Business Daily Media

Business News

there was no time to make it perfect

  • Written by Steven Hamilton, Visiting Fellow, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University
image

No Australian government has ever spent A$130 billion so quickly.

Last Tuesday, when the Prime Minister announced the government would subsidise six million jobs for six months to the tune of $1,500 a fortnight, the nation’s economists were left speechless.

Today, the government unveiled the legislation[1] to be considered by the parliament tomorrow.

In ordinary times, there wouldn’t be a lot of support for a $130 billion wage subsidy. But these aren’t ordinary times.

Whole sectors of the economy have shut down, either directly as part of the health response to the pandemic, or indirectly as part of a wave of knock-on effects.

Read more: Australia's $130 billion JobKeeper payment: what the experts think[2]

The JobKeeper wage subsidies will give direct support[3] to the worst-affected businesses and jobs, helping to keep the economic damage to a minimum. The package isn’t perfect. But it’s a far better response than had been feared.

It will help keep the Australian economy afloat over the next six months, putting it in a position to bounce back when health officials deem it safe to reopen parts of the economy for business.

It has three key features:

  • businesses get $1,500 per fortnight per worker (only for those workers who were employed on March 1. Short-term casuals with the business and some visa holders are excluded)

  • the employer has to keep those workers on the books and pay them at least $1,500 per fortnight

  • it only applies to businesses whose revenue has collapsed by at least 30% (15% for charities and not-for-profits, 50% for the largest businesses, with banks excluded).

To be effective, it has to deliver on three goals:

  • to support workers’ incomes through the crisis

  • to keep workers attached to firms, preserving as many job-specific skills and as much know-how as possible

  • to prevent wide-scale business failures which could turn a short and sharp recession into a long and painful depression.

Importantly, this means if it’s working well, both workers and employers will get something out of the deal.

At firms that would otherwise have shut down, workers will benefit considerably.

Many workers will get paid more

The $1,500 payment will give them much more than the Newstart payment they would have received if laid off, even the doubled Newstart (now called JobSeeker) which for six months has been paired with a Coronavirus supplement[4] lifting it from $565.70 to $1,115.60 per fortnight.

And for the one third of workers otherwise earning less than $1,500 per fortnight, the JobKeeper payment will be a pay rise. If the subsidy keeps their firm afloat, they’ll keep their job and be paid even more than before for the next six months.

It’s possible those earning more than $1,500 per fortnight will earn less than they did before in pay and benefits, depending on what the government does with the Fair Work Act.

Read more: The key to the success of the $130 billion wage subsidy is retrospective paid work[5]

Exactly how it works out for workers who get JobKeeper will depend on the labour market. On one hand, they will be more attractive to employers because their employment comes with a big subsidy that new hires don’t bring with them. On the other hand, they might have few alternative employers to turn to. Jobs might be hard to find.

They’ll get to keep their jobs

Regardless, even if their pay is reduced, their situation will be much better than under the renamed Newstart. And to the extent that cutting their pay helps to keep the firm viable, it will secure a job for them on the other side.

Employers will also benefit. If a business stays open, it will get the benefit of its workers’ labour for free or at a big discount. It might look like corporate welfare, but it’s a feature, not a bug.

Read more: Open letter to the prime minister: extend coronavirus support to temporary workers[6]

A key objective of the scheme is to plug the hole in firms’ revenues to prevent them going under. Most would have been viable if it weren’t for the necessary public health measures governments have taken. Allowing them to fail would mean a pointless destruction of valuable resources.

The wage subsidy is somewhat crude and inevitably there will be some waste. Some firms will be given more money than they need, some workers will be given more, some less.

It was never going to be perfect

Given more time, the treasury could have designed something better targeted, less wasteful. It didn’t have it. The economy has never experienced so sudden a collapse.

But there are a few simple things the government could do to make it better.

It could include short-term casuals and visa holders, and it should take care not to weaken the Fair Work Act.

JobKeeper won’t prevent a serious contraction in the Australian economy, but it should give us a very good chance to bounce back on the other side.

We would like to thank Jeff Borland for his comments on a draft version of this article.

Authors: Steven Hamilton, Visiting Fellow, Tax and Transfer Policy Institute, Crawford School of Public Policy, Australian National University

Read more https://theconversation.com/jobkeeper-is-quick-dirty-and-effective-there-was-no-time-to-make-it-perfect-135195

Business Daily Media Business Development

Constant product innovation is critical to finding market fit

The significant impact the COVID-19 pandemic has had on businesses worldwide is undeniable. Businesses in every industry have been forced to reinvent the way they operate, communicate ...

Jack Zhang, co-founder and CEO of Airwallex - avatar Jack Zhang, co-founder and CEO of Airwallex

Tips to Keep Your Business Competitive in Today’s Digital Age

Sydney is known to be a startup hub because of the attractive opportunities for business-minded people and the perks of living in the city. Innovation, in particular, is a massive aspect o...

Emily Stuart - avatar Emily Stuart

Pay for Convenience: The Perks of Using a Business Registration Service

If you are looking to register your company so you can finally be a legitimate business, with all the right licences and paperwork, then you will benefit from using a Business Registration...

Emily Stuart - avatar Emily Stuart

Lonely Planet launches first-ever-travel-only TV platform

Classic adventures. Epic discoveries. Lonely Planet launches first-ever travel-only TV platform and a range of tools for temporarily-grounded travellers   Lonely Planet TV will tr...

Media Release - avatar Media Release

Digital Agency



News Company Media Core

Content & Technology Connecting Global Audiences

More Information - Less Opinion