The Government Is Not Paying Nine Million People's Wages

7th August 2020

From the Resolution foundation 1st August 2020.

The number of people currently furloughed is less than half this amount.

From 1st August, employers will start contributing towards the wage costs of furloughed employees. This significant first step in the phasing-out of the Coronavirus Job Retention Scheme (JRS) carries real risks of increased redundancies - particularly for those in the hardest-hit sectors - and so attention should also focus on the important question of just how many people are furloughed today.

Despite significant easing of the lockdown and attention rightly focused on the large number of redundancies announced of late, it's still common to hear the claim that nine million employees are being paid right now through the scheme. However, this is simply not true. Although it is true to say that in total nine million people have been furloughed for at least one three-week period since March, this cumulative figure does not reflect what's happening right now. Rather, all the evidence suggests that the number of people furloughed today - as employer contributions towards furlough pay kick in - is likely to be at most half, and maybe even as low as one-third, of this nine million total.

For the millions of workers who have returned to active employment over the past three months, the JRS has served its purpose well. But it may be the case that more than one million employees in the hardest-hit hospitality and leisure industries are still furloughed. It's in this context that the impact of the across-the-board increases to employer contributions in August, September and October are a concern. Delaying future increases in JRS contributions for the hardest-hit sectors would help reduce the rise in unemployment forecast in the autumn.

There are not nine million people on the Coronavirus Job Retention Scheme today

The Coronavirus Job Retention Scheme (JRS) has been a very successful and well-implemented policy intervention. It has supported household incomes in the face of an unprecedented shock, and maintained the crucial attachment between employees and their employer. However, for many firms and employees it will have only ever been used on a temporary basis at the height of the economic shutdown. Many furloughed employees have since returned to work (some on ‘flexible furlough' for part of their working hours), and a smaller group will have been made redundant already, even before today's introduction of employer contributions.

But you wouldn’t know this from listening to our politicians and broadcasters. The Prime Minister, claimed on 24 July 2020 that his Government was "supporting the livelihoods of 9 million people now through furlough". Similarly, the BBC reported on 28 July 2020 that "9.5 million people are using the scheme, the same as a week ago".

This is wrong. Although the cumulative take-up of the scheme since its launch is in excess of nine million, the actual number of people using the scheme right now - on the day that employers are now required to start contributing to the payroll costs of furloughed employees – is undoubtedly much lower.

Figure 1 shows the increase in cumulative JRS take-up over time, as published by HM Revenue and Customs. These cumulative figures are now entirely meaningless when it comes to understanding the path of the economic recovery or the numbers of people who have been furloughed for a prolonged period of time.

Read the full article at - https://www.resolutionfoundation.org/publications/the-government-is-not-paying-nine-million-peoples-wages/