By Jay Wiggan

August 8 2020

The introduction of the Coronavirus Job Retention Scheme (CJRS) in March 2020 was broadly welcomed as a useful labour market policy innovation that held out the possibility of encouraging compliance as the British Government shut down swathes of the economy in response to the COVID 19 pandemic and avoiding business bankruptcies and job losses. Months later, it is reasonable to conclude the support provided by the CJRS to meet the costs of 80% of the wages of furloughed workers up to a maximum of £2500 per month functioned as intended. From July the CJRS will permit employers to bring back workers previously furloughed to work part time[i]. The maximum amount that can be reimbursed by the state to employers reduces from 80% of the wage capped at £2500 to 60% capped at £1875 (with employers to make up the difference to £2500) in October when the CJRS is scheduled to end with the maximum amount payable proportionate to the hours a person is furloughed.[ii]

 

Yet, as Paul Gregg[iii] has suggested, the rapid decline in vacancies and rise in the claimant count of unemployed people carries disturbing echoes of the first half of the 1980s, rather than the 2008-09 financial crisis and subsequent recession. The likelihood of mass redundancy and rapidly rising unemployment as the CJRS closes has led to calls for job guarantees and expansion of apprenticeship places as well as additional investment in Jobcentre Plus[iv]. Such measures could provide valuable support, but are targeted at the stock of already unemployed people and it would be useful to have an intervention that stemmed the flow of people into unemployment in the first place. The CJRS is the mechanism by which this has been achieved so far and rather than completely withdraw the scheme in the autumn one option available to the Government is to extend and reform the scheme to better facilitate short time working. The operation of expansive short time working schemes for a considerable period of time is not without precedent as a response to a cratering economy, rapidly rising unemployment and labour market restructuring in Britain.

1980s

The Temporary Short Time Working Compensation Scheme

One example we can look to takes us back to the last time a recently elected Conservative Government committed to the radical transformation of Britain’s political economy found itself faced with mass unemployment. Unlike in June 2020 however, in June 1980 a short time working scheme had already been in operation for two years, with the introduction in 1978 of the Short Time Working Compensation Scheme, followed by its replacement in 1979 by the more expansive Temporary Short Time Working Compensation Scheme (TSTWCS). The TSTWCS scheme had been established in the dying days of the Labour Government of James Callaghan as one component in a suite of job creation, work experience, training and employment subsidy programmes that were broadly continued by the incoming the Conservatives. That’s right; under the radical right Conservative Government of Margaret Thatcher the state provided financial support to companies to enable a portion of their workforce to be placed on a shorter working week.

 

The objective of the TSTWCS was to stem the flow of labour moving into unemployment by encouraging companies to substitute short time working for planned redundancies. Under the scheme a company would identify how many working days would be lost to the company as a result of the (proposed) redundancies. The common example used to explain how this operated in practice is to consider a given number of workers about to be made redundant[v]. For our purpose here let us say 10 potential redundancies; if we assume a five day week this equates to a potential loss of 50 work days for the company. Rather than proceeding with the loss of the 50 work days through redundancies the TSTWCS could be applied for support to transform this concentrated loss of staff into a reduction for example of one working day per week for 50 staff members or two days per week for 25 member of staff. From April to June 1979 companies could claim support under the TSTWCS for a threatened job for up to 12 months and receive a reimbursement of 75% of wage costs for short work days. Subsequent changes altered these arrangements and so at different points in the remainder of the life of the scheme the duration for which support could be claimed for short work was variously set at 6 months or 9 months. Similarly the proportion of wages reimbursed by the state was reduced to 50% from November 1980[vi]. Contrary to the impermanence implied by the name the TSTWCS was to last five years. In the depths of the 1980-81 recession the numbers on short time peaked at almost 1 million[vii] and then gradually fell back and tailed off before the programme came to an end in 1984[viii].

 

The level of support provided by the British state to facilitate a reduction in work intensity would until recently have seemed almost fanciful given the narrow vision of labour market interventions in recent years. If we had not recently experienced the introduction of the CJRS the fact that such a programme was expanded by a radical Conservative Government generally unsympathetic to interfering with ‘market’ forces might seem even more striking. It is perhaps less surprising when one considers the objective of New Right Ministers was to hold power long enough to enact the economic and social policy reforms they deemed necessary to remake Britain’s economy. In a context in which high unemployment was still perceived as an electoral threat the TSTWCS was a mechanism, amongst a broader package of special employment programmes, the Conservative Government could use to moderate the flow of people onto the unemployment register and seek to dampen public concern about unemployment. On the one hand then, the TSTWCS reminds us that (some level of) state support for short time work to prevent redundancies is entirely feasible in Britain and is perfectly compatible with centre left and centre right governments. Indeed, Autonomy have recently proposed such a thing, for struggling industries. The above example offers a guide as to how such a scheme has operated in the past and could facilitate reduction in working hours in the present. Yet, the TSTWCS also provides a warning for advocates[ix][x] of a reduction in hours of paid work that policies supporting short time work as a crisis response do not necessarily lead to long term changes in what is regarded as full time paid work.

References

[i] Adam, S. (2020) Extending the Coronavirus Job Retention Scheme to short-time workers, IFS Briefing Note BN291, https://www.ifs.org.uk/publications/14859

[ii] HM Revenue and Customs (2020) Changes to the Coronavirus Job Retention Scheme, Policy paper, June 23rd , https://www.gov.uk/government/publications/changes-to-the-coronavirus-job-retention-scheme

[iii] Gregg, P. (2020) Unemployment: The Coming Storm,  17 June, https://blogs.ucl.ac.uk/cepeo/2020/06/17/unemployment-the-coming-storm/

[iv] Evans, S. and Dromey, J. (2020) Emergency exit: how we get Britain back to work, Learning and Work Institute, https://learningandwork.org.uk/resources/research-and-reports/emergency-exit-how-we-get-britain-back-to-work/

[v] Metcalf, D. (1982) Alternatives to unemployment: Special Employment Measures in Britain, Policy Studies Institute/ Anglo-German Foundation, London.

[vi] Richards, J. (1987) ‘The Temporary Short Time Working Compensation Scheme’, Applied Economics, 19: 111-125

[vii] Ibid.

[viii] Hansard (1985) Training and Special Employment (Cost), Written Answers 15th January 1985, House of Commons, Volume 71, Column, 77.

[ix] Open Letter to the Chancellor of the Exchequer, June 20th 2020, https://www.4dayweek.co.uk/latest-news

[x] Ryle, J. (2020) Why the Conservatives should support a four day working week, https://www.spectator.co.uk/article/why-conservatives-should-support-a-four-day-week

Jay Wiggan is a Senior Lecturer in Social Policy at the University of Edinburgh. His research concentrates on the politics of labour market policy and the governance of public employment services and social security administration.