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Think tank calls for continued wage subsidies in hospitality and retail

29 Jun 2020 By Francis Churchill

The need to maintain social distancing measures means employers are a ‘long way off returning to business as usual’, warns Resolution Foundation  

The UK needs a ‘job protection scheme’ in the sectors hardest hit by the coronavirus crisis to subsidise wage costs after the furlough scheme ends, a think tank has said.

As the government prepares to wind down its job retention scheme, the Resolution Foundation has argued that continued government support is needed in sectors including hospitality, retail and leisure to prevent job losses.

In its report, The Full Monty: Facing up to the challenge of the coronavirus labour market crisis, the think tank warned that while these sectors were expected to enjoy something of a bounceback when they reopened at the end of this week, ongoing social distancing measures were likely to have a dampening effect. It noted that trips to the shops in France and Germany were still down 17 and 13 per cent respectively, despite both countries having reopened their economies significantly more than the UK.



The think tank proposed a 10 per cent subsidy on all labour costs in the worst-hit sectors, capped at £2,500 a year, which it estimated would cost the taxpayer £5bn a year.

Alternatively, the minimum earning threshold before employers were required to start paying national insurance contributions could be increased to £15,000 in these sectors, it said. It estimated this would cost the taxpayer £1.3bn a year. However, it said this would not be as effective in preserving jobs through a subsidy.

The report added that, as well as preventing job losses, more needed to be done to encourage those losing jobs in sectors such as hospitality and retail to take up work in other areas of the economy. The report said outflows of workers from the hardest-hit sectors was “taking place on such a scale and speed... that we should be cautious about assuming they automatically translate into inflows into other sectors”.


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“Without significant policy action, lasting unemployment or inactivity may be a more likely result for many,” the report warned, calling for public investment in new jobs and more training opportunities for younger workers.

The report added that, over the last decade, three-quarters of those who had lost jobs returned to work in the same sector – something that might not be possible as the economy recovers from coronavirus. It said those most likely to be affected by the outbreak were the least likely to travel significant distances for new work, and were among the lowest qualified in the labourforce.

Nye Cominetti, senior economist at the Resolution Foundation, said a second wave of unemployment as the furlough scheme came to an end could leave Britain with the highest levels of unemployment in a generation.

“Britain is slowly emerging from the lockdown that brought the economy to a halt and sent employment tumbling. But we are a long way off returning to business as usual, and its jobs crisis is far from over,” he said. “The success of the job retention scheme in protecting family incomes has shown why it pays to be bold with policy decisions. That same ambition is needed in the next phase of the crisis.”

Cominetti added that major public investment in areas such as social care and retro-fitting homes could increase job creation while creating other social benefits such as supporting an ageing population and addressing climate change.

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