Thin Ice
Rishi Sunak has unveiled his Winter Economic Plan.
At its centre stands the Job Support Scheme – as detailed in our latest Policy Update – which replaces the furlough scheme. It was inspired by the German Kurzarbeit short-time work scheme, which is largely credited for keeping employment stable during the global financial crisis. Running from November to April, all SMEs will be eligible and can use it, even if they have not previously furloughed employees.
It will support the wages of people working for businesses facing reduced demand. Workers participating in the scheme will need to work at least 1/3 of their current hours and be paid for that work as normal. Employees will then be paid 2/3rds of the wages they lost by reducing their hours, split evenly between employer and government.
For example, a worker previously working a 36 hour week could have their hours reduced to 12 hours a week, but be paid as if they had worked 28 hours. From the employers’ perspective, they will have paid for 20 hours worth of work.
While enthusiastically welcomed by the CBI, Federation of Small Businesses and the British Chambers of Commerce, the Resolution Foundation isn't convinced. The think tank believes business owners won’t be incentivised to pay employees for hours not worked. And once employer NICs are factored in, it will cost a firm ￡1,500 to employ one full-time worker on ￡17,000, but more than ￡2,000 a month to employ two half-time workers on the same full-time equivalent salary.
Can you kick it?
Whether or not the Job Support Scheme works, we don’t just need to protect old jobs. We need to create news ones.
So who will create them? While large, mature businesses account for a large fraction of jobs, they aren’t where most new jobs are created. It is new businesses that create jobs, as, conditional on survival, young firms grow more rapidly than their more mature counterparts. In the US, though startups only account for 3% of employment, they account for almost 20% of gross job creation.
This is why it’s wrongheaded to exclude startups from the generous Kickstart Scheme, which subsidises wages, national insurance and pension contributions. To qualify directly businesses need to hire a minimum of 30 people, so it’s a policy aimed squarely at the biggest employers.
There’s a third-party option that circumvents the need to bring on 30 people, but I’m hearing that the ￡300 of funding third parties get for each job placement isn’t enough of an incentive for organisations to get involved. That said, you can find out who to contact at DWP here to be connected to third-party support in your region. They promise to get back to you in two days. If you do this, please let me know how it’s working – or not.
Of course, it would be a whole lot easier if they just got rid of the minimum requirement.
It's 25%
In a newly launched newsletter, Jeremy Driver makes the case for why we should pay politicians more. He thinks we should pay more across the board – from the Prime Minister, who’s on around ￡150,000, an MP on ￡81,932, or the Mayor of Tees Valley on ￡35,700. (This latter role involves heading up a Combined Authority representing almost 700,000 people and responsibility for a multi-million pound investment fund.)
Driver thinks we need more talent in politics, citing the astonishing 2012 test by the Royal Statistical Society, which saw 60% of MPs fail the basic test of working out the probability of getting two heads in a row when you toss a coin.
Of course, money isn’t the only factor when people decide whether or not to go into politics, but like Driver, I’ve spoken to some great people for whom it’s the main reason they’re sticking with the private sector. When you factor in the job insecurity and public ridicule, it’s amazing anyone wants to do the job – let alone the incredibly smart, dedicated MPs we have, for example, on the APPG for Entrepreneurship (and, of course, the Members of Parliament who have wisely signed up to this newsletter).
I would go further than just raising the pay of politicians though. In normal times, the average MP gets ￡26,000 a year to run their office. I would have no hesitation in doubling this overnight, which would both ensure that constituents’ concerns are better understood and dealt with, but would allow for more support in scrutinising legislation and developing policy positions from within each MPs’ office.
It wouldn’t be the most popular thing to do – quite the opposite. But doing the right thing isn’t always popular.