IFS: A well-communicated plan will make for a smoother and more productive exit from coronavirus (COVID-19) lockdown

Monday, 4 May 2020 10:53

We are going through the deepest recession in living memory. Even given current lockdown measures there are things government should do now to mitigate its long-term costs.

First and foremost, it needs to provide as much forward guidance as it can confidently give. Uncertainty is in itself deeply damaging to business and the economy. Much uncertainty is inevitable. But some things seem relatively clear. Many occupations, such as those in the desk-based economy, will surely be expected to work from home for some time, as will social distancing in many workplaces. Being clear about this now will reduce the risk that businesses do not sufficiently prepare, invest and innovate to make these things happen effectively.

A well-managed transition out of lockdown is going to rely crucially on effective innovation, to enable productive home working and social distancing in workplaces. Firms will be best placed to know how to innovate in their setting, but government has a crucial role in providing the right conditions and incentives for them to do so. Beyond mitigation of uncertainty it should consider regulation and monitoring, the publicising and sharing of new innovations and industry best practices, and perhaps industry grant schemes for innovations to enable work while social distancing.

Government should ensure that furloughed and redundant workers know what vacancies are available and consider expanding the role of job matching platforms to help firms find workers with the skills they are looking for. Barriers like exclusivity clauses which prevent furloughed workers taking up other roles should be prohibited wherever possible.

These are among conclusions of a new analysis of the economics of getting people back to work by IFS researchers. The analysis also suggests that as we move out of lockdown government will need to consider policies such as:

Providing incentives or subsidies for home working where it’s possible, since the benefits of some continuing to work at home will be felt by all (through lower virus transmission), not merely the firms or workers who do it.
Promoting changed commuting patterns. We are used to trying to encourage public transport use and discourage driving. This logic is temporarily reversed. This is a much bigger issues in London than elsewhere. Pre-crisis, more than half of workers who live in London used public transport to commute, compared to 1 in 8 in the rest of the country. For those who do use public transport, spreading their commutes out more from the morning and evening rush hours will be important. In normal times 20% of London workers are commuting at 8.30am. Options include changing the relative price of peak-time travel, suspending the London congestion charge and encouraging firms to innovate in shift scheduling.
Public investment in infrastructure. With high levels of unemployment likely, there is a stronger-than-usual case for employing furloughed or redundant workers to do valuable public investment work that will pay off later – if the government can identify areas where the private sector is not producing vacancies appropriate to unemployed workers’ skill-sets, and if it can plan the public investment wisely.

Government needs to be guided by the data. Our analysis reveals for example that:

Londoners are both much more likely than others to use public transport to get to work and more likely to be able to work from home, given the nature of their occupations. This suggests scope to use public transport in London selectively. Based on pre-crisis data, almost two-thirds of London workers who commute using public transport are in occupations that are compatible with home working.
There is a close correlation between occupations involving team work and those which are customer facing, suggesting a fairly clear hierarchy of ability for social distancing.
Of those who are not key workers and who cannot easily work from home around two thirds may find it hard to return to work safely because of their age or health status, the age or health status of those they live with, or because they have school or pre-school children. Even if schools and childcare were to reopen this might still be a problem for a third of workers.

Finally, government will find itself being lobbied for support by all sorts of firms and industries. It needs a clear and transparent framework for making decisions which favours growing and productive sectors and avoids propping up those which were already declining.

Robert Joyce, Deputy Director at IFS and an author of the report, said:

“The economy is in uncharted territory and steering a safe and prosperous path out of lockdown will be difficult. Some old principles applied to this new situation will be crucial. More than ever the government needs to mitigate uncertainty wherever possible, promote and share innovation and help smooth the matching of workers to jobs. It needs to adjust policy to incentivise newly desirable behaviours like home working and avoiding public transport at peak hours. And it needs a transparent and principled stance on supporting industry which will stop it falling victim to special pleading.”

ENDS

Notes to editors:

1. The briefing note 'Getting people back into work', by Monica Costa Dias, Christine Farquharson, Rachel Griffith, Robert Joyce and Peter Levell, is now available on the IFS website: https://www.ifs.org.uk/publications/14829