Ending Coronavirus Job Retention Scheme too soon risks second surge in unemployment, says Resolution Foundation

New report calls for scheme to be extended to partial furloughs, with employers contributing to furloughed workers’ wages

Ending the Coronavirus Job Retention Scheme (CJRS) too soon risks a second surge in unemployment, according to a new report from the Resolution Foundation.

In Getting Britain working (safely) again - The next phase of the Coronavirus Job Retention Scheme, published today ahead of the announcement from Chancellor Rishi Sunak on the future of the scheme, the Resolution Foundation argues that, while the CJRS has helped the UK to avoid depression-era levels of unemployment, decisions about its future are much more complex than it’s 'relatively straightforward' introduction, and that -

'Moving too quickly could cause a second surge in unemployment, while moving too slowly would fail to support the recovery.

The mass unemployment risk of moving too quickly is particularly high as the sectors of the economy that hired new workers during the last crisis – hospitality and retail, which accounted for one in five job entries in 2010 and 2011 – are among the hardest-hit this time around.'

To avoid the risk of a further spike in unemployment, the Resolution Foundation therefore makes a number of recommendations, including that -

• the government should announce that the CJRS will exist in its current form for workers already furloughed until early August, and in some form for all firms until at least the end of September;
• fully-flexible (hourly) short-hours working wage top-ups should be introduced to the CJRS as soon as possible, with the same cap (pro-rated) and replacement rate as offered to those fully furloughed, with aggressive fines and naming and shaming for firms abusing the system in order to prevent fraud;
• the government should clarify that the use of the CJRS for health reasons (shielding, self-isolating and childcare for children off school) will continue as long as individuals are expected to take such measures;
• the government should be clear that when the phasing out of the CJRS begins it will ask firms to contribute towards the costs of furlough – rising from 10 per cent of previous wages initially; and
• the next phase of the CJRS should be supported by a broader policy package including the dialling up of generalised demand stimulus, further improvements to benefits, and comprehensive investment in back-to-work support for the unemployed.

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

'The government should reject calls to swiftly end the CJRS. Moving too quickly could spark a huge second surge in job losses at a time when unemployment already looks set to be at the highest level for a quarter of a century....

The retention scheme could end up costing almost £50 billion. That’s a huge sum – but money well spent given the huge threat posed to our health, economy and living standards by this pandemic.

This policy has made a huge difference in this crisis. It now needs careful and gradual change to ensure the benefits it has provided are secured rather than squandered'

For more information, see Ending the Job Retention Scheme too soon risks a second surge in unemployment from resolutionfoundation.org