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Only 230,000 jobs will be saved by Rishi’s new Job Support Scheme

The IPPR think tank estimates that 1.8 million viable jobs will be lost when the furlough scheme is replaced by the Chancellor’s new Job Support Scheme at the end of the month.

The key flaw in the Job Support Scheme identified by IPPR’s research is that only a narrow set of workers earning between £625 and £987 a month would be expected to benefit. Those who fall below the lower bound do not qualify for the Job Retention Bonus and the bonus is too small to be an incentive to keep workers earning above the higher band. This means only about one in ten workers currently on furlough could benefit from the current job support schemes.

The think tank previously predicted that two million viable jobs will still need protecting when the Job Retention Scheme (furlough scheme) winds up at the end of October. This suggests only 230,000 of these jobs will actually be preserved by the new scheme announced by the Chancellor in his Winter Economic Plan, according to IPPR analysis.

The IPPR report urges the Chancellor to redesign the Job Retention Bonus and the Job Support Scheme to preserve more viable jobs. Researchers say that this could be achieved by converting the deadweight one-off Job Retention Bonus payment into a monthly payment proportional to wages for hours worked part time (up to a ceiling of £2,500). The Job Retention Bonus should be targeted only at those firms that qualify for the Job Support Scheme and should be extended to align the time they are available for.

IPPR says this redesigned scheme will act as a subsidy for part-time work and encourage work sharing, rather than layoffs, until demand recovers.

The report says that the savings generated from this redesign should be used to increase the generosity of the Job Support Scheme. IPPR suggests the government’s contribution to non-worked hours could be increased by 10 percentage points (from 33 per cent to 43 per cent), thereby reducing the employer contribution by the same amount. This will further boost job retention at struggling firms.

The repurposed and extended Job Retention Bonus together with increased government contribution would cost £7.4 billion, slightly less than the money set aside for the Job Retention Bonus (£7.5 billion). This is due to it being a proportional payment for firms that need it, rather than a blanket deadweight payment to every firm that furloughed staff during the pandemic, according to IPPR analysis.

Carsten Jung, IPPR Senior Economist, said: “A design change to employment support schemes could save hundreds of thousands of viable jobs and hugely improve value for money. It would target resources at those firms that truly need it rather than paying out money to all firms that used job support schemes at some point – including those that are now doing fine or even profited from the pandemic.”

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