The government is thought likely to offer a replacement for furlough today that will make employers pay a significant part of the cost of keeping employees on when there is no work for them. This will not solve unemployment. It will encourage it.
Let me offer a simple example. Assume an employer has 10 employees, all on £2,000 a month. The employer has enough work for five people. They could sack 5 people and save £10,000 a month. Or Sunak offers a scheme where all ten are kept.
Under this scheme the company pays for the work the employees do, i.e. £10,000. Then it pays 1/3 of the wages for the time they’re not working i.e, £3,333. The government then pays 1/3 of their wages when not working i.e. £3,333. And the employees lose £3,333 in wages in total.
But this means wage cost per employee time worked has gone up by a third when the business is facing a massive downturn in its business and threat to its survival or it would not be thinking about doing this. Wage cost to the business is now £13,333.
So rationally, any business that knows this might last for at least six months, as the government says we should expect, will look at this scenario and sack half its employees and get the same work for much less cost.
In fact, any business facing this situation will probably have no choice but sack staff and nit use this scheme if it is to survive. That’s because any scheme like this is an invitation to make people redundant, and not a job retention scheme.
Let’s sincerely hope that Sunak does not deliver this CBI created idea.

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More from @RichardJMurphy

12 Jan
The crisis in the NHS is overwhelming this week. It has reminded me of conversations I had with my late father on how to manage within the state sector. I think they're worth sharing.
My father worked for the nationalised electricity industry from the late 1940s to late 1980s. He spent much of that time as a fairly senior engineer. He was committed to what he did. He believed electricity supply was a human right. And he sought to delver it.
He left the industry and retired when he realised that privatisation challenged what the believed in. The priority was no longer supply. It was, instead, profit. He had a clear example of the difference this made. It was about emergency management.
Read 14 tweets
9 Jan
I know that I am in denial about what is going to happen over the next few weeks as the NHS is overwhelmed by Covid 19 and tens of thousands of people die, unnecessarily. But I should not be. I should be nurturing my anger that our government has chosen to let this happen.
They were too late last March, too early in June, wildly optimistic in the summer, irresponsible in September, feeble in November, reckless about Christmas and too late again in January. Whenever they could make this crisis worse that’s exactly what the government’s done.
Why has that happened? Three reasons. First, this government has never cared about the NHS and the people working in it. They treat them with the contempt they have for all private sector employees. Several in the Cabinet have been open about wanting to privatise the NHS.
Read 6 tweets
29 Dec 20
I am bored by being patronised by those telling me ‘don’t you know Remain is dead?, closely followed by ‘Move on.’ I can tell you, I have. That’s why I want to Return. To Europe, for sure. But to something much more than that.
I want to also Return to a positive politics. That’s the form rooted in compassion, care and genuine concern. But it’s also one that’s also learned that economics has moved on from what was taught by that subject in the 1980s, as has our understanding of the environment.
I want a politics that is not based in materialism. Or jingoism. Or nationalism. Or populism. Instead, I want a Return to the principles of mutual respect, tolerance, acceptance and co-existence, with each other and the rest of this world, human and otherwise.
Read 20 tweets
28 Dec 20
The more I read it the more I am perplexed by the Brexit deal.
It is an OK deal for trade in goods. Except for a mountain of very expensive and burdensome red tape, that is. And red tape and burdens on business are the thing the Tories always supposedly hated.
And the priority on the trade in goods also makes no sense for a service economy, which we are since the Tories abandoned manufacturing.
Read 20 tweets
20 Dec 20
I am bemused by those who demand that we repay the UK government’s debt. It makes me wonder, do they know what it is? And how do they think it can be repaid? And do they appreciate the consequences? A thread is coming on......bear with me, because I think you need to know this.
First, what is the UK government’s debt? I’ve immersed myself in this issue and can confidently say the Office for National Statistics’s figures are wrong, most especially because they claim that the UK government is in debt by owing money to itself. That’s not possible.
Whatever the Office for National Statistics like to claim, money you owe yourself is not debt, and so quantitative easing cancels about £800 billion of UK national debt right now. There are other mistakes in their numbers, but I’ll just stick with this one for the moment.
Read 95 tweets
12 Dec 20
I keep hearing people complain that the ‘mainstream media’ does not understand economics and that we’re talked down to as if everything must be explained as if the economy is a household. In this thread I explain all you (and they) need to know. Economics in one thread then....
Very few people seem to understand how money is created. Mainly that’s because when they’re told it seems so simple that they can’t believe something that’s so important that we’re willing to pay a lot to get it is created so easily. This thread explains how money is created.
What this thread also explains is that if we understand money we can completely reimagine how the economy really works, which is the pathway to rebuilding from the mess we are in. Which makes this a pretty big deal. I make no apology for its length as a result.
Read 66 tweets

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