Another day, another onslaught of depressing news for the UK – this time around the unemployment rate. The latest data from the Office for National Statistics (ONS) shows that the rate has grown to 4.1 per cent in the three months to July compared to 3.9 per cent before.
While some analysts have pointed out that this is low by historic and international standards, Rishi Sunak will no doubt be having sleepless nights wondering what happens when the Government’s furlough scheme comes to a close; how much worse will the current figures get?
Moreover, Conservatives as a whole need to think critically about how to help young people, who have been worst affected by the economic turmoil. The ONS data showed that people aged 16 to 24 suffered the biggest drop in employment, a trend that has been consistent throughout this crisis, and others; in 2008, it was today’s millennials taking the brunt – hence why the “youth vote” has been so low (and will become more of an election stumbling block for the Tories as this demographic heads towards the 40s and 50s age bracket without home ownership, and the rest).
So what does Sunak do about all this? (Incidentally, he has not stipulated his next budget date, with rumours it could be in January). The first thing to say is that he has already released some enormous measures to support young people. These include a £2 billion “Kickstart Scheme”, whereby the government will pay for employers “to create new 6-month job placements for young people who are currently on Universal Credit” – in the hope that this can create hundreds thousands of new jobs.
The Government is also giving businesses £2,000 for each new apprentice hired under the age of 25, a £111 million investment to triple traineeships in 2020-21 and £17 million funding for sector-based work academy placements, among other measures.
These are all steps in the right direction; for years it has been said that the UK is too focused on university degrees, while the economy demands more technical/ practical skills. The tech sector, particularly, is growing and needs young people to fill the gap. Perhaps it is the case that Sunak will expand these sorts of training schemes even further.
What many want to know is whether the Chancellor will extend furloughing, but he has repeatedly ruled this out, saying: “Indefinitely keeping people out of work is not the answer.” Given that the scheme has already cost the taxpayer an estimated £60 billion, one suspects many quietly want it to come to an end. Besides, it’ll be young people picking up the eventual bill – however much of a support it appears right now.
While ruling out further furloughing, Sunak did promise, however, that “we will be creative in order to find ways of effectively helping people.” He has certainly proven himself to be imaginative, winning hearts and stomachs with the Eat Out to Help Out Scheme, so the question is what this next phase of creativity could look like.
One suggestion that has been made for the UK is that it adopts a model similar to that in Germany, to stave off huge job losses. Germany uses something called the Kurzarbeit job subsidy, which the country has had since the early 20th century, and is estimated to have saved around half a million jobs in the financial crisis.
Whereas the UK’s furloughing scheme meant businesses asked their employees to stay home for months on end, Kurzarbeit invited them back to work – albeit on reduced hours. Using the scheme, German businesses can take employees on for the time they need, and the government then pays workers a percentage (around 60 to 80 per cent) of any lost hours.
The key advantage of the scheme is its flexibility – as it allows companies to respond to fluctuations in their business; they can reduce workers’ hours if they have a loss of trade, for instance, and up again for vice versa. It is also far less expensive than furlough, costing around €33.5 billion so far – with plans for it to be extended until the end of 2021.
France, too, has something similar to the German system, called “partial unemployment” or “partial activity”. Using this scheme, businesses can cut their employees’ hours by up to 40 per cent for up to three years, but they will still receive nearly all of their standard salary – which the government pays a percentage of.
While Sunak has offered a “jobs retention bonus” to get employers to bring staff back from furlough – whereby they received £1,000 for every staff member retained – it may be the case that the flexibility afforded by the German and French systems is what can help businesses feel more confident about hiring again.
There will be other radical proposals put forward as to how to tackle the issue, focussing on how to further incentivise employers to take on the young, whether that’s targetted changes to their National Insurance contributions, or something more inventive.
Another thing to add is that non-employment related measures can greatly help young people feel more secure in their lives. Things as basic as reducing council tax or travel would certainly improve matters for a generation of renters.
And lastly I would write that much of helping young people cannot be done with a budget. It ultimately relies on the Government – and society – realising that repeatedly opening and closing the economy means that this demographic will take the brunt; it requires us to have more difficult conversations about what price we will pay for knee-jerk responses to rising cases. As today’s data shows, the economic consequences are harsh indeed.