Short Term Investment in Wage Subsidy Scheme Could Precipitate Faster Economic Recovery
Two of Scotland’s most influential organisations made an unprecedented joint call to the Scottish Government this weekend to seriously consider implementing a wage and training support scheme, similar to a programme already in place in Wales.
The Federation of Small Businesses (FSB) in Scotland and the Scottish Trades Union Congress (STUC) are advocating to the Scottish Government a temporary support package for viable businesses that have introduced short-time working and are considering redundancies due to the current global downturn. The scheme could be used to subsidise a proportion of employees’ wages to ensure vital skills are not lost, as well as providing additional training to ensure Scottish businesses are well-placed to thrive when the economy recovers.
Such support could enable employers to avoid immediate redundancies and retain essential staff and skills - making business success more likely in both the short and longer terms. It would also reduce the personal and social costs incurred by long-term unemployment (evidence from previous recessions suggests that 30 per cent of those who become unemployed enter long-term unemployment) and increase economic demand by limiting the income reductions faced by workers on short term hours or temporary lay-offs. If linked to training, it could enable longer-term workforce investment and development.
STUC General Secretary Grahame Smith said:
“The STUC has worked, and will continue to work, closely with other representative organisations and government at all levels to develop innovative responses to the current recession.
“This joint call with FSB Scotland reflects a growing belief amongst trade union members and small businesses that further Government intervention is necessary to sustain jobs, communities and strategically important skills currently at serious risk from the sudden and unprecedented collapse in global demand.
“The STUC and FSB both recognise that a poorly administered scheme would risk incurring high deadweight costs and that is why we are proposing tight eligibility criteria and assessment by an appropriately skilled independent panel.
Andy Willox, the FSB’s Scottish Policy Convenor, said:
“The FSB has been at the forefront of these proposals up and down the country, whether in Cardiff, London or Edinburgh.
“We have worked closely with the STUC to look into this scheme and we believe that a properly administered scheme could cushion the damage done to the Scottish economy by the global recession.
“The FSB believes that the Scottish Government should be at the forefront of innovative methods to help Scottish small businesses weather this storm and capitalise on the upturn when it comes.
“When people become out of work, their skills and their experiences are lost to the economy at large. Every tool at the Scottish Government’s disposal should be used to ensure that Scotland’s communities do not lose another generation to the spectre of unemployment.”
The experience from Wales shows that such a short-time working scheme could be introduced quickly – ProAct was conceptualised in November 2008, and began operation in January 2009.
In Wales employers can receive a training subsidy of £2,000 for each worker, in addition to a wage subsidy of £2,000 per worker.
In Wales, employers must demonstrate that they are currently on short-hours working to a minimum of 20 per cent of normal employee hours and that they are seriously considering redundancies. Funding is limited to a maximum of 100 employees per company.
Applications are assessed by an independent panel using agreed criteria, including workforce engagement and the extent to which the training can be shown to enhance long term business viability.
Businesses in France, the Netherlands and Germany are also able to access a short time working scheme.
Details of the UK-wide FSB / TUC proposals can be found here: http://www.fsb.org.uk/policy/assets/tuc%20-%20fsb%20one%20pager.pdf and http://www.tuc.org.uk/extras/wagesubsidies.pdf
Both organisations believe a Scottish scheme should be put in place as soon as possible but should only run for a limited period.
- Be time limited
- Subsidise only a proportion of workers’ previous wages;
- Involve focused training; the majority of which should aim to be accredited;
- Be contingent upon long-term business viability and genuine need, assessed and agreed by an independent panel comprising employer, trade union and agency expertise.
- Be open to application from the entire Scottish business community
- Recognise the importance of certain businesses to local communities
STUC Stephen Boyd 0141 337 8100