Matthew Oulton discusses the Chancellor's speech last week, which outlined measures to protect jobs and the economy.
Last week the Chancellor announced a new set of measures to deal with the economic fallout of the coronavirus crisis. Sunak’s latest raft of measures to protect the economy differ from his previous measures in the crucial question of employment. As the crisis unfurled, the Treasury took radical action to preserve jobs in an economy where working was, for many, not a viable option anymore. So far, this has mostly insulated people from unemployment – in the latest figures from the ONS unemployment has largely remained unchanged during the past few months. However, with the Job Retention Scheme soon to wind down, the threat of mass unemployment looms. Work is very important to wellbeing (Di Tella, MacCulloch, and Oswald, 2001). More than just a source of income, people rely on a job to give them a sense of purpose, for many as a means of socialising, and a sense of community and common purpose. Beyond the financial threat to millions of working families, a spike in unemployment threatens the wellbeing of our people and the future of our economy.
Where, in the aftermath of the Global Financial Crisis, we faced sluggish growth but high employment, in this recession, employment is likely to be disproportionately hit. Thousands of jobs in industries such as hospitality, retail, and transport are at stake, affecting people with the least ability to cope. This crisis has unearthed the underlying weakness of our labour market. Job gains since 2010 have come largely in low productivity sectors, and often with increasing reliance on flexibility. This has built a workforce in which many are working, but still experiencing deprivation and insecurity. The labour market has become a house of cards, and it cannot withstand this virus without support.
In the face of this threat, and of growing calls from the worst-hit industries, the Chancellor announced a series of measures. The ‘Job Retention Bonus’ offers a payment of £1000 to firms that keep furloughed workers in employment through to January. Whilst a laudable effort, £1000 is a small fraction of the cost of employing workers for the months from October to January. The lack of targeting here, either by firm or industry need, also means that many businesses that don’t need the money will be eligible, leaving far less for those that do. The Government has pledged some support for helping young people back into work, but it’s not of sufficient magnitude to confront the problem that ending the furlough scheme will unleash. Over 1 million people are currently on furlough (HMRC, 2020), so if even a modest proportion of these are laid off, unemployment will rise to its highest level in a generation.
The ‘Eat Out to Help Out’ scheme, although much more targeted, is also unlikely to do much in the way of maintaining employment. If this scheme works well, restaurants will see increased trade Monday-Wednesday, and higher takeaway sales. Whilst this will doubtlessly help struggling small businesses, it won’t encourage them to keep their front-of-house staff. Social distancing guidelines don’t allow most hospitality businesses to be fully staffed. Without different incentives, restaurants may well survive but shed half their workers. This may be a success in keeping businesses afloat, but could still leave large waves of redundancies. Not only is mass unemployment in the hospitality sector a human tragedy, it’s also bad for our economy. Laying off and then retraining thousands of workers is a tragic waste of resource that we can scarcely afford. Likewise, in the arts, support for theatres, concert-venues and other institutions is welcome and vital, but it isn’t possible to have an arts industry without artists as well. Since most people working in the arts are free-lance, many have received little support so far and will soon receive none at all.
Our economy is built on human capital. We have a highly educated population, by international standards, and the service sector dominates. The Government needs to respond in a way that is pro-worker, not just pro-business. Sunak should extend the furlough scheme in sectors that are worst hit, reducing the threat of immediate redundancy. We need specific retraining programmes that can help those who do become unemployed remain engaged in the economy and back into work as soon as possible. Likewise, more should be done to help furloughed workers develop and maintain their skills. More public investment is required to boost employment – long-term plans for construction projects are important but will not help in the short-run.
For all their talk of ‘fixing the roof whilst the Sun is shining,’ the Conservatives have left us vulnerable to economic shock by generating a climate of fragile and low productivity employment. We haven’t been supported to get the skills we need; we weren’t preparing our labour force for the economy of tomorrow. This doesn’t have to continue, though. By putting people, not companies, at the heart of this recovery, we can tackle both the acute and chronic problems facing our economy together. Productivity can rise at the same time as demand recovers. If we put people first, growth will follow.
Matthew Oulton is an Economics student at the University of Warwick. A keen writer on Economics and more broadly, Matthew also works part-time at a Sales Consultancy and sings in the Choir of Coventry Cathedral.
He tweets at @matthewoulton