This paper argues that policymakers should introduce a savings auto-enrolment scheme to help bolster financial resilience amongst low-paid workers.
- By making the Job Support Scheme less generous than the Job Retention Scheme, the Government is implicitly shifting part of the economic costs of Covid restrictions onto employees themselves.
- But employees are badly placed to bear such costs. In the hospitality sector – which faces shutdowns across much of the country – over half of workers are low paid. This is more than any other sector of the economy.
- Financial resilience among such workers is low. Our analysis shows a third of households in the lowest income quartile (“the poorest 25%”) have no bank or other savings that they can draw on in an emergency – such as when facing the sort of pay cuts now approaching them.
- While immediate additional support for low income households and workers is needed, the Government also needs to focus on improving financial resilience in its economic recovery plan.
- Given the widely-acknowledged success of pensions auto-enrolment, a savings auto-enrolment scheme could go some way to bolstering financial security.