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21 October, 2020 Open access

More than two million ‘at-risk’ jobs will not be saved by the Job Support Scheme, predicts New Economics Foundation

Subsidising a higher proportion of wages and reducing the employer's contribution would protect more jobs and would likely pay for itself in the longer term, says think tank

More than two million jobs that are at risk due to the coronavirus (COVID-19) pandemic will not be saved by the Job Support Scheme (JSS), the New Economics Foundation (NEF) has predicted.

Highlighting that the JSS - that will run for six months from 1 November 2020 and will pay employees up to a third of their wages for unworked hours with the employer also contributing a third - is much less generous than its predecessor Job Retention Scheme, both in terms of overall salary protected and the level of employer contribution towards salary costs, the NEF points out that the direct costs of keeping two employees working part-time (50 per cent hours) on the scheme will often be higher than keeping one employee working full-time (100 per cent hours) and firing the other.

Modelling three different scenarios that could develop as the COVID-19 crisis progresses - a downside, an upside, and a core - the NEF predicts that, in the core scenario, 2.7 million peoples' jobs will be 'at-risk' and that the incentives of the JSS are unlikely to be sufficient to save 83 per cent (2.2 million) of these.

However, the NEF suggests that this scenario could be dramatically altered by adjusting the employer contribution for unworked hours from the current 33 per cent to 25 per cent or 10 per cent, and increasing the government's contribution correspondingly. This action, the NEF says, would be likely to see 400,000 to 1.4 million more jobs protected by the scheme.

Presenting its analysis as a 'very strong case' for improving the JSS, the NEF argues - 

'The cost of reducing the employer’s contribution to 25 per cent of unworked hours is estimated to be around £65 per worker per month, and the cost of reducing it to 10 per cent comes in at around £200 per worker per month. The latter would convert the JSS from a scheme which is likely to support only a minority of jobs, to one which could support the large majority. The upfront costs of such a scheme would bring it closer in line with the costs of furlough in October. But ... due to higher taxes and reduced social security payments, subsidising wages in order to protect jobs is likely to pay for itself in the longer term.'

For more information, see Job Support Scheme leaves two million jobs unprotected from neweconomics.org