- Noah Keate
Britain’s welfare system must adapt to an insecure jobs market
By NOAH KEATE
It is seen as an inevitability. Even the Chancellor Rishi Sunak has admitted he cannot prevent it. Everyone is bracing for the rising unemployment figures released over the next few months. This has far more than an economic impact. For many, work is their very identity. It is an intrinsic part of their humanity, something they spend eight hours a day, five days a week doing. To have their social and economic security, which embedded them into an area, taken away will have severe consequences.
One doesn't need to be Einstein to recognise what will happen. The furlough scheme concludes at the end of October. Companies have already needed to pay a higher portion of their employees’ wages. Under the government's new job scheme, an employer must pay at least a third of their worker’s wages. This will be impossible for some.
Many organisations are still unable to properly reopen and flourish. The hospitality and leisure sector in particular has been completely decimated. Even organisations that can operate will have most likely seen a smaller volume of customers, not least as daily coronavirus cases increase and a national 10pm curfew is imposed. Redundancy and economic uncertainty are unfortunately, the only certainties.
The reason a government like higher employment is because it guarantees the state receives money. If individuals work, they pay income tax and national insurance. With their disposable income, they’ll buy products with VAT applied. However, the opposite will be true if people have no jobs to go to. Just as government revenue from taxation will decrease, so economic dependency on government will increase as more individuals claim benefits.
This will affect young people in particular. According to government figures, there has been a significant decrease in young people in employment while youth unemployment has increased. Those aged 16 to 24 in work decreased by 156,000 to 3.63 million, with a record decrease of 146,000 for those aged 18 to 24 years. It is precisely because young people are more likely to work in hospitality or leisure jobs that require few academic skills. These have either dramatically decreased or gone altogether.
Reliance on Universal Credit, the government’s main form of benefit, is therefore essential. The claimant count reached 2.7 million in August 2020, which marked an 120.8% increase from March 2020. This is thanks to the number of employees on payrolls decreasing by 695,000 in August 2020 compared to March, with the quarterly and annual redundancy figures the highest since 2009. Benefits therefore provide a vital safety net for allowing people as they switch between jobs.
There are numerous problems with the benefits. Firstly, they aren't generous. A single individual under 25 can receive £342.72 per month, while a single person over 25 is eligible for £409.89. Parents are entitled to £235.83 per child born after 6th April 2017. This is pittance, not least as Universal Credit is replacing six previous benefits including Jobseeker's Allowance and Working Tax Credits. While, in principle, there is nothing wrong with simplifying the benefits system, it must work for those who need it.
Universal Credit has involved failure after failure. The scheme took over five years to be rolled out and was repeatedly delayed. Although trials before a full implementation of a system were welcome, that it took so long doesn’t inspire confidence. Similarly, the duration people had to wait for their first benefit was around five weeks, far longer than anyone would have to wait for a payslip. Many individuals live from month to month as their salaries are too inadequate to be able to save. Like any new system, there were also concerns about the IT resources and whether they were suited for the volume of individuals requiring the system.
Universal Credit has also so far only applied to new claimants. Individuals from the old legacy system are still receiving their payments alongside people who have recently lost their job. This means the completion date, where everyone claiming benefits is using Universal Credit, has been pushed back from December 2023 to September 2024. With all the logistical problems of the pandemic, this may need to be delayed further.
It is too simple to look at the welfare system as a brief safety net between jobs. The pandemic has completely altered that. Businesses that were prospering before the pandemic will have either gone bust or been reduced to a fraction of their former size. New projects and opportunities will have been delayed or cancelled altogether. Companies that are still trading will be letting staff go, not taking new people on. Of course, working should be incentivised over a life on benefits. An individual dependence on the state however, is likely to only increase.
The unemployment figures in the second quarter of 2020 were 3.9%, up from 3.8% a year earlier. Though the second peak of coronavirus is often discussed, the imminent peak of unemployment cannot be forgotten. The government has committed to retraining individuals but this will take time. While some may have used lockdown as an opportunity to formulate a business plan, that won’t be successful overnight. People need assistance now.
The Liberal Democrats committing to a Universal Basic Income then, should be welcomed. They are a small party within Parliament and have minimal influence. However, their endorsement of the policy will have increased the Overton Window - what is deemed politically acceptable - and discussions of its eventual implementation. Providing every citizen with basic economic certainty, it is proven to have boosted people’s mental health and confidence.
As work becomes more precarious, insecure and uncertain, a degree of security is necessary. UBI could help to supplement someone’s wages if they want to earn lots. However, if an individual wishes to dedicate more of their life to projects outside of the workplace, there is that chance too. Pilot schemes across the UK to test the policy’s effectiveness should enter the mainstream political conversation and not be placed on the back burner simply because of the pandemic. Coronavirus has proven life is precious and can so easily be taken away. Financial security, whether from temporary benefits like UC or a permanent UBI, can provide citizens with a secure, if not complete, level of reassurance to chart their own future as they wish.
Image: Flickr: Andrew Parsons / No 10 Downing Street