The government has been urged to create a job-matching scheme to redeploy staff of businesses that have closed due to the coronavirus outbreak to areas that have a higher demand for workers.
The recommendation has been made by the Institute for Fiscal Studies, which said there is a clear need to temporarily reallocate some workers across the economy.
The government’s Coronavirus Job Retention Scheme will pay up to 80% of wages for furloughed workers in businesses, such as non-essential retail, hospitality and leisure businesses, that have been ordered to close down.
This approach is focused on trying to limit people permanently losing their jobs, the think tank said, in order to maintain “firm-specific human capital” – meaning that when the economy recovers the people going back to the jobs will have the knowledge about the company’s operation and colleagues and proficiency in just the right combination of skills for the job.
However, although maintaining these links is important because most of the radical restricting of the economy that has happened in a matter of days will be temporary, the IFS said the scale of the crisis is such that the government should examine ways to relocate some of these workers in the short term.
“The initial policy response has been focused heavily on preventing employment ties from being severed in struggling sectors and protecting the incomes of those workers,” the briefing by Monica Costa Dias, Robert Joyce, Fabien Postel-Vinay and Xiaowei Xu said.
However, the ideal outcome would be “to find a way of reallocating some workers in temporarily shut down sectors to those sectors facing temporary labour shortages, whilst still allowing them to return seamlessly to their original work once the crisis is over”, according to the authors.
Among the ways to achieve this could be highlighting local opportunities in sectors facing labour shortages through an online platform, which the government could advertise to furloughed workers.
The government could go further and proactively match the skills needed for jobs with occupations in low-demand sectors and ask people to switch for a period. The analysis found this is already happening in a piecemeal way: for example, laid-off cabin crew at SAS have been offered fast-tracked healthcare training in Sweden: a good match since cabin crew are already trained in first-aid and following emergency procedures.
It could also be possible for the government to make Job Retention Scheme payments conditional on taking up a job in a labour shortage sector if one is available locally, but the authors note this would be “a more heavy-handed approach” that would have challenges.
“Whatever is the best way of enabling furloughed workers to temporarily take up work in other sectors, a crucial challenge while doing this is to make sure that existing employer-employee links are not permanently severed – so that we do not need a massive rehiring and reallocation exercise just to return to where we were before once the crisis ends.”
As a first step, the government should clarify – and emphasise – that the Job Retention Scheme is still available to workers who take up stopgap work in priority sectors.
“The nature of the economic shock associated with Covid-19 is highly unusual,” the report concludes. “Not only is the scale of the downturn likely to be large; the types of economic activity that we are doing in the UK have changed radically in a matter of days. But the vast majority of that change is likely to be temporary, and we will want to keep the economy ready to return to ‘business as usual’ as seamlessly as possible once the crisis subsides. This creates a distinctive set of labour market policy challenges.
“The policy response should preserve existing employer-worker links by limiting permanent job separations, all while removing barriers to taking up temporary stopgap jobs.”