8. A furlough for slumps

New Zealand

Recession is looming, and on one count working Britons stand uniquely exposed. Our basic unemployment benefit is the lowest in the OECD, typically replacing only a fifth of pay, compared with more than 60 per cent in most rich economies. Other benefits sometimes soften the blow, but redundancy is frequently a trapdoor to immediate poverty.

That position is hard to square with the UK’s furlough scheme, a great improvised success in protecting the incomes and jobs of workers that would otherwise have been destroyed by Covid. If blameless employees deserve protection from

a rampaging virus, then don’t they also warrant shelter when caught by a raging economic storm?

Like Britain, New Zealand has traditionally relied more on a welfare safety net than wage-replacement benefits. But Jacinda Ardern’s government has developed an “income insurance” scheme, jointly with unions and business groups. Both sides of industry will chip in an estimated 1.39 per cent of wages in return for cover against being laid off, which is worth—subject to a cap for high earners—80 per cent of previous pay for six months.

The extra tax will be a hard sell, but could be a shrewd investment. The argument is less about charity than productivity: buying workers the time they need to find a new role that harnesses their skills and experience, instead of harrying them into the first dead-end job. With extended payments available for those re-training, a standing furlough scheme might just provide a way to jolt our stagnating economy into working smarter.