Workers must be protected during the coronavirus crisis – by guaranteeing incomes

All eyes are once again on Rishi Sunak, the chancellor as he prepares to announce the latest tranche of emergency spending and other measures to help address the economic challenge posed by the coronavirus outbreak.

This next package, we are told, will be aimed directly at the millions of workers who face an uncertain future. It is imperative that during this crisis, their incomes and employment status are secured, and that they can continue to enjoy a decent standard of living.

On the business side, Sunak has already recognised the sheer scale of the challenge. The £330 billion he has already pledged in loans to businesses as well as the £20 billion in grants is a first step towards shoring up the economy over the months ahead. Now it is time for him to do more.

It is crucial that firms are encouraged and supported as much as possible to retain staff during the downturn. The aim should be to keep people in employment, even if - perhaps because their workplace has had to close temporarily - there is not now enough work for them.

So first, the government must make clear that its financial support to business is conditional on firms guaranteeing not to lay off workers or significantly reduce their employees’ incomes. The Chancellor should insist that any emergency funding channelled through business is used to retain workers as the economy contracts – as a condition of an employer accepting government help.

Second, all full-time workers in this position should be guaranteed incomes of at least £362 a week. This is equivalent to the Minimum Income Standard, the accepted level needed to afford the essentials in life. For low-income workers especially, it is important that a wage floor is established so that they do not fall into poverty and destitution during this crisis.

For those who previously earned more, guaranteed income could be higher – perhaps 70 per cent of their normal monthly salary.

And third, steps should be taken to protect the many workers who are self-employed or on zero-hours contracts. We recommend an income floor equivalent to £166 a week for part-time workers and those on zero-hour contracts who on average worked fewer than 30 hours a week in the previous month. This is equivalent to 16 hours’ pay at the rate that would deliver the Minimum Income Standard to someone who worked full-time.

These recommendations are driven by the new economic reality we face. Under normal circumstances, we might expect a stimulus package to save the day. In the aftermath of the 2008 financial crisis, government spending was ramped up, banks received considerable bailouts, interest rates were cut to almost zero and cash was injected into ailing economies. These measures may have been drastic, but they served a very simple purpose; to stimulate demand when people were facing a severe credit crunch.

This is not a viable option in the current crisis. With people being told to stay at home for their own safety, no injection of cash is going to result in people running unnecessarily to shops, bars and restaurants to spend their money. That’s why demand is collapsing, putting countless firms at risk of going under. This in turn is causing a huge amount of uncertainty for millions of people who work in affected sectors.

It is essential that the government recognises this problem. Denmark’s government has already taken steps to support firms on the condition they retain their workers, because they understand the potential economic catastrophe involved in letting millions of people fall into unemployment while their countries are struggling to control the spread of Coronavirus.

In the longer term we need to consider the inadequacies of our social safety net that have been exposed by this crisis. Even in ordinary times many people, especially those on low-incomes or in precarious employment of one kind or another, live their lives haunted by this kind of insecurity.

Action is needed now to deal with this extraordinary crisis, but when the dust settles, we also need to reflect on the type of society we want to live in. No one should go without the minimum resources to maintain a basic living standard. We have the means to protect everyone in our society. This shouldn’t simply be an urgent matter in a crisis, but a feature embedded into our entire social and economic framework.

Dean Hochlaf is a researcher on work and welfare for the Institute for Public Policy Research (IPPR) think tank