Chancellor's Job Support Scheme is a big deal that will (temporarily) stem but not halt the rise in unemployment coming. A thread...

This is basically an extension and reformatting of the partial furlough bit of the Job Retention Scheme. So long as a worker is brought back for a 1/3 of their previous hours, the govt covers 1/3 of their lost wages for hours they don't work. The employer covers another 1/3

The odd thing about this scheme (given all the short time working headlines/references to Germany) is not really a short hours work scheme (ie one that encourages employers to cut hours rather than jobs) when considered in isolation

The scheme on it's own WILL NOT encourage firms to cut hours rather than jobs because the 1/3 employer contribution means it is much cheaper for firms to employ 1 person full time than 2 people part time

BUT interaction with the £1000 Job Retention Bonus is REALLY important here. When this new scheme is combined with that we've now got a big incentive for firms to retain workers part time UNTIL you qualify for the bonus ie the end of January is the new end of October cliff edge

After January this scheme will not be effective at encouraging firms to hold onto workers in the sectors that are hardest hit (ie hospitality/leisure) - the employer contribution is just too high.

What should the Chancellor have done? Scrap the badly designed and too expensive job retention bonus and used the £9bn saved to provide much clearer and lasting incentives for firms to retain workers beyond January - this crisis is not going to be remotely done by then

Summary: Chancellor has rightly brought economic policy back into line with the reality that covid restrictions are here to stay. The policy is a big deal and will slow the rise in unemployment, but the design means it's big effect is to shift the jobs cliff edge to end January