Does Furlough Work for Workers?

The Chancellor’s extension of the Furlough scheme came as somewhat of a surprise to many.

Most of us had been fully expecting the Job Support Scheme to take over from the Job Retention Scheme on October 31st 2020. However, the Job Support Scheme has now been postponed until March.

As many will remember, the Chancellor’s reasoning for introducing the Job Support Scheme was to allow people to remain in ‘viable’ jobs. The problem with this, according to opposition, was that he had not defined which jobs he considered to be viable. Did this mean that those sectors which had not been allowed to reopen were now forever unviable? Furthermore, the opposition have also stated that the extension of the furlough scheme came too late. As a result, businesses were forced to make redundancies and, therefore, many ordinarily viable jobs were lost.

What does the data say?

According to the ONS data, unemployment for July to September 2020 stood at an estimated 4.8%. This is compared to an estimated 3.9% for the months February to April 2020. The figure was estimated to be the same for the months April to June 2020.

This suggests that the unemployment rate was fairly stable until June. However, the February to April and April to June ONS reports also note that employment was weakening with self-employed and part-time workers seeing reductions. But these didn’t cause unemployment figures to rise due to increases of those workers being out of work but not looking for work.

Has the furlough scheme protected jobs or just delayed the inevitable disappearance of unviable ones?

From the ONS percentages, it does look like the furlough scheme was working. At least for those in permanent employment. And, had it not been for the second lockdown, it looks as though the Chancellor’s reasoning may have worked out. The recruitment market reports showed that the jobs market was back to pre-covid levels prior to the second lockdown.

Unfortunately for the Chancellor, it wasn’t entirely unexpected that Coronavirus levels would necessitate another lockdown – whether under the tiered system or at national level. The ONS figures suggest that it would have been prudent to extend the furlough scheme and, if under the tier system, introduce the Job Support Scheme at the same time.

As we know, the furlough scheme was not extended until the last moment. Since the rise in recordable unemployment came in the three months to September, it does seem to correlate with opposition assertions that the furlough extension came too late. With no Covid solution on the horizon, at the time, and an expected second wave, businesses were left with little choice but to make redundancies.

To put all of this into plain terms, 314,000 people have been made redundant according the BBC. While the actual number is a bitter pill to swallow, particularly for those who have been made redundant just before the second lockdown, it does seem that the furlough scheme itself was effective at saving jobs. The ONS figures show that 2.5 million workers are still reliant on furlough.