The A$130 billion payment will be benefit six million of Australia’s 13 million employees through their employers.
We asked three experts to pick the package apart.
Visiting Scholar, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University
This is a welcome move by the government that will keep many businesses afloat and connected to their employees, which are critical to a speedy recovery. It is commendable that the government reversed course so quickly given rapidly deteriorating economic conditions.
You can’t shut down the economy for months without providing massive support to businesses and workers. At A$130 billion, this package alone is worth 12% of the economy over the next six months. Along with the measures already announced, it takes our fiscal support to a similar scale as recently legislated in the United States.
Targeting only businesses experiencing a revenue loss limits profiteering. Those currently doing well won’t get unneeded support. It applies to all full-time, part-time, and long-term casual employees, as well as the self-employed, and it forces all participating firms to pay workers at least the $1,500 per fortnight subsidy.
It could have several unintended consequences. It might encourage firms to limit sales to push revenue down below the turnover threshold.
For example, for Qantas the subsidy would be almost $600 million, but to receive it, its revenue will need to fall to 50% below where it was this time last year. That might discourage it from reopening routes, which would slow the recovery.
The scheme will also make it harder for businesses desperately in need of staff (such as supermarkets) to hire new workers from currently struggling businesses.
To do so, they would need to entice workers to move from what might be suddenly better-paid jobs (everyone benefiting from the scheme must receive at least $1,500 per fortngiht) to less well paid ones.
And the choice to subsidise the largest businesses in Australia is questionable.
The major banks are excluded, but every other large company with at least a 50% reduction in revenue is included. Specific, targeted measures for the worst-affected industries might have been a better approach.
Professor of Employment Relations, Centre for Work, Organisation and Wellbeing, Griffith University
Dangers often associated with wage subsidy schemes — like wasting money on jobs that would have been created anyway, or substituting one type of worker for another — aren’t much of a concern when a wage subsidy is introduced in an environment in which revenue and employment is diving.
That said, the scheme will mainly target workers at or near the minimum wage. That’s because the payment is set close to the minimum wage.
In effect, firms can rehire or keep on minimum-wage workers for free.
For workers on average full-time adult earnings, which are about twice the minimum wage, the subsidy is nowhere near as big. Many are still likely to lose their jobs, as we have already seen.
- ^ $1,500 per fortnight (theconversation.com)
- ^ move (treasury.gov.au)
- ^ The key to the success of the $130 billion wage subsidy is retrospective paid work (theconversation.com)
- ^ Modelling suggests going early and going hard will save lives and help the economy (theconversation.com)
- ^ temporary (treasury.gov.au)
- ^ CC BY-ND (creativecommons.org)
- ^ New OECD estimates suggest a 22% hit to Australia's economy (theconversation.com)
- ^ long term (treasury.gov.au)
- ^ Coronavirus Job Retention Scheme (www.gov.uk)
- ^ broader (treasury.gov.au)
- ^ Coronavirus: how UK job retention plan borrows from collectivist Europe (theconversation.com)
- ^ Delivery workers are now essential. They deserve the rights of other employees (theconversation.com)
Authors: Steven Hamilton, Visiting Scholar, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University