‘If JobSeeker was cut, the unemployed would be picking fruit’? Why that’s not true



F Armstrong Photography/Shutterstock

Peter Davidson, UNSW

I’m not sure which does the most harm: the cut of A$150 per week in JobSeeker payments due this Friday or the sudden and coincidental volley of media reports about unemployed people refusing jobs, including fruit picking.

This narrative is jarring when there are 19 people unemployed or underemployed for every vacancy and only 3% of employers report that they are recruiting but can’t find enough applicants.

Are unemployment payments really that cosy since they almost doubled in April from $282.85 to $557.85 a week?

$557.85 a week for a single adult is around 80% of the full-time minimum after-tax wage of $669 per week, and a good less again as a proportion of what most entry level jobs pay, because most pay more than the minimum wage.

Five studies conducted in the United States where unemployment payments were lifted US$600 per week during the coronavirus crisis found no evidence they were discouraging people from finding jobs.

Some were making 70% more than they did while in jobs.

Unemployed workers would generally prefer to be in paid work, and in any event are usually required to search for it.

There are other reasons not to pick fruit…

Fruit pickers are often underpaid cash-in-hand.

Growers representatives have told a parliamentary inquiry that when JobSeeker payments were doubled, many workers collected their final cheques and went home.

But temporary migrants and young locals are often underpaid in such jobs.

Squeezed by powerful customers, employers with thin margins and a ready supply of labour have grown used to offering very low wages cash-in-hand.

In piece-work like picking where pay is tied to output, there’s no legal requirement to pay minimum wages.

A labour hire firm recently complained people weren’t taking up their offer of “at least $500 per week” to pick strawberries.

$500 is two-thirds of the minimum wage.

It’s not just the pay that discourages people from taking up crop picking: they need to be fit and able to travel for what’s often a short period of paid work.

This won’t work for many people on Jobseeker, including the quarter with disabilities, the third aged 45 or over, and the 10% caring for children.




Read more:
Unemployment support will be slashed by $300 this week. This won’t help people find work


There are ways to reduce under-payment and high turnover in such jobs.

Reducing our reliance on temporary migrants would be a first step.

Otherwise, employers won’t compete fairly to attract workers, and local workers will remain wary.

More direct contact between the employers and unemployed people and less reliance on labour hire firms would help build trust.

…and other reasons not to work more days

Jobseeker tops up the wages of many part-time workers.

It is cut by 50c for every dollar earned above $53 per week, then 60c for every extra dollar earned up to $128 per week, before cutting out completely for a single adult on $544 per week.

Former social security official David Plunkett calculates that before COVID and the effective doubling of JobSeeker, a worker on it gained a net $100 to $200 for working one to three days a week at the minimum wage, climbing to $269 for the fourth day, after which Jobseeker expired.

Since the new arrangements and top up that effectively doubled JobSeeker, the net gains have fallen slightly $100 to $175 for the first three days, before dropping to just $5 on the fourth.




Read more:
The compromise that might just boost the JobSeeker unemployment benefit


The problem isn’t the effective doubling of JobSeeker, it’s the sudden-death cut off of the top-up as soon as the last dollar of Jobseeker expires.

That flaw could be fixed by tapering the supplement out gradually (rather than increasing the “income free area” to $150 per week as the government is proposing).

There’s no need to force people to choose between poverty and entry-level jobs.

Even if, for example, Jobseeker was increased permanently to the pension rate, it would still be under 70% of the minimum wage after tax.

Incentives for part-time work can be fixed by reforming income tests and tax. Beyond that, the answer to periodic labour shortages, exploitation and high turnover in entry-level jobs is better entry-level jobs.The Conversation

Peter Davidson, Adjunct Senior Lecturer, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Keating is right. The Reserve Bank should do more. It needs to aim for more inflation



Ashwin/Shutterstock

Chris Edmond, University of Melbourne and Bruce Preston, University of Melbourne

Former prime minister Paul Keating isn’t alone in wanting the Reserve Bank to do much more to ensure economic recovery.

In an opinion piece for major newspapers he has said it ought to be directly funding government spending rather than indirectly by buying government bonds from third parties.

But we think there’s something else the Reserve Bank can do.

Governor Philip Lowe is right to call on governments to spend more, creating “fiscal stimulus”.

But we don’t think that absolves the Reserve Bank of the need to provide more “monetary stimulus”.

Simply put, the Reserve Bank needs to create more inflation. Quite a lot more.

For years now, the bank has chronically undershot its inflation target of 2% to 3% per year. This has to stop.


Consumer price inflation since the Reserve Bank’s 2-3% target


ABS Consumer Price Index, Australia

Inflation plays a vital role in government finances, through its influence on nominal income growth. Higher nominal income growth lowers outstanding debt as a fraction of income.

To appreciate the size of the effect, if average inflation runs at 1.5% per year rather than 2.5% per year (the bank’s central target), after a decade prices will be roughly 10% lower.




Read more:
No big bounce: 2020-21 economic survey points to a weak recovery getting weaker, amid declining living standards


As a consequence, public debt as a fraction of national income will be 10% higher, and that’s before taking into account the revenue implications of lower inflation.

Too much inflation creates its own problems, but so does too little.

Of course, the Reserve Bank’s options are limited right now. Short term interest rates are effectively zero and can’t go much lower without turning negative, an idea the bank has so far resisted.

The bank needs to commit to “too much” inflation

But there are things the bank can do, and they involve making clear its plans for when inflation recovers.

When economic growth revives, be it in 12 or 24 months, the bank will face a choice between raising rates to more normal levels, or continuing to keep them extraordinarily low.

The RBA should do the latter and promise serious inflation, more than it is comfortable with, for some time to come.




Read more:
Price-level targeting: how inflation-focused central banks can squeeze more from interest rates


Promising to overshoot its target band will raise inflation expectations and then inflation itself, lowering the real interest rate.

This will buttress the recovery, supporting economic growth. It will also greatly improve the state of government finances.

How much inflation should the RBA generate?

It should aim for average inflation of 2-3% over a long window, at least ten years.

This will place a clear upper bound on how much inflation is appropriate over the long term, while requiring substantial inflation for some time to make up for the sustained undershooting of its target.

It’s being tried in the United States

Such a policy might sound unusual. And there would be protests about credibility and the risks of changing institutional arrangements during a crisis.

But the United States Federal Reserve recently adopted such a policy after an extensive review.

There’s no reason Australia’s Reserve Bank couldn’t do the same.

As it happens, hardly any formal change is required. Its Statement on the Conduct of Monetary Policy says its goal is 2 to 3% inflation “on average, over time.”

So there’s no need to change the wording, merely the interpretation.

It could make clear that a practical change had taken place by referring to the new regime as a “price-level target”, since targeting inflation over a long time is equivalent to targeting a path for the overall level of prices.

It’d hold the bank to account

Regardless of the label, such a clearly enunciated approach would make monetary policy more effective and help the government with its finances.

And that’s not all. An average inflation target would provide a clearer benchmark against which to assess the bank’s performance and thus strengthen the accountability of one of our most important institutions.

Too often in the past the bank has excused its failure to hit its inflation target by appeals to a vague and shifting list of factors outside of its control.




Read more:
Vital Signs. Yet another year of steady rates. What’s the point of the RBA inflation target?


While some excuses may have merit, the existing regime does not well communicate how such undershooting determines what the bank will do in the future.

By contrast, an average inflation target would clearly communicate that whatever the excuses for undershooting, future policy will be set to overshoot until average inflation is back on target.

It’s appropriate for fiscal policy to take the lead right now. But monetary policy has to be ready to do its job too.The Conversation

Chris Edmond, Professor of Economics, University of Melbourne and Bruce Preston, Professor of Economics, University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Reserve Bank ‘dallies with indolence’ instead of helping government pursue full employment: Paul Keating


Michelle Grattan, University of Canberra

Former prime minister Paul Keating has launched an extraordinary attack on the Reserve Bank, accusing it of having “one of its dalliances with indolence”, and describing it as “the Reverse Bank”.

Keating, who was treasurer in the Hawke government and once boasted of having the Reserve Bank in his pocket, said the bank’s job was “to help the government meet the task of full employment” and it was failing in this.

He criticised its officials for being “the high priests” of incrementalism, rather than doing what the situation called for.

His outburst, in a statement issued on Wednesday, followed a speech this week by the bank’s deputy governor Guy Debelle who canvassed the pros and cons of options for further monetary policy action if the bank’s board decided it was needed.

These included buying bonds further out along the curve, foreign exchange intervention, lowering rates without going into negative territory, and moving to negative rates.

Keating labelled Debelle’s contribution “meandering thoughts”.

“Knowing full well that monetary policy can now no longer add to nominal demand – something that now, only fiscal policy is capable of doing, the Reserve Bank is way behind the curve in supporting the government in its budgetary funding measures,” Keating said.

“For a moment, it showed some unlikely form in pursuing its 0.25% bond yield target for three year Treasury bonds and a low interest facility for banks.

“But now, after 600,000 superannuation accounts were cleared and closed down, with 500,000 of those belonging to people under 35 – a withdrawal of $35 billion in personal savings, and further demands arising from the employment hiatus in Victoria, [Debelle] yesterday strolled out with debating points about what further RBA action might be contemplated.”

Keating said that in his office when he was treasurer, the bank was nicknamed “the Reverse Bank”, because it was too slow raising rates in the late 1980s and too slow lowering them in the early 1990s – which gave Australia “a recession deeper than it would have otherwise had”.

As treasurer he’d “worn the cost of the bank’s indolence in the task of smashing inflation”. And as a measure of his giving the bank more discretion, as prime minister he’d worn the “great political cost” of the bank’s rate rises in 1994.

“As history has shown, when a real crisis is upon us the RBA is invariably late to the party. And so it is again,” Keating said.

The bank’s act had two objectives – price stability (not a problem at the moment) and full employment, Keating said.

“The Act says the Bank and the government should endeavour to agree on policies which meet that objective – in this case, employment.”

The bank “should be explicitly supporting the government so the country does not experience a massive fall in employment”, hitting particularly younger workers.

But instead of that, Debelle “conducts a guessing competition on what incremental step the Bank might take to help,” Keating said.

“These are the high priests of the incremental. Making absolutely certain that not a bank toe will be put across the line of central bank orthodoxy.

“Certainly not buying bonds directly from the Treasury – wash your mouth out on that one – what would they say about us at the annual BIS meeting in Basel?

“Not even ambitiously buying sufficient bonds in the secondary market, like the European Central Bank or the Bank of Japan.”

He said the bank should “shoulder the load. And in a super-low inflationary world, that load is funding fiscal policy. Mountainous sums of it.

“In an economic emergency of the current dimension that means putting the orthodoxy into perspective and doing what is sensibly required.”

Like other central banks, the Reserve Bank “has become a sort of deity, where lesser mortals might inquire, however respectfully, what the exalted priests might be thinking or have in mind for their prosperity or the country at large,” Keating said.

“The Governor and his deputies do not wear clerical collars and black suits. But that is the only difference in their comport and attitude.”The Conversation

Michelle Grattan, Professorial Fellow, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Mapping COVID-19 spread in Melbourne shows link to job types and ability to stay home



Shutterstock

Melanie Davern, RMIT University; Mary-Louise McLaws, UNSW, and Ori Gudes, UNSW

COVID-19 provides a stark reminder of inequity and the spread of disease. These aren’t new ideas and can be traced back to John Snow’s cholera maps and Charles Booth and his colour-coded maps of occupation types and poverty in the 19th century. Today, as case numbers soar in Melbourne, large clusters of COVID-19 cases have been identified across the northern and western suburbs, raising questions about occupation types and socio-economic differences across the city.

One of the most important messages from government during the pandemic has been to work from home if you can. Though what happens if your work isn’t suited to this?




Read more:
Two weeks into Melbourne’s lockdown, why aren’t COVID-19 case numbers going down?


Snow and Booth were forefathers of modern geographical information systems (GIS) analysis. It’s a powerful tool for mapping and visualising differences or inequities across cities and the spread of disease. We mapped the connection between occupation types, indicating the ability to work from home, and the locations of COVID-19 cases across Melbourne in the recent second wave.

Why is equity a health issue?

Hotspot suburbs were first identified and ring-fenced in early July. A hard lockdown was applied to the 3,000 residents of nine high-density public housing estates in inner Melbourne.

Ring fencing is a powerful method of containing a disease. It’s most appropriate where a specific location has a distinctive pattern of risk. It should also be applied without bias.

As the public housing towers lockdown reminded us, there is an inequity in health.




Read more:
Our lives matter – Melbourne public housing residents talk about why COVID-19 hits them hard


Many people associate equality with treating everyone the same regardless of their needs. This is very different to equity, which is about treating people according to their needs. Unlike equality, equity is providing people with extra help when it is needed.

The picture below makes the concept of equity easier to understand.

Illustration of equity by showing how standing on crates enables children of different heights to look over the people in front of them and see the action on a sports field.

Craig Froehle/Medium, CC BY

In the context of this pandemic, a recent discussion of housing affordability raised the issue of equality versus equity.




Read more:
Overcrowding and affordability stress: Melbourne’s COVID-19 hotspots are also housing crisis hotspots


We see a stark difference between the initial transmission of COVID-19 and the second wave. The earliest cases were concentrated in Melbourne’s wealthier areas and associated with international travel. In the second wave we have seen a different pattern of spread across disadvantaged areas of Melbourne.

This pattern is possibly linked to inequity associated with living and work conditions. People with higher education tend to work in occupations that often enable them to work from home, making it easier to self-isolate.

Outer areas of Melbourne have had more cases of COVID-19 cases in the second wave and this might be associated with job types and education levels. Residents living in inner areas of Melbourne are more likely to hold tertiary qualifications needed for occupations more suited to working from home.

What does mapping reveal?

We analysed Australian Bureau of Statistics Census data on employment types from the Australian and New Zealand Standard Classification of Occupations. We identified 93 major occupation types suitable for working from home.

We linked and mapped these occupation data along with COVID-19 incidence according to local government areas. The map below shows data from July 16.

Map of incidence of COVID-19 cases across Melbourne and proportion of people in occupations able to work from home by local government area.

Data: DHHS, July 16, Author provided
Legend for map: size of red dots shows number of COVID-19 cases, darker areas indicate more people in occupations able to work from home.

The map reveals lower proportions (shown by lighter-coloured areas) of people employed in occupations suitable for working from home in many outer northern and western areas of Melbourne. In particular, the proportion is low in Hume, one of the local government areas where COVID-19 cases have been concentrated.

In the inner and outer eastern areas of Melbourne, residents are more likely to be able to work from home. Nillumbik in the outer north-east has the highest proportion of people able to work remotely. It has very few cases of COVID-19.

Greater Dandenong is an exception to this pattern. As a manufacturing hub for Melbourne, it has a low proportion of people in occupations suitable from working from home, but has few cases.

COVID-19 is spread through community transmission or close contact with others who are infected, as happened in meatworks factory clusters in northern and western Melbourne. Greater Dandenong may have been protected by the small number of cases across south-eastern Melbourne where more residents have occupations suitable for working from home.

The Victorian Department of Health and Human Services updates COVID-19 incidence data hourly. We first sourced data on July 16, a week after the Melbourne-wide lockdown began, to understand the patterns of occupation types and COVID-19 clusters as they evolved. To continue monitoring, we have developed a data dashboard, which is shown below.

Data dashboard showing incidence of COVID-19 cases by local government areas

Ori Gudes, Author provided

We hope this data dashboard will be released in coming days with updated data.

Using inclusive data to protect everyone

The related patterns of occupations and COVID-19 incidence remind us of the importance of the well-known relationships between health and place.




Read more:
Your local train station can predict health and death


This pandemic takes advantage of inequity and our most vulnerable communities. It shows us why we must include the full spectrum of society (not only those we know best) when we make decisions, communicate and ask people to work from home.

Many workers are engaged in casual and insecure employment and work is a critical determinant of health. Our mapping provides evidence that can help authorities decide where and how to focus preventive measures when planning public health interventions.

These methods of GIS analysis and easily understood maps should be freely available. The community will then be able to interrogate the data so they can realise in close to real time the rationale for public health directives.

These same principles have been used to understand health and liveability in cities though the Australian Urban Observatory to inform city planning.


We thank Weijia Liu of UNSW for assisting with data collection in this study.The Conversation

Melanie Davern, Senior Research Fellow, Director Australian Urban Observatory, Co-Director Healthy Liveable Cities Group, Centre for Urban Research, RMIT University; Mary-Louise McLaws, Professor of Epidemiology Healthcare Infection and Infectious Diseases Control, UNSW, and Ori Gudes, Senior Research Fellow, Geospatial Health Lab, University of Canberra, and Adjunct Senior Lecturer, School of Public Health and Community Medicine, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Cutting unemployment will require an extra $70 to $90 billion in stimulus. Here’s why



Shutterstock

Brendan Coates, Grattan Institute; Matthew Cowgill, Grattan Institute, and Tony Chen, Grattan Institute

After managing the first stage of the COVID-19 crisis so effectively, the government now faces a bigger challenge: getting us back to work.

The official employment figures indicate the scale of what’s needed. In the past two months number of Australians with a job has fallen by 835,000. Millions more are in jobs kept on life support by JobKeeper.

Employed Australians, total

Includes Australians regarded as still employed because they are on JobKeeper.
ABS 6202.0

The Reserve Bank’s latest public forecast has the unemployment rate peaking at 10% and then falling to 6.5% (baseline scenario) or 5% (optimistic scenario) by mid-2022.

In Grattan Institute’s latest report, The Recovery Book, released this morning, we argue this isn’t ambitious enough.

The case for ambition

The bank and the government ought to aim for something better, closer to 4.5%.

This is the rate it has previously identified as “full employment”, the lowest Australia can sustainably achieve without stoking inflation.

It would mean bringing unemployment down 1.5 percentage points further than it might otherwise fall over the next two years – to somewhere between 4% and 5%.

Projected unemployment with and without extra fiscal stimulus

RBA forecasts linearly interpolated between 6-month intervals. ‘Full employment’ corresponds to the RBA’s pre-COVID estimate, plus and minus one standard error band.
Grattan calculations, RBA May 2020 Statement on Monetary Policy; Lucy Ellis, 2019 Freebairn Lecture in Public Policy

The bank has passed the baton

With the bank’s cash rate already cut to 0.25%, conventional monetary policy (cutting the cash rate) has run out of steam.

Unconventional policy will help.

The Reserve Bank is advancing cheap money to private banks for onlending to businesses, buying government bonds to keep the three year bond rate near 0.25%, and has pledged to keep the cash rate at 0.25% for the next three years.

The bank can and should do more, but the rest will have to be done by government spending and tax measures, so-called fiscal policy, of the kind that has already been proved effective in suppressing unemployment.

We’ll need $70 to $90 billion

We estimate that reducing unemployment by 1.5 percentage points by mid-2022 would require additional stimulus of A$70 billion to A$90 billion over the next two years, equivalent to between 3% and 4% of GDP.

This is on top of the more than $160 billion committed to JobKeeper and other coronavirus supports to date.

Here’s how we make the calculation.

First, to reduce unemployment by that much we estimate that real gross domestic product needs to grow by about 4 percentage points more than forecast over the next two years.

The estimate is based on previous work by economist Jeff Borland. Jeff kindly updated his calculation with us for this article, finding that each one percentage point increase in annual GDP growth reduces the unemployment rate by around 0.38 percentage points.




Read more:
Why even the best case for jobs isn’t good. We’ll need more JobKeeper


Second, we assume each dollar of stimulus in a particular year increases GDP in that year by between 80 cents and one dollar (some of the rest is saved and some leaks overseas).

This estimate of “fiscal multiplier” is slightly higher than that used by treasury during the global financial crisis but is in line with recent academic work finding that stimulus measures are more effective when monetary policy is out of ammunition.

If the fiscal multiplier isn’t as high – or if the recovery is more sluggish than expected, more stimulus might be needed.

There’s little risk of overkill…

A few weeks ago Reserve Bank Governor Philip Lowe raised the possibility that the crisis had pushed the minimum sustainable rate of unemployment higher, from 4.5% to nearer 5%, on the face of it making a case for less ambition.

His concern was “scarring” – the risk that some of the people who lose their jobs will become so damaged they become unsuitable for future employment, meaning that employers looking for staff would rather bid up the wages of existing workers than employ them, fuelling inflation.

But, if anything, his concern is a powerful argument for spending more, and more quickly, in order to avoid scarring. There’s good evidence sustained high unemployment hurts the economy in the long term.




Read more:
The charts that show coronavirus pushing up to a quarter of the workforce out of work


And if the extra spending did fuel inflation, it mightn’t be such a bad thing.

Inflation has been below the bank’s target for years. If it gets above it and becomes a problem, the bank can dampen it by raising rates.

…and little time to lose

The extra stimulus will need to be announced soon: on or well before the federal budget scheduled for October. Fiscal measures take time to have their biggest effect.

We are facing a “fiscal cliff” when measures including JobKeeper and the enhanced JobSeeker payment are withdrawn at the end of September. To escape it, they will need to be wound down more gradually, as the international Monetary Fund warned last week.

There are plenty of ways to maintain support including further cash payments to households, along the lines of those in the global financial crisis showed were effective in boosting spending, as well as spending on things such as social housing, roads and school maintenance.

Fear of debt needn’t hold us back

Extra stimulus will mean extra government debt. But the Australian government can now borrow for 10 years at a fixed interest rate below 1%. Adjusted for inflation, that’s a negative real interest rate, making debt more affordable than it has been in living memory.

There will naturally be concerns that further debt will place a burden on younger generations. But they are the generations that will be lumbered with the costs of worse than necessary unemployment, some of it very long term unemployment, unless we act.

In the worst case, they’ll ask why we didn’t do more.




Read more:
No big bounce: 2020-21 economic survey points to a weak recovery getting weaker, amid declining living standards


The Conversation


Brendan Coates, Program Director, Household Finances, Grattan Institute; Matthew Cowgill, Senior Associate, Grattan Institute, and Tony Chen, Researcher, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

How to improve JobKeeper (hint: it would help not to pay businesses late)



Shutterstock

Danielle Wood, Grattan Institute and Nathan Blane, Grattan Institute

JobKeeper has been a lifeline for the economy.

Given the ferocity of the economic hit caused by COVID-19, the government was right to prioritise speed over perfection.

But the current review of the A$70 billion provides an opportunity to iron out some of its crinkles.

The biggest priorities should be moving to upfront payments, expanding the scheme to cover temporary workers and short-term casuals, and avoiding the looming government support cliff.




Read more:
That estimate of 6.6 million Australians on JobKeeper, it tells us how it can be improved


The government should also introduce a separate part-time payment rate, to better target the scheme and provide greater bang for buck.

The biggest barrier to the effectiveness of JobKeeper is the fact that the employer gets it in arrears, weeks after she or he has paid it to employees.

Stop paying businesses late

Businesses without the necessary cashflow have been encouraged to take advantage of government-backed loans, but for many the process has been too slow or unacceptably risky.

It might help explain why the take-up of the JobKeeper has been lower than expected.

Those cash-flow-constrained businesses that have been able to access finance have been forced to borrow on an ongoing basis in order to pay their workers.




Read more:
JobKeeper is quick, dirty and effective: there was no time to make it perfect


Given that the government now knows how much it needs to pay to businesses that are in the scheme, it would be very easy to switch to payment in advance by doubling up a payment – moving to being in step with, rather than behind, employers’ needs.

With government able to borrow so cheaply – at less than the rate of inflation – the fix would cost it little, and would add little to JobKeeper’s total cost.

The case for extending JobKeeper to temporary visa holders is clear cut.

Include more workers

Temporary visa holders can’t get safety net payments such as JobSeeker. And many of them are stuck here: there are no affordable options for them to return to their home country.

Leaving people without support does not do much for Australia’s reputation as a global citizen – many of the countries with which Australia normally compares itself have extended wage support to the wages of temporary residents.

It means JobKeeper is far less generous for businesses in sectors that rely on temporary visa holders, including the hard-hit sectors such as hospitality, retail, healthcare, and aged care.




Read more:
Why temporary migrants need JobKeeper


If temporary visa holders sign up to the scheme at the same rate as other residents, including them for six months would cost about $10 billion.

Short-term casuals – those who’ve worked for their employers for less than a year – have also been excluded, which has also left big holes in support for some of the worst-hit sectors and some of the lowest-income Australians.

Including short-term casuals would cost an extra $6 billion.

Pay part-timers less

JobKeeper pays all eligible workers at the same flat rate, regardless of the hours they worked before coronavirus hit or afterwards. More than 80% of part-time workers are believed to have received a pay rise under JobKeeper.

This means the scheme costs more than it needs to. It also raises questions about fairness between employees within businesses, because a part-time worker gets as much as full-time worker.

No doubt the government chose a flat rate to make the program simple, but a simple way to adapt the scheme would be to follow New Zealand and introduce a lower rate for people working less than 20 hours a week.




Read more:
JobKeeper payment: how will it work, who will miss out and how to get it?


It could mean that full-time employees on JobKeeper continued to receive $1,500 a fortnight, while employees working less than 20 hours a week got $800.

The saving, more than $2 billion per quarter, could be used to fund some of the extensions to the scheme we propose.

Extend it for businesses not recovered

The universal September 27 cut off date is blunt. It does not recognise that social distancing constraints will continue to affect some businesses for many months and that different sectors will bounce back at different rates.

Pulling back assistance on businesses that are still significantly revenue constrained risks undoing much of the good work JobKeeper has done to preserve jobs.




Read more:
Australia’s first service sector recession will be unlike those that have gone before it


Businesses currently receiving the payment should be required to re-test against the turnover requirement at the end of July and September. Where a business’s turnover climbs to higher than 80% of pre-crisis levels, support could be withdrawn with notice.

Businesses that remain below the recovery threshold in September should receive JobKeeper for an additional three months.

While the incentives would not be perfect – some businesses close to the threshold would have a short-term incentive to limit their recovery – it would be better than withdrawing support prematurely for scores of businesses.

JobKeeper is good, we can make it better

As well as being more effective in maintaining productive capacity, the approach we advocate would help cushion the “fiscal cliff” due at the end of September when all major coronavirus supports are due to come off at once.

Three months into its short life, JobKeeper is performing well. Now is the time to get it right.

Overall the proposed changes would cost a little more but they would better target the scheme and ensure it delivers on its promise of keeping Australians in jobs.The Conversation

Danielle Wood, Program Director, Budget Policy and Institutional Reform, Grattan Institute and Nathan Blane, Analyst, Grattan Institute

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Number of Australia’s vulnerable children is set to double as COVID-19 takes its toll



Shutterstock

Kate Noble, Victoria University; Peter Hurley, Victoria University, and Sergio Macklin, Victoria University

Three quarters of a million Australian children are likely to be experiencing employment stress in the family as a result of COVID-19. This is on top of around 615,000 children whose families were already dealing with employment stress, whose situation may have worsened.

Latest figures from the Australian Bureau of Statistics show 2.7 million people left their job or had their hours reduced between March and April. This means the jobs crisis is affecting 1.4 million Australian children, according to new modelling from the Mitchell Institute.

The stress and anxiety facing parents who have lost their jobs, coupled with social isolation and educational disruption, are likely to put many children at a significantly higher risk of poorer education and health outcomes.

Financial stress affects healthy development

A family’s socio-economic status is the biggest factor influencing children’s educational opportunities in Australia. Research by the Mitchell Institute has found children from struggling families are 10-20% more likely to be missing key educational milestones compared with their peers.



Children in families experiencing job loss are more like to start school developmentally vulnerable, to repeat a grade, to leave school early and may be less likely to attend university.

As stress in the home increases, children and young people’s health and well-being often suffers too. Extreme employment stress, for example in jobless households, can compromise the quality of parenting and home environments. Providing basic necessities can be challenging, and lead to poorer child nutrition.

Health and well-being issues caused by the crisis may undermine young people’s learning and efforts to reengage with school. Young people who don’t receive a good education are more likely to have poor longterm health outcomes.

Preschools and schools can help children recover

With schools and preschools now resuming something close to normal operations, it’s time to shift our collective focus from how we deliver education remotely, to how we support a huge newly vulnerable population of students.




Read more:
1 in 5 kids start school with health or emotional difficulties that challenge their learning


Many students will benefit by simply resuming learning and socialising at their preschool or school. Others will find life returns to normal as their parents return to work or find a new job, and their families regain financial security.

But previous recessions tell us recovery may be slow. For some parents, unemployment and underemployment will be prolonged, leaving many children, including some who were never previously considered vulnerable, at risk.

Teachers have shown agility, resilience and skill in the face of COVID-19. But preschools and schools aren’t equipped to deal with the huge upsurge in student vulnerability, on top of the upheaval of COVID-19.

Here’s what needs to happen

The Australian government has made childcare free for parents as part of a temporary relief package, but that policy is under review.

Governments must ensure children and families aren’t locked out of early education because they can’t afford it. Ensuring access is critical for children’s learning and development, as well as economic recovery through parental workforce participation.

Along with an emphasis on academic learning and re-engaging students with school routines, school children would benefit from an increased focus on health and well-being in schools. Supporting students to reconnect socially and build their own resilience will improve academic learning and should be central to schools’ efforts.




Read more:
Childcare is critical for COVID-19 recovery. We can’t just snap back to ‘normal’ funding arrangements


Links between schools and external social and health services also need to be strengthened to support children of all ages. Many of the issues that need to be addressed to reduce student vulnerability occur at home and in the community, requiring targeted and expert care from a range of non-school service providers.

Dedicated well-being staff could be employed in schools to facilitate these connections, and drive schools’ focus on health and well-being.

Senior secondary students face a high risk of disengagement from education as a result of disruption and parental unemployment. Prior to COVID-19, the cost of leaving school early was calculated at around $A900 million per year, per cohort. Helping students remain in education is critical to improving health and employment outcomes later in life.

Current funding arrangements will not enable preschools and schools to adequately respond to this unprecedented situation. Investing in prevention and outreach now is vastly more effective than dealing with the fallout later.The Conversation

Kate Noble, Education Policy Fellow, Mitchell Institute, Victoria University; Peter Hurley, Policy Fellow, Mitchell Institute, Victoria University, and Sergio Macklin, Deputy Lead of Education Policy, Mitchell Institute, Victoria University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

HomeBuilder might be the most-complex least-equitable construction jobs program ever devised



Jason Pofahl/Unsplash

Geoff Hanmer, University of Adelaide

HomeBuilder is a good idea gone bad. It is possibly the most complex and least equitable program the government could have devised to deliver construction jobs.

It gives $25,000 to people who already own a home or already have enough money to buy one while delivering a minimal stimulus to extra construction. It isn’t a program to create jobs, it is a way of making people who are reasonably well off richer.

It does not address homelessness, precarious rental or any of the other pressing problems that are caused by our current housing mix.

It might build more nice decks for sipping Chardonnay (most already planned), it might deliver ritzy new bathrooms with imported taps or even new kitchens with the latest European appliances, but it won’t help those suffering housing stress.




Read more:
Scott Morrison’s HomeBuilder scheme is classic retail politics but lousy economics


Construction is Australia’s third-biggest employer, after retail and health care and social assistance. It employs one in every 11 Australians, and it generates other jobs in the building supplies industry and in design and engineering.

The Master Builders Association says construction is facing a decline of 40%, with potentially horrendous implications for employment.

The industry has three main components:

  • residential – apartments and houses

  • commercial – including offices, airport terminals, retail, tourism, education and factories

  • engineering – including roads, railways and airport runways.

Engineering construction is doing reasonably well.

Across the country, governments are delivering a veritable infrastructure Utopia. Continuing projects include the Tullamarine Airport Rail Link, the second stage of the Sydney Metro, the North East Link motorway in Melbourne, the WestConnex motorway in Sydney, the Airport Metro in Perth and Cross River Rail in Brisbane.

All governments have to do is keep this pipeline going, which, by and large, they are doing.

On the other hand, commercial construction will be in deep trouble by the end of the year as current projects finish without new projects to replace them.

Outlook bleak, then COVID

The outlook for residential construction is desolate, although for some people with secure jobs working from home, COVID-19 appears to have ignited a mini home renovation boom.

Prior to COVID-19, commercial construction was forecast to shrink from A$48.77 billion in 2020-11 to $41.3 billion in 2023-24.

Residential construction was forecast to bottom out in 2021-22 with only 168,000 dwelling starts, down from a peak of 233,872 starts in 2016-17.

Now, both forecasts will be slashed.

The tourism sector is dead, the education sector is near death and the multi-unit residential market, already badly impacted by confidence issues around construction quality, is in terrible shape with many projects on hold.

Not big enough, not broad enough

The HomeBuilder scheme is not big enough or broad enough to do much to reignite residential construction. To be useful for jobs, it would need to deliver an extra 60,000 housing starts.

Given the only people who will benefit from the grant will be those some way down the track to either buying or building, it is hard to guess what the additional outcome will be, but it would be surprising if the scheme generated much additional activity.

Even if the full budget allocation of the scheme is taken up, it would fund only about 25,000 projects. Many would have gone ahead anyway.

Among the peculiarities of HomeBuilder are that it won’t work in much of Sydney where many houses are likely to be valued above the $1.5 million limit and it won’t work in regional towns where the required spend will overcapitalise existing houses.

Complexities aplenty

It will encourage people to build in fridges, microwaves, coffee makers and washing machines (many of them tastefully European) to bump the contract price up above the $150,000 minimum.

It is a potential administrative nightmare for state governments that are already stretched administering existing emergency relief programs.

Who will establish that the value of an existing house is less than the $1.5 million upper limit? Will it be the value now in the middle of the COVID downturn or the value last year, or the value used to set local government rates?

Contracts are meant to be arms-length, but who will ensure the builder is not the cousin or the in-law of the owner, something that might be impossible to avoid in a small country town? If a garage is built on the side of a house, rather than as a separate structure, will it comply with the rules? And on and on and on.

Few extra homes

While these are legitimate questions, they ignore the big, central problem with the scheme: the opportunity to deliver a substantial program of social housing that would address real problems, including homelessness, has been missed.

And the government has done it in a way that will minimise the jobs created and maximise the wealth transfer to Australians who are relatively well off.

For a government that has mostly managed to do the right thing ever since COVID-19 hit, this has been a terrible policy clanger.

It will encourage everyone who cannot afford to buy a home, or who is homeless, to believe the government has forgotten them.The Conversation

Geoff Hanmer, Adjunct Professor of Architecture, University of Adelaide

This article is republished from The Conversation under a Creative Commons license. Read the original article.

There may not be enough skilled workers in Australia’s pipeline for a post-COVID-19 recovery



Shutterstock

Pi-Shen Seet, Edith Cowan University and Janice Jones, Flinders University

Scott Morrison wants to overhaul the skills workforce to ensure a better post-COVID-19 recovery. But there may not be enough people with the necessary skills to do so. And travel restrictions, which will reduce migration, will only compound the issue.

A Productivity Commission interim report released today found the proportion of people without qualifications at a Certificate 3 level or above decreased from 47.1% in 2009 to 37.5% in 2019. This will not be enough to meet a Council of Australian Governments (COAG) target of 23.6% set for 2020.




Read more:
Morrison’s VET reforms offer the same old promises, with no more money


The report also found while the number of higher-level qualifications (diplomas and advanced diplomas) sharply increased between 2009 and 2012, it has since fallen to its 2009 level.

The 2020 target was set out in the 2012 National Agreement for Skills and Workforce Development (NASWD), which identified long-term federal and state objectives in skills and workforce development.

The report noted the skills agreement is no longer fit for purpose, and the A$6.1 billion governments spend annually on vocational education and training can be better allocated to improve outcomes.

What the report found

The National Agreement for Skills and Workforce Development was intended to significantly lift the skills of the Australian workforce and improve participation in training, especially by students facing disadvantage. Several targets, performance indicators and outcomes were agreed to.

These included to:

  • halve the proportion of Australians aged between 20-64 without qualification at certificate 3 level and below, from 47.1% in 2009 to 23.6% by 2020

  • double the number of advanced diploma and diploma completions nationally from 53,974 to 107,948 in 2020.

The commissioners admit some of the targets agreed to were arbitrary and ambitious.

The report says:

If targets are unattainable, they quickly become irrelevant for policymakers. The NASWD’s performance indicators were reasonable general measures but needed to be linked to specific policies to allow governments to monitor progress.

The NASWD’s targets will not be met.

The commissioners state the failure to meet the targets is not an indication the national agreement has failed overall. This is because the targets only looked at those with formal education.

It noted a large proportion of the workforce aged over 25 are more likely to do informal training to increase skills for their current occupation, as opposed to formal training to get a new job.




Read more:
Most young people who do VET after school are in full-time work by the age of 25


About 85% of workers’ non-formal learning is paid for by employers, but government policies are largely silent about this kind of training.

Noting these caveats, the report identified factors that contributed to the failure to meet the targets. These included:

  1. a lack of uniform commitment and execution to meet the reform directions set as part of the original national agreement. This was meant to improve training accessibility, affordability and depth of skills through a more open and competitive VET market, driven by user choice

  2. the reputational damage of the VET FEE-HELP scheme that facilitated rorting of the system

  3. a reduction in governments’ commitment to a competitive training market. This includes a lack of accessible course information for students and inadequate sector regulation

  4. unclear pathways to jobs through the VET system – for example through lack of proper employment advice through school career advisors.

The fall in VET participation also coincided with an increase in university enrolments. This suggests students were choosing university over VET. VET and traineeship funding also tightened from 2014.

What the report recommends

Treasurer Josh Freydenberg asked the Productivity Commission to undertake the review of the National Agreement for Skills and Workforce Development in November 2019, before the bushfires and COVID-19 hit the economy.

The request came a few months after former New Zealand skills minister Steven Joyce released a report and recommendations of his review of Australia’s VET system.

The findings of the Productivity Commission’s interim report appear to dovetail well with those of the Joyce review. This recommended the formation of the National Skills Commission, which can facilitate an overarching national and consistent approach to vocational education and training.




Read more:
The government keeps talking about revamping VET – but is it actually doing it?


The interim report’s main recommendation is for governments to consider reforms to make the VET system a more efficient, competitive market. This must be driven by informed choices of students and employers, with the flexibility to deliver a broad suite of training options.

The commissioners also advocate for the use of common methods of measurement among states and territories to achieve nationally consistent VET funding and pricing.

For example, one of the most popular VET courses in Australia is the Certificate 3 in individual support — the course you’d study to work in aged or disability care. Standard subsidies for this course vary by as much as A$3,700 across Australia.

The report calls for more submissions and consultation as part of the next phase of the review.

The initial assumption of the commissioners was that the changing nature of work largely driven by new technology would be the main driver of changes to VET requirements.

But given the disruptions to the economy, and learning delivery having moved online, the commissioners note that while their current options and recommendations are unlikely to change in the general sense, COVID-19 is probably driving longer-term changes to the economy.

They say the pandemic may lead to structural changes in the VET sector which will also be relevant to any future agreements between governments.The Conversation

Pi-Shen Seet, Professor of Entrepreneurship and Innovation, Edith Cowan University and Janice Jones, Associate Professor, College of Business, Government and Law, Flinders University

This article is republished from The Conversation under a Creative Commons license. Read the original article.