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



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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.




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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.




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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.




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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)



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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.




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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.




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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.




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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.




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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.




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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



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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.




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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.




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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



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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.




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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



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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.




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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.




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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.




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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.

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



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Jeff Borland, University of Melbourne

When it comes to the outlook for employment, there’s good news and bad news.

To begin with the good news: with a bit of luck, the next few months will see the fastest expansion of employment in Australia’s history.

The bad news? Well, there’s virtually no chance it will be enough to get employment to where it was in March, before the COVID-19 shutdown.

In fact, even on a best-case scenario it’s likely by the end of September we will only be back to the worst points of the 1980s and 1990s recessions.

The best-case scenario

Other Bureau of Statistics data suggests that between mid-March and mid-April employment fell 1.3 to 1.6 million.

Treasury estimates that the planned reopening of the economy will result in a bounceback of 850,000 jobs.

Suppose that a decrease of 1.3 million turns out to be the trough and recovery is uninterrupted.

Employment at the end of September would then be 440,000 below where it was in March, 3.4% lower.




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The turnaround would be a considerable achievement.

But even if it happens, we will have only recovered to around the worst points of the 1980s and 1990s recessions, where employment decreased by about 4 per cent.

Employment won’t recover fully in this best-case scenario because some parts of the economy will still be shut down (including international travel) and COVID-19 will continue to cause many consumers to spend less than usual.

That best case is unlikely

There are several reasons to worry about whether the best-case can be achieved.

First, job gains from reopening businesses are likely to be offset by losses in employment in other industries suffering from reduced consumer demand and business investment.

While cafes and restaurants may start up again, Bureau of Statistics data shows that employment has begun to decline in large industries such as construction and professional services.




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Second, the effects of reopening may not be all we expect. Labour hoarding – where businesses retain more workers than needed during an economic downturn – might mean that reopening doesn’t translate into as many new jobs as expected.

This is likely to be particularly acute given that JobKeeper has effectively paid employers to subsidise labour.

Third, impacts from longer-run structural changes in the economy might begin to cause employment losses, especially as JobKeeper is partially unwound.

So what are we to do?

Even under the best-case scenario employment will be substantially lower than before COVID-19 well into the future. And we can’t presume the best-case will happen. A compelling case exists for substantial ongoing economic stimulus post-September 2020.

The labour market will not have fully recovered by then. To remove stimulus would only set back recovery. The question therefore should not be: is stimulus needed, but rather, what size and type of stimulus is needed.

Continuing JobKeeper beyond September 2020 could have an important role in providing income security to affected workers and macroeconomic stimulus.

It is a known policy, it operates effectively, and it appears to have community support. Replacing it with an alternative type of stimulus could risk harming confidence and the recovery.

We can’t simply end JobKeeper

An extra (and considerable) advantage of continuing JobKeeper is allowing time for a staged transition away from it. Stopping it will inevitably push up unemployment.

A staged transition would spread out that adjustment rather than creating a shock in September.

A transition from JobKeeper could be done via stepped decreases in the size of payment or progressively restricting eligibility as industries or businesses recover. The transition could begin at the end of September, or earlier if it is judged that employment is likely to have already recovered substantially before then.




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An objection to retaining JobKeeper is that it is preventing adjustment in the labour market, and disrupting the normal process of businesses starting up and failing.

There are two responses.

First, the question is not about whether JobKeeper should be permanent, but about the timing of its removal.

Whenever it is (or starts to be) removed, labour mobility will return and any firms on life support will disappear. Having this happen via a staged transition is better than having it happen all at once.

Second, the potential economic losses from unemployment in a depressed economy swamp the potential losses from having inefficient firms operating for longer.

Our number one priority has to be maintaining and restoring employment.The Conversation

Jeff Borland, Professor of Economics, University of Melbourne

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

A four-day working week could be the shot in the arm post-coronavirus tourism needs



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Jarrod Haar, Auckland University of Technology

When New Zealand Prime Minister Jacinda Ardern said recently, “I’ve heard lots of people suggesting we should have a four-day week”, she inevitably ignited debate.

Ardern was not, as some critics seemed to assume, just flying a kite. She was responding to various ideas about how to boost domestic tourism. Like the hospitality industry, tourism has been economically ravaged by the COVID-19 lockdown, so her remarks received a lot of coverage.

But Ardern added a caveat that received rather less attention: “Ultimately, that really sits between employers and employees.”

This suggests it is unlikely to become official government policy, but rather something businesses might choose to adopt if it made sense.

The idea has already gained traction in Australia and America, highlighting a widespread interest in new ways of organising work. Ultimately, Ardern was suggesting the end of lockdown might present organisations with a chance to do things differently.

But could it work? How would organisations do it? And what would be the benefits?

One company has shown the way already

In New Zealand, the four-day week was pioneered in 2018 by Andrew Barnes, now a champion of the concept after trialling and then adopting it for his finance company, Perpetual Guardian. Employees now work a four-day week on their previous five-day salary. They work normal eight-hour days, not simply longer hours to make up a normal 40-hour week.




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Working four-day weeks for five days’ pay? Research shows it pays off


Perpetual Guardian calls it the “100-80-100” model: 100% productivity for 80% time at 100% salary.

Research showed employees reported significantly better well-being than before the trial, including a better work-life balance and lower job stress. They were more engaged and reported higher job satisfaction.

Managers reported the same level of productivity. Furthermore, management found their teams were more creative, more helpful, and provided better customer service.

Overall it was a win for employees and their employer.

Perpetual Guardian’s Andrew Barnes.
Author provided

From my own research I’ve identified a few key factors that determine success. Firstly, it needs leadership support. Having a leader who can champion the adoption of a four-day trial is vital.

Barnes recommends a trial as the first step to discovering whether it is an option for your organisation or not. As evidence of the benefits builds (for example, Microsoft in Japan reported a 40% increase in productivity), employees might want to lobby their managers to give it a go.

Employee engagement is vital

My research also showed employees are central to making a four-day week work. Ultimately they have to create better ways to work – for example, collectively identifying what was previously wasted time and seeking solutions. In one case, a team told me they reduced a two-hour weekly meeting to 30 minutes a fortnight.




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How to reschedule the week is another factor: organisations might adopt a fixed day off – such as Melbourne firm Versa, which chose Wednesday. Or they might rotate the day off among team members.

The latter approach requires a strong creative focus on maintaining team productivity. But there is no one way to make it work. While Perpetual Guardian operates 32-hour weeks, Versa works a 37.5-hour week in four days.

What is most important is that workers are empowered to think about productivity and wastage and to make their work more efficient and effective. Even if an organisation trials the four-day week but chooses not to adopt it, it will still gain useful insights into working methods and productivity.

Beyond the benefits to employers (more focused and attentive staff, better customer relations) and employees (enhanced well-being and engagement), there are potentially wider social benefits too.

More leisure time equals greater opportunity

Reduced commuting times due to fewer days in the office mean fewer cars on the road, less congestion and lower CO₂ emissions. Offices use less power and, if an organisation is growing, potentially feel less pressure to expand if a rotating day off is in place.

If supporting tourism is the goal, business owners might be encouraged to close for one day a week, ideally a Friday or Monday, perhaps in split shifts if they need to remain operating five days a week. This would maximise people’s ability to plan a three-day weekend of travel – potentially within a “trans-Tasman bubble”.




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Were Australian organisations to adopt a four-day week too it could significantly increase two-way traffic, enhancing both economies.

Paying workers 100% of their salary for 80% of a traditional working week while maintaining productivity would, in theory at least, increase opportunities for discretionary spending.

Combined with a patriotic call to use the extra time to support hospitality and tourism, it could align with the prime minister’s desire to find innovative ways to stimulate economic activity.

Healthier, happier and more productive workers helping other businesses stay viable? That sounds like a win-win for all.The Conversation

Jarrod Haar, Professor of Human Resource Management, Auckland University of Technology

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

Scott Morrison strengthens his policy power, enshrining national cabinet and giving it “laser-like” focus on jobs


Michelle Grattan, University of Canberra

Scott Morrison has won support for a major restructure of federal-state architecture which scraps the Council of Australian Governments, enshrines the “national cabinet” permanently, and pares down a plethora of ancillary ministerial bodies.

The Prime Minister is shaping the ongoing national cabinet around his government’s central priority of jobs, and strengthening the government’s grip on Commonwealth-state relations.

“The national cabinet will be driven by a singular agenda, and that is to create jobs,” Morrison said on Friday.

This would be its “laser-like” mission as the country came out of the COVID crisis and went into the years ahead. The national cabinet would “drive the reform process” between federal and state governments “to drive jobs.”

It would oversee ministerial cabinet subcommittees in key areas, including rural and regional, skills, energy, housing, transport and infrastructure, population and migration, transportation and “health, in terms of having a healthy workforce and a healthy community to support a strong economy”.

The changes, agreed at Friday’s national cabinet meeting, follow the success of that body since it was set up to deal with the pandemic.

“By any measure, national cabinet has proven to be a much more effective body for taking decisions in the national interest than the COAG structure,” Morrison said.

Although like COAG the national cabinet includes federal and state leaders, it has not been hampered by so much bureaucracy. Whether what’s regarded as excessive bureaucracy can be prevented from accumulating when there’s not a crisis remains to be seen.

Nor is it clear whether partisan federal-state politicking, which has been missing at national cabinet despite some sharp disagreements, will get back to previous levels in normal times.

The national cabinet is bound by cabinet confidentiality, which likely will work to the federal government’s advantage.

It will continue to meet regularly – fortnightly at the moment and later monthly – and “initial reform areas” will be agreed by it.

Mostly it won’t meet in person but by “telepresence”. Morrison said the virtual meetings during the pandemic had worked incredibly well. He said there would be two face-to-face meetings a year.

It will draw on a wider range of experts than just public servants.

Federal and state treasurers, who already meet regularly, will become a council of federal financial relations (CFFR). They will take responsibility for all funding agreements including national partnership agreements, and look to consolidating some of them.

The reshaped model cuts down the access of local government, the representative of which has been a permanent participant in COAG.

In the new system, once a year the national cabinet, the CFFR and the Australian Local Government Association will meet in person as the national federation reform council. This will discuss federation reform and “priority national federation issues such as Closing the Gap and women’s safety.”

Closing the Gap and women’s safety will also be on the agenda of national cabinet throughout the year.

Some 20 ministerial councils, which currently range from the regional ministerial forum to the ministerial forum on vehicle emissions, are to be consolidated. Another nine ministerial regulatory councils, presently ranging from energy to consumer affairs, are also to be reduced in number and streamlined; they are to focus on areas of key responsibilities.

Morrison said: “It’s important that ministers at state and federal level talk to each other but they don’t have to do it in such a bureaucratic form with a whole bunch of paperwork attached to it.

“They need to talk to each other, share ideas, but the congestion-busting process we’re engaged on here is simplifying that. They come together to solve problems, deal with issues and move on. They should talk to each other because they find value in it, not because of the requirements of some sort of bureaucratic process”.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.

Morrison government invites unions to dance, but employer groups call the tune


Anthony Forsyth, RMIT University

Prime Minister Scott Morrison this week proposed a new deal in industrial relations, bringing together the government, employers and unions to agree on reforms to create jobs and lift the economy in the post-CIVD-19 pandemic recovery phase.

“”We’ve booked the room, we’ve hired the hall, we’ve got the table ready,” he said on Tuesday. “We need people to get together and sort this stuff out.”

Comparisons have been made with the “accords” of the Hawke and Keating Labor years between 1983 and 1991.

It’s not the same.

The Morrison government is simply recasting an agenda that business groups have pushed for the past decade, and inviting unions (and other stakeholders) into the room.

The Hawke-Keating accord era

This is a long way from the seven accords agreed between the Hawke-Keating governments and the Australian Council of Trade Unions.

The agreements secured union support for the government’s economic reform program by promising improvements in the “social wage” in exchange for unions curbing claims for pay rises.




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As a result, landmark social improvements, including the establishment of Medicare and guaranteed employer contributions to superannuation, were achieved for all Australians.

As the accords wore on, though, unions paid a heavy price as “efficiency” became an element in deciding the merits of claims for higher wages. The last accord, for example, ended centralised wage-fixing and ushered in enterprise bargaining. This did more for business productivity than for employee gains.

The WorkChoices era

The election of John Howard in 1996 buried the accord era. His government embraced an overtly anti-union posture, culminating in the 2006 “WorkChoices” legislation that allowed individual workplace agreements. Howard championed this as giving flexibility to both employers and employees. But it really shifted the balance in favour of employers. The backlash helped end Howard’s reign in 2007.

The Labor government of Kevin Rudd then brought in the Fair Work Act, which reinstituted union-centred collective bargaining.

Since then the business lobby has fought back on two fronts: continuing to campaign for deregulation, and developing strategies (including through litigation) to enable employers to sidestep the Fair Work Act’s collective bargaining provisions.

The success of this approach for many employers largely explains the ACTU’s “Change the Rules” campaign before the 2019 election.




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Industrial relations has therefore remained hotly contested. Prior to the COVID-19 crisis it was almost like a war of attrition. The Coalition’s Ensuring Integrity Bill exemplifies its aggressive agenda. It would have enabled union officials to be removed from office, and unions deregistered, for minor breaches of workplace laws.




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Lay down your guns

Now the prime minister wants everyone to put down their weapons.

In fact this has already occurred in the past two months, with the government, businesses and unions co-operating over emergency measures to deal with the pandemic.

Unions have agreed, for example, to the removal of award restrictions, enabling changes to business operations and work-from-home arrangements. They pushed hard for the JobKeeper wage subsidy scheme.

But how much more will union leaders be prepared to concede when it comes to considering permanent changes to workplace regulation?

Battleground issues

The scope for consensus is limited, especially given four of the five items on the government’s agenda align with that of business organisations such as the Australian Industry Group.

First, casuals and fixed-term employees.

This will be the most hotly fought area. The federal government is likely to address business concerns about the Federal Court ruling last week that “permanent casuals” have a right to paid leave as well as their casual loading. The likely outcome is a new statutory definition of “casual” to prevent this.

For unions, the court decision shuts down the ability of employers to treat workers as casuals long-term. A possible compromise might involve ensuring casuals have a legal right to convert to permanent employment after 12 to 18 months.

Second, “greenfields” agreements for new projects.

Employers in the resources and construction sectors have long complained they are compelled to negotiate with a union for new project agreements. Unions are unlikely to be willing to give this up.

Third, enterprise bargaining.

Employer groups complain the Fair Work Commission’s strict approach to the “better off overall test” and other technical requirements make reaching enterprise agreements too difficult. The unions contend some employers have perverted enterprise bargaining through tactics such as getting carefully selected employees to vote for substandard agreements. There is little room for common ground here.

Fourth, award simplification.

Employer groups have argued that wage-theft scandals are really due to awards being too complex. Yet we have gone from several thousand federal and state awards to 122 awards (one for each industry).




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It is hard to see unions agreeing to (for example) removing leave entitlements from awards when they are arguing in a case before the Fair Work Commission for pandemic leave to be included in awards.

Fifth, compliance and enforcement.

This is the one area where employee gains might be achieved, if the government makes good on its commitment to make systemic underpayment of workers a criminal offence.

Overall, however, the Morrison government’s agenda is skewed towards the reform ambitions of the business community without offering any equivalent of the social wage benefits of the original accord.

Unions may well regard his peace proposal as a request to surrender. They won’t, of course, and will try to ensure their concerns about wage stagnation and exploitation of workers in the gig economy form part of the coming discussions.The Conversation

Anthony Forsyth, Professor of Workplace Law, RMIT University

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