JobKeeper has kept thousands of business afloat and workers employed…
The introduction of a wage subsidy program has allowed businesses heavily impacted by the Coronavirus to cover costs of employee wages, which has served to halt spiralling unemployment figures. Particularly, payroll data shows that in the time JobKeeper was implemented, job losses have slowed down to 1.1% in May, following from a fall of 5.5% in early April. With 6.3 million workers under the program, it has provided a welcomed reprieve for a large portion of the citizenry struggling with paying off fixed costs such as rent and the electricity bill.
The role JobKeeper played in stemming a greater decline in jobs and wages has proved to be a key factor in relatively strengthening household spending and consumer sentiment. Specifically, an ANZ-Roy Morgan survey has outlined that the scheme provided the biggest weekly boost in consumer confidence on record (in April), albeit under extraordinary circumstances. The confidence index jumped 10 per cent over the week to 72 points – the largest increase since the survey went weekly in 2008. The stimulation of the economy was something that was sorely needed, and JobKeeper was resoundingly successful in achieving it.
The JobKeeper scheme has supported businesses in maintaining connections with their employees, which in turn will enable them to reactivate their operations without rehiring staff once the crisis is over. This ensures that the transition back into normalcy will be a smooth one, minimising any structural unemployment that would have stemmed from even larger job losses.
A quick response was essential, however JobKeeper was too rushed in deciding who it targeted…
There is no doubt that Job Keeper was effective because of the speed at which it was announced and integrated into the economy. Inevitably constructing a policy at such a rushed pace means there were a number of flaws that hopefully can be ironed out as we transition to JobKeeper 2.0 in September.
The targeting of Job Keeper left some groups of people excessively benefiting at the expense of those who truly needed it. Chances are you’ve heard one of your friends bragging about how they are on JobKeeper earning $1500 per fortnight and they only have to work a couple of hours a week for it (at the disgust of us workers who weren’t eligible for it). It is estimated 80% of part-time workers ended up earning more under JobKeeper than they were pre-stimulus. This no doubt soured the relationship between full time workers and employers in regard to fairness. While you may argue that more in the hands of low-income earners is good for aggregate demand, a higher marginal propensity to consume lay with casual workers (who had been employed by their respective company for less than 12 months) and temporary visa holders. Danielle Wood and Nathan Blane from the Grattan Institute argue that a lower rate of JobKeeper should have been used on part timers, with the leftover funds going towards those who are more likely to be living at the poverty line. Particularly temporary visa holders who can’t afford to go home and had become unemployed.
It didn’t impact as many people as the Government had hoped. The initial estimates predicted JobKeeper would affect 6 million jobs, in reality it only impacted 3 million leading the $130 Billion stimulus to be revised down to $60 billion, which of course leaves a silver lining of less debt to be paid off in the future.
Businesses had been receiving the Job Keeper payments in arrears, which essentially means they were arriving too late and creating a mismatch businesses cash inflows and outflows. A simple fix would be to execute a couple of bulk payments that allow businesses to keep ahead of their expenses.
Lastly, Job Keeper acted perfectly as a quick fix stimulus, but it will not serve to generate sustainable economic activity in the long term. Businesses need to be weaned off government dependency while monitoring needs to be done frequently to ensure JobKeeper money isn’t going to businesses that are inevitably a lost cause where tax payers money is wasted. This is what the March 2021 extension of JobKeeper aims to do. However, some serious structural reform needs to occur in order for Australia to repeat history and achieve another 30 years of consecutive growth.