COVID & Unemployment

How the UK has kept unemployment down — for now

Victoria Craig Jul 7, 2020
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Government furlough programs and business loan and grant schemes allowed U.K. companies to keep their staff on their payrolls even if their doors were shut. Ben Stansall/AFP via Getty Images
COVID & Unemployment

How the UK has kept unemployment down — for now

Victoria Craig Jul 7, 2020
Heard on:
Government furlough programs and business loan and grant schemes allowed U.K. companies to keep their staff on their payrolls even if their doors were shut. Ben Stansall/AFP via Getty Images
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In the U.S., the number of Americans without a job jumped to more than 20 million in April after COVID-19 forced businesses to close as whole industries came to a standstill.

In the months since, some jobs have been added back to the U.S. economy, though the unemployment rate, at 11%, is still far higher than it was pre-crisis.

But not every country has dealt with the same problem. The United Kingdom has been able to keep its unemployment rate from skyrocketing during the crisis.

That’s because government furlough programs and business loan and grant schemes allowed companies to keep their staffs on their payrolls even if their doors were shut.

Back in March, when the coronavirus pandemic forced British shops, restaurants and pubs to close, the government stepped in with unprecedented support.

It announced billions of dollars in loans and grants for businesses and self-employed workers and allowed companies to apply for a furlough program that would cover 80% of an employee’s wages.

So far, that’s meant businesses have avoided laying off 9.3 million workers.

Nermine George, owner of the Le Chalet cafe in the northern English city of Leeds, said those programs were essential for her business’ survival.

“To allow us to pay the staff with the furlough was really a huge help,” George said. “It was vital for their own survival, and for us as a company we have the same staff. So when we start again, our training is only on the new procedures.”

She was able to retain all her staff, but she’s not out of the woods yet.

The cost of these programs, according to the U.K.’s Office of Budget Responsibility, is set to cost the government more than $371 billion this fiscal year.

To try and limit ballooning debt, in August the government will taper its contribution to the job-retention scheme and ask employers to contribute a bigger share of the 80% salary coverage. Starting in August, employers will pay National Insurance and pension contributions, and from September, they’ll have to pay 10% of their furloughed employees’ salaries. By October, that rises to 20%.

To accommodate the change, George is weighing the need to reduce working hours for her employees.

“The staff are very supporting,” she said. “And, actually, I get messages thanking us for doing it for us. And I say, ‘It’s the government helping us more than me.’ But I’m trying to work smartly to make everything work together.”

But with more financial responsibility shifting to employers, Tony Wilson, director of the Institute for Employment Studies, said that could lead to more layoffs as businesses try to cut costs later on. He said job losses could total 4 million or 5 million by early next year.

“I think the government is going to have to shift to helping people out of jobs finding new jobs, retraining to help people find jobs in growing industries, investment in giving people the tools to look for work, prepare for work and apply for new jobs,” Wilson said.

For George, it’s one day at a time.

“Yes, we rely on the government, but we have to be resilient and find solutions for how to survive,” she said. “Nothing is guaranteed. We might have to change location. We might have to change the model to be an online shop and delivering.”

For now, she and her team are keeping busy with local afternoon tea and deli deliveries until, as she says, the cafe can come back with a big bang.

COVID-19 Economy FAQs

Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?

This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.

Could waiving patents increase the global supply of COVID-19 vaccines?

India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.

Can businesses deny you entry if you don’t have a vaccine passport?

As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.

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