Design flaws mean that new Job Support Scheme will not significantly reduce expected rise in unemployment as a result of COVID-19

New Resolution Foundation analysis highlights cost to employers which gives them 'little or no incentive' to protect jobs

Design flaws mean that the government's new Job Support Scheme will not significantly reduce the rise in unemployment expected as a result of COVID-19, according to the Resolution Foundation

In an analysis of the cost and efficacy of the new scheme - that the Chancellor Rishi Sunak announced yesterday will replace the Coronavirus Job Retention Scheme from 1 November 2020 -  the Resolution Foundation finds that, while it offers similar levels of protection to workers as they received when fully furloughed, it is far less generous for firms who are asked to contribute half of the wage costs of employees when they are not working.

The Foundation comments that, in many cases, this gives employers little or no incentive to use the scheme to achieve the Chancellor’s stated objective to 'protect as many viable jobs as we can', noting that, for example -

• it would cost a firm £1,500 to employ one full-time worker on £17,000, but more than £2,000 a month to employ two half-time workers on the same full-time equivalent salary; and
• one full-time worker on £10,000 would cost £800 a month, compared to £1,100 a month for two half-time workers.

Commenting on the analysis, Resolution Foundation Chief Executive Torsten Bell said -

'With Britain facing a dangerous jobs cliff edge next month as the Job Retention Scheme winds down, the Chancellor has rightly stepped in to announce fresh emergency support to help firms and workers through a tough period of rising infections and rising unemployment.

But while the Chancellor has rightly aimed to create a European-style short-hours working scheme, design flaws mean that the new Job Support Scheme will not live up to its promise to significantly reduce the rise in unemployment. Those mistakes could be addressed by scrapping the poorly targeted £7.5 billion Job Retention Bonus, and using those funds to ensure the new support scheme gives firms the right incentives to cut hours rather than jobs.

While households have to date been protected from the worst of the economic hit from the pandemic, that is about to change. The coming rise in unemployment will mean a major living standards squeeze for families this winter.'

Fore more information, see The Job Support Scheme will not support enough jobs – risking a major living standards squeeze from resolutionfoundation.org