Up to 5.6 million people risk falling through cracks in government support

By agency reporter
April 14, 2020

Up to 5.6 million workers are at high risk of losing their jobs or hours and being unable to access the support they need, according to new analysis published by the New Economics Foundation. Within this number, 1.6 million workers are at especially higher risk as they work in industries that have been directly affected by the government shutdown, such as restaurants and non-food retail shops.

The analysis looked at the number of people who are at especially high risk of missing out on the government’s ‘job retention’ and ‘self-employed income protection’ schemes. Employees that are likely to miss out from the job retention scheme include those that see a cut in hours, or who are made redundant rather than being furloughed. The self-employed income protection scheme will miss the newly self-employed, as well as those that are incorporated as companies. But even those self-employed who will be eligible will not receive any support until June 2020.

All workers that meet one of the following characteristics are at high risk of missing out on new government protections: fixed-term contracts, zero-hours contracts, those who were already underemployed by their employer and the self-employed.

Based on analysis of the Labour Force Survey, NEF economists identified all workers who fitted these characteristics prior to the economy lockdown. The analysis showed that outside the public sector and occupations identified as ‘key’ by government, there were 5.6 million workers in insecure employment. Within this number, 1.6 million worked in industries that were directly affected by the government’s lock down.

Many of these vulnerable workers are likely to be among the 1 million people who applied for Universal Credit during the last two weeks of March. But even those workers who are able to access support via the UC system will likely have to wait many weeks, if not months, to receive their full payment. This will cause severe financial hardship for those who have lost work as a result of social distancing measures and are trying to do the right thing.

The New Economics Foundation’s recent work set out a proposal for a non-conditional and non-means tested (at the point of access) Minimum Income Guarantee (MIG) of £221 per week per working-age adult, which would offer support to a wider group of people and mean fast payment via the UC advanced payment system.

The MIG scheme would provide support for those who do not qualify for the two government support schemes as well as those that will have to wait for support, such as the self-employed. As with the government’s existing two schemes, the MIG scheme, would be capped at £2,500 a month, meaning that while anyone can apply, where a claimants income rises above the threshold they would have to pay back the difference in the 2020/?21 tax year. Based in NEF modelling using data from the Department for Work and Pensions and Office for National Statistics, the MIG is estimated to cost between £13 and £20 billion, less than half the estimated costs of the government’s current protection schemes.

Christian Jaccarini , Economist at the New Economics Foundation, said: “This crisis is exposing the precarious situation faced by millions of people who, even before the virus-induced economic shock, were experiencing low pay and job insecurity. And so, in turn, it is exposing critical gaps in the UK’s welfare safety net. What is clear is that you cannot rebuild in a week when you’ve spent a decade destroying – our social security system is not fit for purpose in this crisis and will not be for the next. We urgently need a safety net that allows people to access the support they need for the basics in life whether in a global crisis or a personal one.”

Lukasz Krebel, Assistant Researcher at the New Economics Foundation, said: “Those who do not qualify for the 80 per cent income protection schemes must rely on a welfare system that is overwhelmed, and if their claims do get processed, they will have to survive on a mere £90 a week – equivalent to barely one third of a full time adult being paid the minimum wage – plus meagre top-ups for children and housing. The average self-employed is likely to see a 67 per cent drop in disposable income compared to being in work, a loss of almost £200 a week. And an adult working full-time on the minimum wage is likely to see a 69 per cent drop in income, a loss of over £210 per week. This means many will struggle to be able to cover their basic needs – our proposal of a Minimum Income Guarantee of would provide a decent income for anyone that needs it, including those already on UC, and those awaiting payments – ensuring that people can have security and dignity in these extraordinary times.” 

The Minimum Income Guarantee proposed by NEF is a weekly payment worth £221 per week, which is equal to the value of the 2019 minimum income standard estimated by the Joseph Rowntree Foundation for a single adult, excluding any rent, mortgage or childcare costs.

* Read the NEF proposals for a Minimum Income Guarantee here

* New Economics Foundation https://neweconomics.org/

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