchester, Newcastle and Edinburgh, IPPR is Britain’s only national think tank with a truly national presence. www.ippr.org