Job retention schemes in Europe and the United Kingdom.
Covid–19 has had a profound impact on health, social and economic outcomes around the world. The global economy is projected to contract by 3% in 2020 which is significantly more than the global recession in 2008–2009.
Government financial support has varied across the globe and this article will explore the various approaches to job retention schemes, known as ‘furlough’, in Europe, the United Kingdom (UK) and Northern Ireland.
The European picture
It is estimated that over 40 million workers in some of Europe’s largest economies, have applied for a form of government salary compensation scheme.
The French government, implemented a
‘temporary unemployment’ programme to reduce redundancies, lay–offs, and widespread financial hardship. The scheme pays government subsidies to companies to fund the salaries of those unable to work as a result of the pandemic. The French government has expanded this programme past the initial timeframe and the scheme may continue until 2020. French ministers in favour of the change argued that many returning to work would likely receive reduced working hours and, thus, would still require state support. The government propose that expansion of the scheme will help avoid long–term unemployment whilst preserving skills and roles within the job–market.
Belgian officials have opted for a different approach to their French neighbours and discontinued their Covid–19 temporary unemployment scheme on 31.08.20. However,
support will continue to be provided to certain companies and sectors which have been particularly affected by covid–19 until 31 December 2020. In order to prove eligibility for this extension employers must either prove that they belong to a sector that is still particularly affected by the pandemic (hospitality, tourism, entertainment, etc.) or demonstrate that at least 20% of their employees will be temporarily unemployed due to Covid–19.
Italy approved similar economic measures and extended their unemployment schemes for an extra five weeks until 31.08.20. The government also provided additional financial support until the end of October for companies operating in tourism, events, amusement parks and entertainment.
The Irish government did not implement a furlough scheme and implemented an unemployment based benefit. In mid–August 2020 over 250,000 individuals were in receipt of the weekly Pandemic Unemployment Payment (PUP) in Ireland. This scheme provides weekly payments of between €203 and €350 depending on income prior to the pandemic. This scheme will be extended until April 2021.
Germany has implemented the ‘Kurzarbeit’ economic support system since the global financial crisis of 2008. Kurzarbeit has some similarities to the UK furlough scheme.
The social insurance program enables employers to reduce their employees’ working hours as opposed to laying them off. Following the pandemic,
the system has been adjusted to support sectors that experienced an economic decline due to covid–19. The scheme now provides 21 months of financial support for workers in relevant sectors. Furthermore, employers’ social security contributions for their employees have been paused. In total, it is estimated that between mid–March and the end of April 2020 approximately 20% of the German workforce was enrolled on the programme, which was significantly higher than the peak experienced in 2008 during the scheme’s inception.
The UK government furlough scheme has cost approximately £35.4 billion pounds, supporting millions of people from financial hardship during the economic crisis created by Covid–19. The government have also provided financial assistance to Small and Medium Enterprises (SMEs) and support to those who are self–employed. Our previous report on a new economic vision for Northern Ireland, outlines these issues in some detail.
Governmental financial support for the furlough scheme began to reduce from August 2020 and employer contributions increased.
There is significant concern in Northern Ireland about the impact of the furlough scheme ending. The Executive have supported the Finance Minister’s request to the UK Treasury’s Office for an extension to the furlough scheme. Whilst further financial support will support employment, this must occur within the context of wider economic policy reform.
The Executive has provided effective short–term measures to support businesses, however long–term strategic plans must now take priority. The pandemic has provided the government with an opportunity to re–assess historical weaknesses within Northern Ireland’s economy, along with the opportunity to encourage sectors that develop sustainable economic growth.
Northern Ireland is likely to experience a slow economic recovery due to high employment in sectors that will be slow to return to pre–pandemic levels of activity (e.g. hospitality) combined with historically lower levels of skills, entrepreneurship and innovation.
Occupations with the highest percentages of workers furloughed or laid off were also amongst the lowest paid in the labour market in Northern Ireland. Young people in Northern Ireland may have been disproportionately affected by the economic crisis as over 45% of total workers under the age of 25 are estimated to have been furloughed or laid off. Furthermore, the most vulnerable to permanent job loss are furloughed workers.
UK and Northern Ireland data indicates that qualification level is another risk factor for furlough and future job instability. In Northern Ireland, almost half of the total number of workers who have been furloughed or laid off have a highest qualification equal to NQF level 2 or below. The probability of a worker with a NQF level 6+ worker being furloughed or laid off is approximately half that of the general employment market.
Economic policy responses across Europe and the United Kingdom have aimed to address the immediate financial crisis associated with covid–19. Ambitious policy development must provide effective measures to contain Covid–19 and promote economic recovery. This article demonstrates the wide variation in economic responses across Europe. Some countries have focused on short–term economic relief, whilst other countries have provided long–term financial assistance to the employment market.
The request to extend furlough in Northern Ireland must be considered within the context of wider economic policy reform. Whilst additional funding would be welcomed by many, our recent report highlighted the need for wider reform in public services. The Executive must now agree its priorities for recovery. It needs to bring the focus, ambition and unity that – for the most part – it brought to tackling Covid and direct them to all Northern Ireland’s major concerns. There cannot be a return to the policies of the past or the previous ways in which government worked. Change is needed.
Please see here for an overview of our twelve priorities for recovery following Covid–19.
Joshua Coleman– Research Intern
Dr Ben Harper– Research Manager