Labour must call for a jobs guarantee for workers after the furlough scheme ends

The Office for Budget Responsibility has issued a brutally grim assessment of what lies ahead for the UK economy. It could shrink by a shocking 35% by early summer, with two million individuals joining the ranks of the unemployed. The OBR emphasised that this was not a forecast. But with 1.6 million people having already signed up for unemployment benefits in the past month alone, its dire analysis of the economic and social impact of the coronavirus crisis already feels depressingly real.

The government promised to do “whatever it takes” to prevent such a catastrophic outcome. To save as many jobs as possible, they announced the job retention scheme – an unprecedented move that has seen the state pay the wages of workers who have been furloughed rather than made redundant. The scheme, set to last for three months, has been deliberately designed to protect people’s jobs and earnings, and to ensure that they can heed public health instructions to stay at home.

It will have a huge uptake by the end of the health crisis, with the Resolution Foundation think tank estimating that nine million workers will be furloughed. That is something to applaud, as it shows that the scheme has been successful in its stated aims. However, questions are now being raised as to what happens to these workers once the scheme ends.

The Confederation of British Industry has warned that businesses will be forced to start making people permanently redundant this Saturday if the government does not confirm an extension of the furlough scheme, given that there is a minimum consultation period of 45 day for redundancies of more than 100 employees. ITV’s Robert Peston has also sounded the alarm: “Many employers tell me, big and small ones, if the furlough scheme is simply switched off in three months, they will have no choice but to sack many of those who are currently furloughed.”

How do we stop the truly apocalyptic scenario of up to nine million furloughed workers joining the huge numbers that have already been made unemployed? The answer is a jobs guarantee that promises decently paid work for every worker affected by the pandemic for a period of up to 12 months. This would see the government temporarily pay the wages of workers who have been furloughed and of those who have been made unemployed. Jobs would pay at least the real living wage, or the comparable salary to a similar role – up to a maximum of £2,500 a month.

The jobs guarantee would protect workers in two significant ways. First, by helping employers to keep those on who have been furloughed and to slowly transition off it. If you are a furloughed worker, you are prohibited from doing any work for your employer. A jobs guarantee would remove that condition and allows businesses and people to get back to working life – essential to our recovery.

Second, it would support everyone who has been made unemployed due to the crisis. For these individuals, the jobs guarantee would incentivise the creation of new jobs by covering the wage costs for host organisations. Employers would have to prove these jobs were ‘additional’ through their payroll data and guarantee every participant an interview for any permanent positions advertised.

The jobs guarantee would last up to 12 months but could vary by sector. Its goal would be to target those areas of the economy hardest hit by the lockdown and seeing the most job losses. For instance, the OBR assessment shows in the three months up to June growth collapsing by 85% in accommodation and hospitality, and by 70% in construction. In contrast, there will only a 5% drop in financial and insurance services.

The scheme should also reflect the reality that different parts of the economy will return to normal service at different times. As we are seeing in other countries that have begun easing restrictions, it will be gradual and phased with some sectors and activities – such as hospitality and tourism – not resuming until much later. Even then, it’s very likely that the economy will be affected by considerable behavioural changes, such as people wanting to avoid big crowds and go out less. It’s one reason why so many sporting events that were scheduled for the summer months have been cancelled.

A business working in the tech world might only get support from a jobs guarantee for its workers for an extra month post-furlough, whereas airlines, hotels, restaurants and cafes will likely need it for several months. This proposed scheme would not be cheap. But the price of inaction is far more severe, given that unemployment is one of the principal drivers of poverty and already costs the UK £78bn every year, according to the Joseph Rowntree Foundation.

Keir Starmer has rightly argued that the government needs to publish an exit plan outlining a future beyond lockdown in order to maintain the public’s confidence and morale. Any economic exit strategy must explain how workers will be protected and what comes next after the furlough scheme ends. Labour must ensure that a jobs guarantee is at its heart.