Kristy Dorsey: What next for workers as final hours tick down on furlough?

After 529 days, including a period of winding down, the UK Government is clearly of the opinion that the time has come for an end to its enormous wage bailout programme.

The coronavirus job retention scheme, as it is formally known, has provided approximately 2.3 billion working days of wage support at what the Office for Budget Responsibility (OBR) has estimated to be a cost of £66 billion – about one-fifth of all the government’s expenditure on its response to the Covid crisis. Chancellor Rishi Sunak has been forced to push back its end date five different times. Reading between the lines, his thinking is evident: enough is enough.

Or is it? Reports suggest the Chancellor is preparing more “customised support” to help match newly-unemployed workers with more than one million job vacancies across the UK, with details expected to be announced in next month’s Budget.

Aviation bosses have warned of another wave of redundancies without continued furlough support for the sector

This will likely fall short of suggestions by the TUC and others, who have called for furlough to be used as the basis for a permanent short-time working programme of the sort seen in countries such as Germany. The aim would be to help firms hold on to staff during periods of a temporary reduction in demand, or provide time for re-training in the event of lasting decline.

Citing figures from the Office for National Statistics (ONS), the Resolution Foundation has estimated that about one million people are still on full or partial furlough as of today. Many of those people will have been employed in the airline and travel sector, where the loosening of restrictions on international journeys came too late to save the tourism sector’s crucial summer period.

Bosses from these industries have argued that furlough should be extended for sectors such as theirs to avoid a second mass wave of job losses. Whether the Chancellor has taken heed of this and is factoring it into his package of “customised support” is uncertain. In any event, an announcement in the Autumn Budget on October 27 would be many weeks too late to put a halt to redundancy processes already in motion.

Furthermore, this isn’t a simple equation of one million formerly furloughed workers being cut loose to fill one million vacant jobs. Skills will not necessarily match up, and with predictions that older workers will be hit especially hard by the end of furlough, pay levels for much of the work available could be insufficient to meet many individuals’ financial commitments.

This is one of several factors cited by the MPC as it puzzles over the impact of the end of the government’s job support scheme. Minutes from the committee’s last meeting earlier this month also noted that while the number of furloughed jobs continued to decline, this was at a “materially lesser degree” than its had estimated in its August economic update.

READ MORE: Duty calls as UK officials press for the return of office staff

According to the September minutes: “Key questions include how the economy will adjust to the closure of the furlough scheme at the end of September; the extent, impact and duration of any change in unemployment; as well as the degree and persistence of any difficulties in matching available jobs with workers.”

Samuel Tombs of Pantheon Macroeconomics has cautioned that smaller employers bringing workers back from furlough may not be able to give them all of their pre-pandemic hours, thus masking the true amount of slack in the labour market. A recent report from the Institute for Fiscal Studies (IFS) suggests another dangerous variant of under-employment, with the surge in UK job vacancies being “driven entirely by low-paying occupations”.

The report’s author, IFS senior economist Xiaowei Xu, said stories about rising vacancies and labour shortages in certain areas are real. However, the recent surge in aggregate vacancies has been driven by “a small set of relatively modestly-paid occupations”.

“For people in many lines of work, new job opportunities remain well below their pre-pandemic level,” he explained.

“And it is not just the number of job openings that matters, but how many people are competing for them. After all the disruption of the past year, there are more people looking for work than before. Most jobseekers will therefore find competition to be unusually stiff.”

READ MORE: All work and low pay: The cost of poverty in employment

Another set of research out earlier this week found that 69 per cent of employers expect to make redundancies within the coming year, the majority of which will take place in the coming months. Of the 253 HR professionals and company directors questioned by outplacement specialists Renovo, 46% expect to shed staff within the next six months, while 23% anticipate doing so within six to 12 months.

Among those expecting redundancies, 84% have employees on furlough. However, the perceived threat is not explicitly linked to furlough: among those employees concerned about redundancy within the next year, 56% were not enrolled on the wage support scheme.

Half of employers and 46% of employees said the financial impact of the pandemic on business performance was their cause for concern, but other factors are also contributing to job insecurity. These include the role of new technologies in displacing certain jobs – cited by 28% of employers – while 12% also said that the move to remote and hybrid working meant some roles were no longer necessary.

With so many variables to consider, it’s little wonder the MPC has decided to hang fire on any interest rate moves until the labour market situation starts playing out through the unemployment data.

The furlough programme has been universally hailed as a success, ensuring that the worst economic crisis in 300 years resulted in the smallest rise in unemployment of any recession in living memory. What comes next is just as critical, and far less straightforward than simply paying workers to stay at home.