Are 9.3 million people really still on furlough?

One of the biggest threats to the economic recovery is a second wave of job losses as the government’s job retention scheme (JRS) is wound down. The Resolution Foundation has some good analysis here. Nonetheless, the headline figure of 9.3 million for the number of jobs that have been supported by the JRS may overstate the number of people who are actually still at risk – perhaps significantly.

jrs total

The House of Commons Library has a helpful FAQ on the JRS. Briefly, the government pays a grant to employers to cover 80% of a furloughed worker’s ‘reference salary’, up to £2,500 per month. Employees have to be furloughed for a minimum of three weeks and until today (1st July), they were not able to do any work for the employer during this time.

From today, the scheme is effectively closed to new entrants. Only employees who have already been furloughed for the minimum of three weeks before 30th June can now be furloughed under the scheme, with a few exceptions (e.g. those returning from maternity leave). However, employers can now bring employees back to work part time, with the grant still being paid for any usual hours that are not worked.

The question I’m asking is how many people are actually covered by the scheme now. HMRC publishes regular updates on the ‘total number of jobs furloughed’ under the scheme, which was 9.3 million as of 28th June. This figure is widely reported in the press as the number of ‘people’ who are ‘currently’ having their wages paid by the state under the JRS, or who are ‘now’ furloughed.

But these headlines are wrong, for two main reasons.

First, the HMRC data cover ‘employments’ not ‘people’. It is possible for someone to have more than one job and to be furloughed by more than one employer. Someone with two part-time jobs, both furloughed, would be counted twice. It is therefore more accurate to say that the 9.3 million is the number of ‘jobs’ that have been protected by the scheme, rather than the number of ‘people’ or ‘workers’.

This may not make a huge difference. Just over a million people had ‘second jobs’ before the crisis. This is perhaps more common in the leisure and hospitality sector, which has been among those hit hardest by the lockdown. But these ‘second jobs’ are often self-employment, which is not covered by the JRS. If we assume half a million people had jobs with two separate employers, perhaps a hundred thousand or so might have been furloughed twice.

Second, and more importantly, the headline figures are the total number of claims since the scheme started, not the number of jobs currently being protected. Some people will already have gone back to work, but they will still be included in these figures.

This helps to explain why the reported numbers have only ever gone up, but it would be misleading to interpret this as evidence that the labour market is continuing to deteriorate.

I’m not aware of any analysis that attempts to quantify these factors. If someone has done some, please let me know. However, the survey evidence suggests that a small but significant number of people have already returned to work from furlough.

In particular, the ONS publishes a regular ‘Business Impact of Coronavirus Survey’ (BICS). Businesses responding to the latest BIS, covering the first half of June, reported that 7% of their total workforce had returned from furlough just in the past two weeks.

The latest PMI surveys also reports that companies are beginning phased returns to work and even starting to recruit again. The employment index of the composite PMI has rebounded sharply, even though it remains well below pre-crisis levels.

UK composite PMI employment

This is consistent with evidence from other countries. For example, the number of ‘short-time workers’ in Germany fell to 6.7 million in June, from 7.3 million in May – a drop of around 8%. (At the peak in April, German companies had made short-term working claims for around 10 million people.)

If we assume, conservatively, that 10% of people in the UK have already come off the JRS, the total number of jobs now being protected would be around 8.4 million, rather than 9.3 million.

Of course, that is still an awful lot of people. And even if 25% have already come off the scheme, the total left would still be around 7 million. It is also possible that some people who are no longer covered by the JRS have been made redundant, rather than returned to work.

These issues are worth investigating further. But with the economy already seeing a V-shaped recovery, as I discussed here, the number of jobs at risk as the JRS is wound down may be much lower than the latest headline of 9.3 million suggests.

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