Job Support Scheme 'will not significantly reduce the rise in unemployment'

The Job Support Scheme (JSS) announced yesterday (24/09/20) by Chancellor of the Exchequer, Rishi Sunak “will not significantly reduce the rise in unemployment”.

This is the opinion of the Resolution Foundation, an independent British think tank. The Foundation believes the scheme will slow down the rate of job losses but not put a stop to it as the scheme has “little or no incentive” as employers must pay for hours not worked by their staff.

This six-month JSS will start on the 1st of November, immediately following the end of the Coronavirus Job Retention Scheme (CJRS). The scheme means the Government will pay a third of the hours you have not worked with your employer topping up another third.

The scheme is eligible if the employee works at least 33 per cent of their usual hours, but will receive 77 per cent of their normal pay, with 55 per cent of the unworked hours being paid by the employer and 22 per cent by the Government. The amount of money a worker will receive will be based on their usual salary and capped at £697.92 per month.

The worker on the JSS cannot be made redundant. The scheme will be open to all small and medium-sized enterprises (SMEs) and some larger firms who can prove that their business has been badly damaged by COVID-19 and are in need of it. It is open to all firms, not just ones who used the furlough system and claims can be made for both the Job Support Scheme and Job Retention Bonus.

In response to the JSS, Torsten Bell, chief executive of the Resolution Foundation, 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.