Carsten Jung, senior economist at the Institute for Public Policy Research (IPPR) Centre for Economic Justice, argues YES
The government should extend the furlough scheme until the labour market has recovered. This is because – in this environment of continued uncertainty – businesses and workers need a safety net for a strong recovery.
Currently, there is still an ‘employment gap’ of about three million jobs. This will shrink by the autumn as more of the economy recovers. But, with restrictions now in place for at least another month, there will still be some sectors and businesses that will not have fully recovered by then. This will reach far beyond hospitality, to include transportation, wholesale, retail and administrative sectors. For many of these businesses, the scheme will be an all-important lifeline.
Therefore, as with the virus response strategy, the government should follow the (labour market) data, and not set arbitrary dates. In other words, keep the scheme until the recovery is complete. If the scheme is terminated early, while viable businesses are still facing subdued demand, possibly hundreds of thousands of viable jobs could be lost. At the same time, when the employer contribution kicks in, it ensures that only businesses with a viable future have an incentive to use the scheme.
Businesses have been clear: the furlough scheme so far has been spectacularly successful. It helped employers and workers bounce back once the economy reopened, quickly and at a cost that, it is now clear, is seriously good value for money.
Between January and April, 1.7 million people have come straight back to work. And four in ten people on furlough are using it flexibly, working part-time while activity is still below the normal level. All of this shows that pulling the plug on this innovative support scheme too early would be damaging for businesses, workers and growth.
Len Shackleton, editorial and research fellow at the Institute of Economic Affairs and professor of economics at the University of Buckingham, argues NO
A further extension to the furlough scheme would send out the wrong signal, that we could stay in semi-lockdown indefinitely by running up more and more public debt. The government should focus on ending all restrictions on economic activity as soon as possible rather than give people the impression that the Coronavirus Job Retention Scheme will be, or can be, extended indefinitely.
Around £70 billion has already been spent on keeping millions of workers on furlough. Although the scheme was necessary in the early stages of the pandemic to offset the shock to many viable businesses which were forbidden to operate, we need to recognise that after all this time many of the jobs still protected by the furlough scheme are not going to come back. For example, many London entertainment venues and attractions depend heavily on foreign tourists, who will not be coming back in numbers any time soon, if ever.
The economy has changed dramatically in the last 15 months, as people’s lifestyles have changed with the switch to home entertainment, online shopping and private rather than public transport. And increased working from home is going to decimate the businesses which have grown up to support office workers.
We have to look for different ways of getting people back into work, instead of pouring more money into the existing scheme. We must encourage people to take the new jobs appearing in the economy – and vacancies are running at high levels, with many companies reporting recruitment problems – as businesses explore novel opportunities.
Reskilling and retraining should be a priority for some who cannot easily switch to new jobs, and the government is providing support for this. It may be that we should temporarily increase redundancy compensation to help some workers, while some enhanced support for theatre, opera and ballet may make sense, to preserve a core of cultural workers for the future.
But we cannot just attempt to freeze the existing job structure by keeping people at home indefinitely at the taxpayer’s expense. There have been permanent changes in the pattern of demand for labour – as there are all the time, with or without pandemics – and we must adapt to the new economy.
