Wage subsidies and job retention

Enda Keenan and Reamonn Lydon ()

No 11/EL/20, Economic Letters from Central Bank of Ireland

Abstract: Wage subsidies have supported job retention during the COVID-19 shock. Initial phased re-openings saw workers in consumer-facing sectors such as Accommodation and Food Services and Retail increasingly move onto the scheme. The subsidy level has changed over time, falling initially in the changeover from the TWSS to the EWSS, before rising with the reintroduction of restrictions more recently. In the short-run, the main source of uncertainty for firms and workers is the path of the virus. In this context, maintaining a flexible approach that prioritises income and liquidity supports is the right thing to do. In the longer-run, however, it is important for taxpayers, business owners and employees that firms can ultimately stand on their own, without State supports. The EWSS, along with potential considerations for future formats, can help with the transition. Allowing wage-subsidy supported workers who face a material risk of job loss in the future to engage with Active Labour Market Programs, including retraining and help with job search could also be beneficial.

Date: 2020-10
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