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Lockdown hits low paid workers hard

October 21st 2020

Victoria Winckler looks at the effect of the latest Welsh lockdown on workers.

Claude Hotel Cardiff Closed due to Coronavirus

The two-week lockdown, due to begin on Friday, is another hammer-blow to already hard-hit workers. Earlier this year we estimated that around 211,000 people worked in sectors forced to close in March.  Back then, workers could be furloughed by their employer and receive at least 80% of their pay – and workers in the closed-down sectors were furloughed in their thousands. In the accommodation and food industry and in arts and culture, more than three-quarters of employees had been furloughed by July.

But now, all this has changed.

A worker in a business closed down from Friday 23rd October gets a much worse deal.  The good news is that if they have been furloughed before, they can be put back onto the Job Retention Scheme and receive 80% of their pay as they did last time. The bad news is that their employer will only get UK Government help with 60% of an employee’s wages and has to find the other 20% of pay plus NI and any pension contribution. Many employers will struggle to find that contribution when they’re unable to operate.

On top of this, the employee can only be on the furlough scheme until it ends on 31st October. And if they were not previously furloughed, for example if they were recruited in July or August as businesses re-opened, then they get nothing.

From 1st November, the furlough scheme – or Job Retention Scheme – is replaced by the Job Support Scheme.  In lockdown areas, the scheme pays employers two-thirds of an employee’s wages leaving the employer to contribute NI and pension contributions. From the employer’s point of view this is a much better deal than the furlough scheme – they don’t have to contribute to wages.  But for the employee it is a different story. Now, the worker gets only 67% of their previous pay.

This is an unmanageable pay cut.

People working in some closed-down sectors are already low paid. Half of all full-time workers in accommodation and food or in retail earn less than £20,000 a year, or around £375 a week. A reduction to 67% of earnings means the typical full-time worker in these industries loses £125 a week. For part-timers, earnings are lower still and the effects of moving to the Job Support Scheme are no less harsh. And that assumes that their employer is willing to claim under the scheme.

A cut like this, on top of already low pay, isn’t about stopping the lattes or shopping in Lidl.  A cut of this size made on already modest pay, eats in to rent, food bills, heating and credit repayments.

Two weeks is a long time

This lockdown is ‘only’ for two and half weeks.  But many people in low paid jobs already struggle to get by – they do not have savings in the bank or even a full fridge. We can expect an increase in arrears and in demand for emergency help e.g. from food banks.

The issue here is not whether the lockdown is necessary or sufficient, but why workers who are already low-paid are paying a very high price for the safety of us all.

Victoria Winckler is Director of the Bevan Foundation

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