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



Stefan Postles/AAP

Bruce Bradbury, UNSW and Peter Whiteford, Crawford School of Public Policy, Australian National University

This week, support to unemployed Australians will be dramatically reduced.

In April, the new Coronavirus Supplement roughly doubled the level of benefits for unemployed people on the JobSeeker payment and a range of other working-age payments.

The supplement will drop from $550 to $250 a fortnight from Friday. This is before it is dropped entirely at the end of 2020.

While there has been increasing pressure from welfare groups to maintain a higher level of JobSeeker supplement, there have also been calls from within the government to remove extra supports, amid claims people are not looking for work.

Prime Minister Scott Morrison has warned about increased unemployment payments. As he said in June,

what we have to be worried about now is that we can’t allow the JobSeeker payment to become an impediment to people going out and doing work, getting extra shifts.

But will cutting support to unemployed Australians really help them get a job?

Our analysis shows there is considerable scope to increase JobSeeker payments before they might hinder people’s motivation to find paid work.

Lack of job searching is not the problem

Right now, there is little evidence a lack of job search effort is a significant problem for the economy.

Around 6.8% of the workforce is looking for work. But in July, Treasurer Josh Frydenberg acknowledged the real unemployment rate was closer to 13.3%, when “discouraged jobseekers” — not actively looking for work because their business is locked down or on hold — are included.

Treasurer Josh Frydenberg speaking at a press conference.
Treasurer Josh Frydenberg has noted the real unemployment rate is more than 13%.
Daniel Pockett/AAP

With about 1.6 million people on JobSeeker but only 130,000 job vacancies in May 2020, it matters little if some job seekers are more selective about the job offers they accept.

In fact, for the longer term health of the economy, it is important people find jobs that suit their skills. International evidence shows the provision of unemployment benefits slightly increase both the wages received when work is found and the stability (or duration) of the new job.

But would higher benefits be a problem as the economy recovers?

If benefits start to approach the level of minimum wages, some workers with low earning potential might decide the extra effort is not worth it — and so reduce their job search effort.

As the economy recovers, this will mean some potential jobs will go unfilled and government expenditure on JobSeeker will remain unnecessarily high.

Comparing JobSeeker to the minimum wage

However, our analysis shows Australia is in no danger of creating a disincentive for people to seek work because of higher JobSeeker payments.

We have compared Newstart and JobSeeker payments for single people with the minimum adult full-time wage (after tax) over the past three decades. This is a standard benchmark for assessing incentives to move from welfare benefits into work — assuming work is available.



Our analysis also looks at the payments provided to single pensioners. Pensioners received around 55% of the minimum wage up until 2009, when the pension was increased under the Rudd government. After that, net pension income was around 65% of the minimum wage. This is close to the commonly used poverty line, set at half the median household disposable income.

But for unemployed people on JobSeeker (or its predecessor, Newstart), the past two decades have seen a steady decline in their position relative to the minimum wage. It has fallen from around 50% in the 1990s to under 40% at the start of 2020 — well below the poverty line.

These calculations changed with the introduction of the Coronavirus Supplement in April, which almost doubled the payment for single unemployed people. Nonetheless, JobSeeker plus the supplement was still well below the adult minimum wage (76%, or 82% if we add shared accommodation rent assistance).




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On September 25, the Coronavirus Supplement will drop by $300 a fortnight. And the combined JobSeeker/supplement payment will fall back to 55% of the minimum wage until December 31.

Unless the federal government makes further changes, the supplement will be removed entirely at the end of the year. So those on JobSeeker will be back receiving less than 40% of the minimum wage.

The crisis isn’t over, why is support being wound back?

Neither the pandemic nor the economic crisis will be over by the end of 2020.

As the wage subsidy program JobKeeper is also wound back, next week and then again, next year, increasing numbers will become reliant upon JobSeeker.

Man wearing mask lines up outside Centrelink office.
The Australian economy could take years to recover from COVID-19.
Dan Peled/AAP

If the payment reductions continue as forecast, this will force many people well below the poverty line. A recent Australian National University analysis estimated an extra 740,000 people will be pushed into poverty.

This would not only be a disaster for the people directly affected, but also likely have large adverse economic effects. Deloitte Access Economics estimates withdrawing the Coronavirus Supplement support would be equal to a reduction in the size of the economy of $31.3 billion and an average loss of 145,000 full-time equivalent jobs.

The case to maintain much of the crisis-induced increase in payments is clear. In the short term, there will be no shortage of people looking for work. Maintaining payments at around the pension level — close to the poverty line — should be our policy objective.




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When the Coronavirus Supplement stops, JobSeeker needs to increase by $185 a week


Even in the longer term, as labour demand increases, the large gap between welfare payments and minimum wages leaves plenty of room for permanent increases in income support, without creating a disincentive for people to look for work.

At a minimum, permanently increasing JobSeeker to 50% of the minimum wage — as was the case in the 1990s — should be an easily achievable target for Australia as it makes it way through the economic wreckage of COVID-19.The Conversation

Bruce Bradbury, Associate Professor, Social Policy Research Centre, UNSW and Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University

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

Budget deficit to hit $184.5B this financial year, unemployment to peak at 9.25% in December: economic statement



Lukas Coch/AAP

Michelle Grattan, University of Canberra

Treasurer Josh Frydenberg has announced massive budget deficits of $85.8 billion for the just-finished 2019-2020 financial year and $184.5 billion projected for 2020-2021.

Growth is set to be negative for last financial year and the current one. The government’s economic statement forecasts cuts of 0.25% in GDP in 2019-20 and a reduction of 2.5% in the current financial year.

Unemployment is expected to peak at about 9.25% in the December quarter.

Employment is forecast to fall by 4.4% in 2019-20, but recover by 1% in 2020-21.

The unemployment rate averaged 7% in the June quarter 2020, and is forecast to be 8.75% for the June 2021.

A table containing 'major economic parametres'

Treasury

The statement shows debt levels rising markedly in the wake of the pandemic, although the government emphasises Australia still has a low level of government debt-to-GDP compared to other countries.

Net debt is estimated to be $488.2 billion in June this year. This 24.6% of GDP.

Debt is then forecast to increase to $677.1 billion at June 30 next year, which would be a rise to 35.7% of GDP.

As the government looks to the recovery, Treasurer Josh Frydenberg said: “Our economy has taken a big hit. And there are many challenges we confront. We can see the mountain ahead and Australia begins the climb. We must remain strong. We must draw strength from our resilience as a nation and a people.”

Finance Minister Mathias Cormann said “We are in a better, stronger, more resilient position than most of other countries around the world.”

Defending the high debt level, Cormann asked “what was the alternative?”

The government admits the outlook is unpredictable, and revised numbers will come in the October budget.

“The economic and fiscal outlook remains highly uncertain,” the statement says.

One massive uncertainty is what happens in Victoria. The statement takes into account the present six weeks lockdown but this could be extended if the state does not soon get on top of the second wave of the virus.

The Victorian government on Thursday reported 403 new cases, and five deaths including a man in his 50s. There were 19 new cases in NSW.

The statement says GDP is forecast to have fallen by 7% in the June quarter, but will grow in the September quarter by 1.5%. In the calendar year of 2020, GDP is expected to fall 3.75%, but grow in calendar year 2021 by 2.5%.

Earlier this week, the government announced an extension of JobKeeper and the Coronavirus Supplement that goes with JobSeeker, although both will be scaled back after September.

Despite the government announcing these increases in support, the statement stressed the goverment’s economic response to the crisis was “temporary and targeted” with measures designed to support the economy without undermining the structural integrity of the budget.

a table containing 'budget aggregates

Treasury

Revenue is taking a major knock from the fallout of the pandemic.

Total receipts, including earnings of the Future Fund, have fallen by $33 billion in 2019-20 and $61.1 billion in 2020-21 since the budget update last December.

Since that update, tax receipts have been revised down by $31.7 billion for the just completed financial year, and $63.9 billion for the current financial year.




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“The outlook for tax receipts remains uncertain. This reflects both uncertainty around the economic outlook, and how this interacts with structural and administrative features of the tax system, such as the ability of taxpayers to carry forward losses to offset future income,” the statement says.

It says payments have increased by $187.5 billion over two years from the budget update.

They are expected to reach $550 billion for the 2019-20 year, which is 27.7% of GDP, and rise to $640 billion in the current financial year, representing 33.8% of GDP.

“This increase is as a result of the Government’s targeted responses to the COVID-19 pandemic to support Australia’s economy, as well as the impact of automatic stabilisers including the payment of unemployment benefits,” the statement says.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.

The compromise that might just boost the JobSeeker unemployment benefit


Michael O’Neil, University of Adelaide and Peter Gill, University of Adelaide

The government is about to make an historic decision.

The JobSeeker unemployment benefit (previously called Newstart) has scarcely increased in real terms since 1994.

In that time general living standards, as measured by real gross domestic product per capita, have almost doubled, climbing 83%.

Other benefits such as the age pension have broadly kept pace with living standards. They climb in line with wages rather than the slower-growing consumer price index.

In dollar terms the single rate is now just A$565.70 per fortnight, close to the poverty line and well below the $860.60 paid to single pensioners. Back in the early 1990s it was close to the pension.


Source: Ben Phillips ANU, DSS

The Organisation for Economic Co-operation and Development said in 2010 Newstart had fallen so low as to call into question its effectiveness in “enabling someone to look for a suitable job”.

In March, as the scale of the looming job losses from coronavirus and the responses to it became clear, the government effectively doubled JobSeeker, boosting the $565.70 single payment and other lower payments by a $550 per fortnight coronavirus supplement in an acknowledgement that unemployed people “need to meet the costs of their groceries and other bills”.

The increase took effect from April 27, but was temporary, for six months after it received royal assent, meaning it is due to expire in late September.




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The economic statement due on Thursday will provide an opportunity for the government to cushion the blow by either extending the life of supplement or permanently lifting JobSeeker.

It’ll also provide an opportunity for it to say no, allowing JobSeeker to collapse back to where it was.

An increase suggested to the recent Senate inquiry by the South Australian Centre for Economic Studies was $80 to $120 per week, enough to restore it to where it was relation to other benefits in the early 1990s.

Some Senators wedded to low JobSeeker

But the government will need to get over its seemingly ideological premise that the unemployed are in some way responsible for their own misfortune and are usually undeserving of the support needed to meet living costs.

This sentiment on display in the dissenting report by Coalition members of the Labor and Greens dominated inquiry which recommended JobSeeker be increased.

In explaining their position in April, after the the government had temporally doubled JobSeeker, Coalition Senators Wendy Askew and Hollie Hughes, argued that a permanent increase could carry with it “disincentive effects in respect of engagement with the workforce”.




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Put plainly, they were concerned that if JobSeeker was boosted to a reasonable level (as it has been, temporarily) people mightn’t want to work.

Yet the transcript of evidence given by treasury officials at the inquiry reveals the department has never been asked to examine that question.

Asked whether the treasury had ever done any modelling of an increase in the payment now known as JobSeeker, deputy secretary Jenny Wilkinson relied “no”. Asked again: “You’ve never done that?” she replied “no”.

Others have done the analysis.

The compromise that might just stick

Deloitte Access Economics believes an increase would boost the size of the economy and boost the number of people employed by 12,000.

A compromise that might be acceptable to members of the Coalition who oppose lifting JobSeeker but support “job-ready” training programs, might be an increase in the JobSeeker allowance of, say, $80 per week, split into two.

Half of the increase would be a cash increase without conditions, the other half would be provided for accredited training.

With conditions in place to ensure participation in bona fide training, the increase could drive the skills development both employers and the unemployed want.




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The training that would emerge would be market-driven, responding to the post-COVID-19 needs of employers and potential employees.

The Productivity Commission has implicitly endorsed such an approach, reporting in May that there was “a manifest capacity to better allocate the $6.1 billion in government spending on vocational education and training to improve outcomes”.

JobSeeker could help, both supporting Australians who are out of work and supporting them to get back into work.The Conversation

Michael O’Neil, Executive Director, SA Centre for Economic Studies, University of Adelaide and Peter Gill, Research Associate, SA Centre for Economic Studies, University of Adelaide

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



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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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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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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.

When the Coronavirus Supplement stops, JobSeeker needs to increase by $185 a week



James Gourley/AAP

Peter Whiteford, Crawford School of Public Policy, Australian National University

The Morrison government’s changes to welfare payments were among its most significant responses to the coronavirus crisis.

In April, the new Coronavirus Supplement roughly doubled the level of benefits for unemployed people on the JobSeeker Payment (called Newstart until March) and a range of other working-age payments.

But this huge increase will not last, with the $550 fortnightly supplement due to expire in late September.

If we want to keep unemployed Australians out of poverty in future, significant changes will be required to the base rate of JobSeeker.

According to my analysis, an increase of $185 a week is needed.

Debate brewing over the future of JobSeeker

A political debate is now brewing about what happens next to the JobSeeker Payment.

Before coronavirus, there had been consistent calls across parliament, business and community groups to raise the rate of Newstart/JobSeeker, which has scarcely increased in real terms since 1994.




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Prime Minister Scott Morrison appears to be holding firm to the idea that the increased payments will stop later this year.

As he recently said,

we’ve put a COVID supplement in place for the period of the pandemic and that’s what we’ve budgeted for and that’s what our policy is.

But Labor and the Greens say there should be a permanent increase to the JobSeeker Payment (although they do not agree on an amount). Some Coalition MPs are also pushing for a boost.

Millions of Australians will need JobSeeker support

There are currently about 1.6 million Australians receiving the JobSeeker Payment, while the Coronavirus Supplement also goes to recipients of other payments, including Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit.

In December 2019, there were more than 400,000 people receiving these payments – and possibly more now.

It is also possible that many of the estimated 6.1 million people currently on JobKeeper will need to claim JobSeeker as the former is phased out. So, would the government really halve income support for more than two million people at the end of September?

As the Grattan Institute has pointed out, cutting income support in this way this would be “a recipe for a second downturn”.

The Coronavirus Supplement and the “benefit cliff”

While the Coronavirus Supplement is a crucial element of support for newly unemployed Australians, it is not well designed. This reflects the speed with which it was developed and the fact it was intended to be temporary.

The chart below shows how the supplement combines with the basic JobSeeker Payment for a single person, and how the package of assistance changes by hours of work per week, paid at the minimum wage of $19.49 per hour.



The Conversation, CC BY-ND

What is most striking here is the “benefit cliff”: a person working 27 hours per week takes home around $720, but a person working 28 hours takes home $508. This is the result of the loss of the entire Coronavirus Supplement when the last dollar of JobSeeker is lost under the current income test.

This also creates significant anomalies: a person working up to three hours per week would have a higher disposable income than someone working 28 to 31 hours per week. And someone working 38 hours would have a lower disposable income than someone working between 19 and 27 hours.




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The same benefit cliff applies to couples, but because of the relaxation of the couple income test, the effect is not felt until higher levels of income.

At the moment, these anomalies and the benefit cliff are not very pressing because many people on payments will have reduced hours of work, if any.

But as workplaces open up and people return to employment, these design issues will become more problematic. Put simply, the Coronavirus Supplement in its current form should not be continued.

We need to increase the basic JobSeeker rate

This means that to continue to adequately support unemployed Australians and avoid a double dip economic downturn, the basic rates of payments need to be increased.

Last month, a Senate inquiry released its report into the adequacy of Newstart/JobSeeker.

The report by non-government members made 27 recommendations, including:

once the Coronavirus Supplement is phased out, the Australian Government increase[s] the JobSeeker Payment, Youth Allowance and Parenting Payment rates to ensure that all eligible recipients do not live in poverty.

They also recommended that

the Australian Government set a national definition of poverty. The Government should immediately commence work in collaboration with academic experts and the community sector to determine this definition.

Keeping people out of poverty

Clearly, we need to look at how to make the payment more adequate immediately, without waiting for an inquiry to determine how much is enough – a process that could take months.

There is a simple benchmark already available that can be used. This is the rate of pension paid to the aged, people with disability and carers. Including supplements, a single pensioner currently receives up to $944.30 per fortnight.

When the Coronavirus Supplement ends, a single person on the JobSeeker Payment will receive $574.50 (including the Energy Supplement) – a gap of $370 per fortnight or $185 per week.

Setting working-age payments at the same rate as pensions will significantly simplify our overly complex system and provide a consistent treatment of all adults.

It will reduce incentives for people to seek to qualify for higher payments.

It would also mean that if the federal government sets up an inquiry into poverty standards – as the Senate recommended – we would not have to worry about anomalies in current payment rates. We could focus on clear principles of adequacy for all Australians instead.

JobSeeker must increase by about $185 a week

In January, the Australian Council of Social Service called for a minimum $95 a week increase to Newstart.




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This would have applied at the time to around 850,000 people, at a cost of about $3.8 billion a year.

I estimate that an increase of $185 per week could cost around $7.4 billion, but this does not factor in the projected increase in the number of people needing support.

If we have more than two million people on working age payments in September this year, this would imply a rough budget cost of around $17 billion in a full year.

Raising JobSeeker payments is a substantial budgetary cost. But the current cost of the Coronavirus Supplement over a full year is likely to exceed $30 billion.

The alternative of cutting rates is also extremely costly: a deep increase in poverty among millions of Australian households and the likelihood of a double dip recession.The Conversation

Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University

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

We need to plan for life after JobKeeper now. We need to make it portable



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John Quiggin, The University of Queensland

As an emergency response to the potential mass unemployment created by the sudden lockdown, the Morrison government’s JobKeeper program has been reasonably successful.

An estimated 700 000 employers, accounting for 4.7 million workers have signed up.

On the other hand, the sign up of workers has been been about one million less than expected.

Plenty of problems have emerged with limits on coverage.

Some reflect the difficulty of defining a “job” in an environment in which permanent employment has been eroded in favour of casual employment and contracting and the gig economy.




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Others seem arbitrary, such as the effective exclusion of local government and university employees, and workers whose employers are companies owned by foreign governments.

There will be bigger problems as time goes on.

Working life will change

Many workers will need to move.
Dan Peed/AAP

JobKeeper helps workers keep their existing jobs, but it can’t do anything for those who are already unemployed, who leave their jobs, or who need to switch employers.

As the crisis continues, the number in these categories is going to grow, while the number of workers protected by the scheme will shrink.

In six months time, when JobKeeper is due to end, it seems reasonable to assume that most of the restrictions requiring businesses to close their doors will have been lifted.

Shops, cafes, gyms and bars will be open, with adaptations for social distancing.

But other parts of the economy won’t be anything like the “normal” that existed before the crisis.

Even after the domestic restrictions end, large-scale international travel won’t resume until an effective vaccine is found and distributed widely enough so that (at a minimum) all intending travellers can be vaccinated.

Tourism will be very different, as will work and commerce, with the shift to online working, shopping and medicine only partly reversed.




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A much smaller number of people coming into the country (even if long-term arrivals are be allowed in subject to quarantine) means weaker construction and education industries.

And even if we recover fully, our customers in the rest of the world will not. Europe is already in a deep recession. The pandemic was slow to reach the United States, but the likely impacts on both health and the economy look to be even worse.

These shocks would be a challenge even to a strong economy. But Australia’s performance before the crisis was sluggish at best.




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Unemployment had barely come down from the levels reached during the global financial crisis and under-employment had reached all time highs. Inflation was persistently below the Reserve Bank’s target range, reflecting the overall weakness of the economy.

In these circumstances, the idea that the economy will magically “snap back” to normal once restrictions are lifted is a dangerous fantasy.

If we are to avoid an era of sustained high unemployment similar to the one we had in the early 1990s, the government must act to stop it happening.

JobKeeper should be made portable

The first step should be to convert JobKeeper into a wage-subsidy program, in the hands of workers, not tied to previous employment. Unemployed workers could assign the subsidy to whichever employer willing to hire them under standard wages and conditions.

There are plenty of difficulties with such a program. The most immediate is the need to ensure that it creates additional jobs, rather than allowing employers to sack existing workers and replace them with subsidised new hires.

A second lot of problems arises, as with JobKeeper, because of the increasing prevalence of non-standard forms of employment.




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These problems are not reasons to abandon the idea of wage subsidies. Rather, they imply that the government should be thinking about these problems now, rather than deferring the problem with the assertion that everything will return to normal in six months.

Much more will be needed to avoid mass unemployment.

Public services such as health and education will need to employ more people to deal with the extra requirements of social distancing, and the need for training and retraining.




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Restructuring the economy will require the abandonment of free-market doctrine in favour of direct government involvement, including public ownership where necessary, at least for a while.

And while it is appropriate to meet the immediate needs of the economy through increased borrowing, we will ultimately need increased revenue, and we will probably need to forgo the lavish legislated tax cuts that were due to kick in from the mid-2020s.The Conversation

John Quiggin, Professor, School of Economics, The University of Queensland

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

Were it not for JobKeeper, unemployment would be 11.7%, up from 5.2% in one month. Here’s how the numbers pan out



ABS

Jeff Borland, University of Melbourne

After all the forecasts and speculation, now we know the worst.

Today’s numbers from the Australian Bureau of Statistics lay out the catastrophic impact of COVID-19 on the Australian labour market.

Total hours worked fell 9.2% – in just one month, between March and April.


Percentage fall in hours worked

Months from start of recession.
Author’s calculations from ABS 6202.0

The scale and speed are difficult to comprehend.

By comparison, in the major recessions of the 1980s and 1990s, hours worked fell by 6% – but after 18 months.

Women have been hurt more than men, losing 11.5% of the hours worked in March, compared to men who lost 7.5%.

Queensland and NSW have so far fared better than other states.


Percentage fall in hours worked by state


ABS 6202.0

Predictions of much bigger job losses for the young than the old have been proved correct.

Workers aged 15 to 24 losing about 11% of employment compared to 3.4% for those aged 25 to 54, and 4.3% for the over 55s.

The official rate of unemployment in April 2020 rose to 6.2%. This is the highest rate since July 2015.




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It doesn’t seem a big rise amid talk of a new great depression, but this is one of those times when you need to read the fine print.

To calculate its official rate the Australian Bureau of Statistics follows International Labor Organisation conventions in classifying employment and unemployment.

These classify as employed anyone who worked zero hours but was still being paid or who believed they had a job to go back to.

Much worse than it looks, the bureau says so

This is important because the JobKeeper scheme means many workers in Australia fit these categories. It makes a difference.

For this reason, the bureau has provided an adjusted rate of unemployment which counts these workers as unemployed.

It puts our unemployment rate at 11.7% in April, up from 5.2% in March.

It is more in line with what we have been seeing in Canada and the United States.


Unemployment rates, January 2019 to April 2020


ABS 6202.0 and Canndian and US statistical agencies

Under-employment is also an important part of the story. Workers who kept their jobs are now much less likely to be working the hours they want.

Between March and April the rate of underemployment (working fewer hours than wanted) jumped from 9.8% to 13.7%.




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And many workers have also withdrawn completely from looking for work.

In the past month the labour force participation rate fell by 2.5 percentage points.

Again, women have been hurt more than men, with an extra 2.9% of women out of the labour force compared to an extra 2.1% for men.

Statistically, these people have vanished. They are not employed, but they are not counted as unemployed because they say they are no longer available for work.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.

Let’s “SnapBack” to better society with more secure jobs: Anthony Albanese


Michelle Grattan, University of Canberra

Anthony Albanese says Australia must use the pandemic experience to move to a more resilient society, creating more permanent jobs and revitalising high value manufacturing.

In his fifth “vision statement”, delivered against the background of the government foreshadowing an extensive post-crisis reform agenda, Albanese is giving a broad outline of Labor’s priorities for change.

The Monday speech, issued ahead of delivery, comes a day before parliament resumes for a three-day sitting expected to be more combative than the previous two one-day sittings. It also precedes Josh Frydenberg’s economic update on Tuesday – the day the treasurer was, pre-pandemic, due to deliver the budget, now delayed until October.




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Referring to the government’s “SnapBack” terminology, Albanese says: “Let’s not SnapBack to insecure work, to jobseekers stuck in poverty, to scientists being ignored.”

“It’s no time for a ‘SnapBack’ to the Liberal agenda of cutting services, suppressing wages and undermining job security.

“This pandemic has shown that Labor’s values of fairness and security and our belief in the power of government to shape change to the advantage of working people are the right ones.

“A constrained fiscal position does mean difficult choices. But a reform agenda that doesn’t work for all Australians isn’t one we should pursue”.

Albanese says Labor has been constructive during the crisis, not allowing “the perfect to be the enemy of the good”; he contrasts its approach with the Coalition’s negativity against the Labor government during the global financial crisis.

While Australians have been getting through the crisis together, it has been tougher for some than others, including those who have lost jobs and businesses, he says.

“Sharing the sacrifice to get through the crisis together has to mean working to secure a recovery in which no one is left behind.

“We have to be clear in recognising that those with the least, have suffered the most through this crisis – something that must change.

“It’s critical that we are still saying , ‘we’re all in this together’, after the lockdown has come to an end,” Albanese says.

“We must move forward to having not just survived the pandemic, but having learned from it.

“To secure a more resilient society, given just how quickly things can change, through no fault of anyone.

“To better recognise the contributions of unsung heroes, like our cleaners, supermarket workers and delivery workers. To honour our health and aged care workers.

“To recognise that young people have done more than their share.

“Young people deserve better than an economy and society that consigns them to a lifetime of low wages, job insecurity, and unaffordable housing.

“We must ensure that what emerges is a society that no longer seems stacked against them, or denies them the opportunity and economic security of older generations”.

Albanese says this is a once-in-a-political lifetime event that “creates once-in-a-century opportunity to renew and revitalise the federation” and “a once-in-a-generation chance to shape our economy so it works for people and deepens the meaning of a fair go”.

“We must build more permanent jobs, an industrial relations system that promotes co-operation, productivity improvements and shared benefits,” he says.

“We must revitalise high value Australian manufacturing using our clean energy resources.”

He also urges nation building infrastructure including high speed rail and the local construction of trains; a decentralisation strategy including restoring public service jobs in agencies such as Centrelink that deliver services to regional areas; a conservation program to boost regional employment; and governments working with the private sector and superannuation funds to deliver investment in social and affordable housing.

“A housing construction package should include funding to make it easier for essential workers to find affordable rental accommodation closer to work.”

Albanese says that “too much of the risk in our economy has been shifted onto those with the least capacity to manage in tougher times.

“The broadest burden has been put on the narrowest shoulders.

“Our economy has become riskier, and we need to think through what that means for us all.

“We need to realise that a good society can’t thrive when the balance between risk and security falls out of step.”

Albanese says there needs to be an emphasis on growth, “because only inclusive economic growth can raise our living standards.

“We need to put more emphasis on secure employment – especially for the next generation of younger workers who nowadays have little idea of the meaning of reliable income or holiday pay”.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.

Coronavirus redundancies are understandable, but there are alternatives



Shutterstock

Robyn Johns, University of Technology Sydney

Redundancies are attractive to organisations in crisis. Although the payouts cost money upfront, they can reshape the remaining workforce to make it leaner and more fit for purpose.

On the other hand they can demoralise that workforce, and they are far from good for the rest of the economy.

One alternative, available to the employers of as many as 6.6 million Australians for the next six months, is JobKeeper.




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Another is being tried with apparent success by Domain Group, the real estate listings and journalism firm majority owned by Nine Entertainment Holdings, which also owns newspapers including The Age and The Sydney Morning Herald.

Domain, and the real estate industry in general, has been hard hit by plummeting listings and plateauing home prices.

Project Zipline

Because it is part owned by the public and listed on the Australian Securities Exchange, it has had to explain its approach to shareholders.

Its April 26 announcement notes that about 45% of its cost base relates to staff and employee-related expenses.

“We had the option of taking the standard path of reducing hours, stand downs and redundancies, chief executive Jason Pellegrino explained on the Domain website.

He chose another option: Project Zipline

employees were offered the opportunity to participate in a share rights program whereby they could receive a percentage of their salary package over the next six months in share rights, or alternatively elect to reduce working hours

The target is a 20% reduction in staff costs, while retaining employee talent and “momentum for the long term”.

It’ll also help align the employees and the organisational interests.

Domain’s group director for employee experience, Rosalind Tregurtha says there has been a 90% take up of the options offered.

Sacrifices at the top

The executive leadership and board are role modelling by taking greater proportions of their own remuneration in share rights: 30% and 50%.

It has had to work quickly so the savings can start from May.

The work has included preparing information packs for managers and employees, briefing managers, asking employees to chose options, working with Link Market Services to get offers out and processing the changes for the more than 600 employees on the payroll.

Zipline is a case study of an organisation working quickly with its workers to find a solution that works.

It mightn’t work elsewhere. Other options for businesses include

  • offering greater work flexibility including shortened weeks and job sharing

  • freezing or limiting recruitment

  • restricting or banning overtime

  • increasing the scope of jobs

  • allowing employees to take accrued leave

  • directing employees to take unpaid leave under the government’s stand down provisions

  • seeking voluntary redundancies

Whatever option works the best, for many employers doing nothing is not an option.




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Coronavirus lays bare the trauma of losing your job


It is important to consider, as Domain did, that while demand for their services might have slowed for a time, there is every likelihood that in the not too distant future things will pick up.

The firms that have done all they can to retain their industry knowledge and company experience will be the best placed for revival.The Conversation

Robyn Johns, Senior Lecturer in Human Resource Management and Industrial Relations, University of Technology Sydney

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