A new jobs miracle needs to be laid on firmer foundations than the last

Published on 8 June 2020

We need policies directly focused on job creation and supporting people - especially young people - to find jobs, writes Paul Johnson.

It looked like good news. Last week the Office for Budget Responsibility revised down its estimate of the cost of the coronavirus job retention scheme — that’s the scheme under which the government pays 80 per cent of the wages of furloughed workers — by a cool £24 billion. It now expects it to cost a “mere” £60 billion.

It’s worth dwelling on the scale of those numbers for a moment. They are staggering. We still look set to spend considerably more than the entire annual defence budget on a few months of the furlough scheme. The £24 billion “saving” is equivalent to the entire social care budget for a year.

The reason, though, that the number-crunchers at the OBR revised down their estimates so dramatically was not because they now think that fewer people are being furloughed. Not at all. We know that getting on for nine million jobs had been furloughed by the end of May. The government is thus paying the wages of about a third of the private sector workforce. If anything, that’s more than the OBR had anticipated originally. The change in estimates arose because the average wages of those being furloughed are much lower than they had expected.

It looks like the average earnings of each furloughed worker was only £320 a week, way below the economy-wide average and nearer the average for part-time workers than for full-time workers. Even accounting for the fact that wages in locked-down sectors such as retail and hospitality are lower than those elsewhere in the economy, it looks like employers are choosing to furlough their lowest-paid staff and those who were working fewest hours pre-lockdown.

This is not good news. These are the people most likely to become unemployed as the present furlough scheme is unwound and they are the least resilient both financially and in their capacity to find other work.

The numbers affected could be very big indeed. We have seen the start already. The claimant count measure of unemployment recorded its biggest ever rise in April, up from 1.2 million to 2.1 million in a single month, its highest level for a quarter of a century. The prime minister has warned of much worse to come.

The young, the low-skilled, the poorly paid will find it doubly hard to find alternative work because so many of the jobs being lost are in exactly those sectors of the labour market, in hospitality and retail for example, that have been accessible to them. That’s going to make the tried-and-tested active job search programmes run through Jobcentre Plus, which have been effective in helping to maintain the jobs miracle of the past decade, much more challenging to deliver.

Even so, the first thing that government should do is make sure that Jobcentre Plus is adequately resourced. Advisers will be dealing with far more people and in tougher circumstances than for a long time. It may not be the whole answer, but it will remain an important part of the answer, a part that should be neither underestimated nor neglected as bigger, sexier ideas take the limelight. Nor should we forget the Jobcentre Plus staff. I doubt anyone will go outside to clap them on a weekly basis, but they will be the most key of key workers over the months to come.

We also should not forget that the most important contributor to bringing unemployment back down will be a vibrant and growing economy. Policies that look like they have nothing to do with employment may be the most effective at job creation. Over the longer term, that should include anything that improves our education system, planning laws and tax system.

Right now we will need policies more directly focused on job creation and supporting people, especially young people, to find jobs. The prime minister’s suggestion last week that an apprenticeship should be guaranteed to every young person is one indication that the government is now paying attention to this. And it appears to be thinking big.

Yet here’s where we need to be careful. Boris Johnson’s got part of the right idea. Effective training schemes and schemes to get people into work need the active involvement of employers — and apprenticeships meet that requirement — but effective schemes also need to be deliverable and of high quality. They should not do too much damage to longer-term priorities.

The apprenticeship system has just gone through an upheaval. It has been traumatic and the number of openings has fallen, but there are signs that quality is rising. It’s touch and go, but we may just have the basis for a successful renaissance of apprenticeships in this country. The risk of a guarantee for all is that we end up in a numbers game as government rushes to meet its commitment by pouring good money after bad and counting every dubious job or training opportunity as an apprenticeship, undermining both quality, effectiveness and the apprenticeship brand.

Nevertheless, it is part of the right idea. More support will be needed for apprenticeships, at a minimum to stop the number of openings falling. Schemes such as the rather successful Future Jobs Fund, a substantial employment subsidy for unemployed young people introduced during the last crisis, probably will be needed, too, as will investment in further education, programmes to deliver infrastructure investment and much more besides.

The jobs miracle of the 2010s was too dependent on relatively low-paid and low-skilled jobs in sectors that may now be in retreat. It was a model that left too many people without the resilience in either financial capital or transferable skills to cope with the present crisis. Any new jobs miracle will need to be based on firmer foundations.

This article orginally appeared in The Times and is used here with kind permission.