Coronavirus (COVID-19) - extending the Coronavirus Job Retention Scheme: analysis

Paper exploring the costs and benefits of extending the Coronavirus Job Retention Scheme on a temporary basis. Such an extension could reduce unemployment in Scotland by 61,000 through the first half of 2021, at a cost of around £850 million.

Wage Subsidy Schemes in Other Countries

The COVID-19 pandemic is having profound economic consequences and there has been an unprecedented fiscal policy response from governments around the world although the scale and design of the fiscal stimulus varies across countries.

As part of their fiscal packages, many countries have also provided targeted labour market policies, including wage subsidy schemes similar to the UK’s CJRS, to mitigate the rise in unemployment and sustain the link between employers and employees.

However, some countries have already signalled a more gradual removal of their comparable schemes than the UK, albeit sometimes with reduced generosity and tighter eligibility criteria. Six countries - Australia, Austria, France, Germany, Ireland and Switzerland - have extended their furlough schemes beyond this year, while Italy and Canada have extended them to the end of this year.

For example, France has already committed to extending its employment support scheme until July 2022 while Italy confirmed an 18 week extension until the end of 2020. Germany has confirmed that its COVID-adjusted scheme will continue until the end of 2021. Spain is also considering an extension into 2021.

In four countries – Belgium, Canada, Italy and France – furlough schemes make special provisions for businesses, or sectors, that have been hit hardest by the pandemic: Belgium has extended its furlough scheme for hard-hit businesses until the end of the year; Canada offers up to 25% extra on its wage subsidy for these businesses; Italy makes companies contribute to employees compensation based on their revenue loss and France maintains a more generous furlough scheme for hotels, restaurants, travel agencies, sport clubs, airlines, and other businesses that have been more affected by the crisis.

Belgium and Germany’s wage subsidy schemes predated the pandemic but have been adapted and simplified to reflect the COVID-19 crisis.

The UK scheme compares favourably to wage subsidy schemes in other countries. At 80% the rate of coverage is broadly on par with other schemes. The UK is, however, different from other countries in terms of length of the scheme as 9 countries have extended their programs beyond the UK timeframe. Table 1 summarise the design of the furlough schemes in several advanced economies.

Table 1: Summary of countries that have extended their furlough schemes
Country Scheme end date Eligibility Compensation
Australia 28 Mar 2021 Prove 30-50% decline in turnover for businesses (15% for charities) $1,500 per fortnight until 28 Sep 2020; then $1,200 until 3 Jan 2021 and $1,000 until 28 Mar 2021;
Austria End Mar 2021 Employees must work 30-80% of normal hours. 80 to 90% of gross salary, according to income level
Belgium 31 Dec 2020 Prove 20% temporary unemployment due to "force majeure" or fall under a sector particularly hit. 70% of wages (capped at €2,755)
Canada 31 Dec 2020 Demonstrate any drop in revenue but subsidy rate reflects revenue loss Initially 75% wages but reduced to base rate of 60% as of July 2020; declining to 20% towards the end of the scheme.
France July 2022 Face decrease in activity and impossibility to keep all employees full time Initially 70% of gross salary but reduced to 60% of gross salary from October. The gov. covers only 85% of this, but 100% of this for hard-hit sectors; 100% net salary for minimum wage earners.
Germany End Dec 2021 At least 10% reduction of workload for at least 10% of employees Employees receive 60% of net salary (67% if they have children). Compensation increases to 70-77% from month 4; 80-87% from month 7. This increase is limited until 31 December 2020.
Italy End Dec 2020 Suspension or reduction of working activities 80% of total wages for unworked hours, capped at €1,200
Ireland 31 March 2021 Expect 30% loss of company’s trade or revenue From September, a flat rate subsidy of €151.5 or €203 per week depending on income level. No subsidy paid for employees earning €1,462 gross or more per week
Sweden End of 2020 Prove reduction of 20-60% of normal working time and financial difficulty Employee receives 92-96% of regular salary (capped at SEK 44,000), with the state covering up to 45% of it.
Switzerland 31 Dec 2021 Work loss that equals 10% of total hours normally worked. 80% of lost earnings due to reduced working hours



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