The narrow corridor

The Chancellor's ‘Winter Economic Plan’ included a redesigned version of the Job Retention Scheme – the Job Support Scheme. Together with the Job Retention Bonus (JRB), which is due to be paid out at the end of January, its purpose is “to protect viable jobs in businesses who are facing lower demand over the winter months due to coronavirus”.

With their current design, the JSS and JRB are unlikely to achieve this objective as they do not make it sufficiently profitable for firms to preserve viable jobs on a part-time basis over winter. We find that the new schemes will only save 230,000 of these jobs. As such, 1.8 million viable jobs which could otherwise be preserved will be lost, at great individual and wider economic cost.

To prevent these job losses the government should make the Job Retention Bonus (JRB) proportional to wages for hours worked part-time (up to a ceiling of £2500). This would replace the flat payment with a proportional one, paid in monthly instalments instead of a one-off. This ‘JRB+’ would have the advantage of benefitting those workers who need support and are outside the narrow corridor of wages for which the scheme currently acts as an incentive to keep workers on. The timing of the JRB+ should also be aligned with that of the JSS, to make sure that their joint benefits are effective until April.

Crucially, this is a design issue and not a question of overall funding. We estimate the JRB+ together jointly with the JSS would cost slightly less than the money set aside for the JRB.