The Government’s furlough scheme may be an albatross around the UK’s neck

Even when lockdowns are relaxed, social distancing will constrain these industries. Many businesses will face both sustained depressions of demand and the cost burdens of adopting new safety protocols.

In this environment, lots of firms that received taxpayer subsidy will go bust or lay off workers. What’s more, this would be efficient – we do not want zombie companies. Yet having implicitly promised to protect jobs and businesses, it will be difficult for the UK Government to pivot to allow widespread layoffs.

Already, the Chancellor has faced criticism for plans to reduce the generosity of the furlough subsidies. Even if he faced that down, the retention scheme could simply be masking a big rise in unemployment, requiring a rapid build-up of new or existing programmes, and a significant delay in the jobs recovery.

America’s approach, on the other hand, set fewer expectations for preserving the jobs of March 2020. The newly unemployed might still think their old jobs will return. But if they do not, the economic link is less strong, and they find themselves in a programme that policymakers can tinker with, not least altering its generosity. The approach, in the longer term, looks more flexible. It will lead to a more rapid reallocation of workers if Bloom, Barrero and Davis are correct.

That reallocation of workers would be painful in either country. Periods where the supply and demand for skills are mismatched are economically costly. “Active labour market policies” in the form of jobs clearing sites and retraining will likely be necessary.

But if this pandemic has changed our behaviour semi-permanently, then seeking to preserve the March 2020 economy will prove misguided.

Endeavouring to freeze the pre-pandemic jobs market could then fast become a political albatross, with a long economic hangover.

Ryan Bourne holds the R Evan Scharf chair for the public understanding of economics at the Cato Institute