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

F Armstrong Photography/Shutterstock

Peter Davidson, UNSW

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

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

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

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

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

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

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

There are other reasons not to pick fruit…

Fruit pickers are often underpaid cash-in-hand.

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

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

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

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

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

$500 is two-thirds of the minimum wage.

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

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

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

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

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

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

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

…and other reasons not to work more days

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

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

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

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

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

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

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

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

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

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

Peter Davidson, Adjunct Senior Lecturer, UNSW

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

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).

Read more:
Australia has been stigmatising unemployed people for almost 100 years. COVID-19 is our big chance to change this

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.

Read more:
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.

Winding back JobKeeper and JobSeeker will push 740,000 Australians into poverty

lakshmiprasada S/Shutterstock

Ben Phillips, Australian National University; Matthew Gray, Australian National University, and Nicholas Biddle, Australian National University

Australian National University calculations suggest JobKeeper and the boosted JobSeeker payment have saved about 2.2 million people from poverty.

It’s a remarkable outcome without precedent in Australia.

JobKeeper was set at A$1,500 per fortnight and the Coronavirus Supplement was set high enough to double JobSeeker and associated payments, increasing them to about $1,115 per fortnight.

Both are well above the poverty line, which according to our modelling is around $816 per fortnight.

From the end of September both will be cut. JobKeeper will fall to $1,200 per fortnight for those who previously worked 20 or more hours per week and to just $700 for those who previously worked less than 20 hours per week.

The payment to people on JobSeeker and related benefits will fall to $815.

Beyond December, JobKeeper will fall to $1,000 and $650 per fortnight and the Coronavirus Supplement will end, returning JobSeeker to $565.70 per fortnight.

Three quarters of a million more

Our estimates suggest that by themselves these changes will push an extra 740,000 Australians into poverty, lifting the total number in poverty from from 1.1 million to 1.84 million.

Partly offsetting this, the improvement in the economy forecast in the July Economic and Fiscal Update should it be realised would cut the number of Australians in poverty by about 140,000.

Treasurer Frydenberg said the payment he intends to withdraw would help with groceries.

These numbers tell us two important things.

One is that the Newstart unemployment benefit (now called JobSeeker) was too low.

Treasurer Josh Frydenberg seemed to acknowledge this when he announced the doubling in March, saying it would allow unemployed people to “meet the costs of their groceries and other bills”.

The other is that without (and even with) JobKeeper, many, many more people would have been pushed on to it.

We define poverty an equivalised household income of less than half the median household income.

What it would do to the poverty gap

We define the “poverty gap” as the total difference in income between those households below that poverty line and the poverty line.

Prior to COVID-19 it was A$5.9 billion.

Should the unemployment rate stay at its present 7.5% after JobKeeper is withdrawn and JobSeeker returned to normal we expect it to climb to $6.5 billion.

Should it linger at the 10% forecast by the Reserve Bank, we expect it to climb to $6.9 billion.

Read more:
The coronavirus supplement is the biggest boost to Indigenous incomes since Whitlam. It should be made permanent

It’s in all of our interests to minimise it for any given level of government support.

The ANU Centre for Social Research and Methods has developed an algorithm for calculating the optimal mix of government supports to achieve a range of policy goals including minimising poverty.

The mix it suggests would cut the poverty gap from $6.5 billion to $5.6 billion under the 7.5% unemployment scenario and from $6.9 billion to 5.8 billion under the 10% unemployment scenario.

How to minimise the damage

If the total level of welfare expenditure were to remain unchanged on pre-JobKeeper and Coronavirus supplement settings, the single JobSeeker would be increased substantially from $551 to $821 per fortnight and the age pension single rate from $902 to $915 per fortnight.

The increases would be offset by reductions in the Parenting Payment from $770 to $737 per fortnight (single), Family Tax Benefit Part A for children under 13 years of age from $218 to $154 per fortnight and Rent Assistance from $137 to $131 per fortnight.

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

We have also modelled the optimal setting for a 20% increase in government support and a 20% cut.

What our algorithm proposes wouldn’t eliminate poverty (it would cut it by between 14% and 15%) but it would enable to the government to achieve a lot without spending more money.

An essential part of whatever solution it adopts has to be an increase in JobSeeker. Without it an extra 740,000 Australians will be in poverty.The Conversation

Ben Phillips, Associate Professor, Centre for Social Research and Methods, Director, Centre for Economic Policy Research (CEPR), Australian National University; Matthew Gray, Director, ANU Centre for Social Research and Methods, Australian National University, and Nicholas Biddle, Professor of Economics and Public Policy, ANU College of Arts and Social Sciences, Australian National University

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

Melbourne non-essential retailers closed, as Morrison unveils pandemic leave

Michelle Grattan, University of Canberra

Non-essential retailers across Melbourne will be shut except for “click and collect” and delivery sales, and industries including meatworks and construction will be drastically scaled back, under Victoria’s unprecedented lockdown.

The business shutdown details came as Scott Morrison announced a “pandemic disaster payment” worth $1,500 for Victorian workers who have to isolate for two weeks and do not have sick leave.

The leave can be taken multiple times if needed but it will only be available to those hit by the Victorian disaster.

Premier Daniel Andrews estimated 250,000 more workers would be stood down as a result of his government’s measures, which run for six weeks. “We know there is about 250,000 people stood down in one form or another and this will add a further 250,000 in rough numbers.”

Read more:
State of disaster called as Melbourne moves to nightly curfew and stage 4 restrictions

Melbourne supermarkets, grocery stores, bottle shops, pharmacies, petrol stations, banks, newsagents and post offices will remain open, giving people access to necessities.

Businesses have been put into three categories:

  • those able to stay open

  • full “onsite” closures – including retail stores and services, some manufacturing and administration – which must shut by 11.59pm Wednesday

  • those that will have to drastically reduce their operations.

While most of the restrictions relate to Melbourne, the provision for meatworks – on which many COVID cases have been centred – apply across the state.

Andrews said workers in these enterprises would be dressed like health nurses – with shields, masks, gowns, gloves – and have to undergo temperature tests. The on-site workforces at meat works will have to be reduced by one third.

Bunnings, which has been particularly popular during the pandemic, will be only allowed to offer “drive through” sales to the public, although tradespeople will be able into the store for purchases.

Services from tradespeople to the public will be confined to emergencies. Cleaners will not be able to go to houses.

Different rules will apply to various parts of the construction industry, which will move to what Andrews called “pilot light” levels.

Workforces constructing large commercial buildings above three stories will need to be reduced at any one time to no more than 25% of normal numbers.

No more than five people will be able to be working on a house-building site at one time.

The state government has already reduced its large-scale projects and will look at further reduction.

Warehousing and distribution centres in Melbourne will be limited to no more than two thirds of their normal workforce on site at one time.

Workplaces that are continuing to operate will have extra requirements including more personal protective equipment, staggered shifts and breaks, health declarations and more support for sick workers to ensure they stay home.

Daniels announced the latest Victorian number of new cases was 429; there had been 13 deaths, of whom eight were linked to aged care.

Morrison said many Victorians “would have reached breaking point trying to come to terms with what has happened in their state”.

Andrews warned if the changes didn’t work “we’ll need a much longer list of complete shutdowns”.

Treasurer Josh Frydenberg flagged changes to eligibility for JobKeeper to take account of the impact of the Victorian hard lockdown.

Last month the government announced eligibility would be tightened under the revised scheme to operate after September – businesses would have to demonstrate they had met the relevant 30% decline in turnover test in both the June and September quarters.

But on Monday Frydenberg foreshadowed tweaking to ensure businesses badly hit in the September quarter were not disadvantaged because they had not had low turnover in the June quarter.

The change would apply nationally, not just in Victoria.

The Business Council of Australia and the ACTU on Monday wrote jointly to the federal government strongly urging it “to move quickly to introduce a paid pandemic leave scheme”.

After the announcement, the ACTU said the pandemic leave disaster payment was a step forward but didn’t go far enough. 

“The $1500 a fortnight is the minimum wage when the average wage is double this amount. This means that nearly every fulltime worker will still suffer a financial penalty for isolating. Only full wage replacement, like sick leave, can fix this,” the ACTU said.

The Australian Industry Group said the economic impact of the draconian Victoria lockdown would “devastate the livelihoods of millions in the state”.

CEO Innes Willox said: “Closing or restricting large swathes of manufacturing and construction as well as their supply chains brings the hammer down on sectors that have been responsible for relatively little transmission, which have followed strict COVID-safe plans and are vital to the community and the country’s economic well-being.”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.

Social housing, aged care and Black Americans: how coronavirus affects already disadvantaged groups

Hassan Vally, La Trobe University

While it’s true anyone is at risk of catching and becoming ill with COVID-19, it’s becoming increasingly clear this virus discriminates.

From early in the pandemic, we’ve seen how COVID-19 disproportionately affects older people and those with other health conditions, who are more likely to develop severe symptoms and die.

But as well as discriminating on the basis of biology, this virus discriminates on the basis of socioeconomic disadvantage. It ruthlessly picks on the most vulnerable in society.

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

The Melbourne tower blocks

The recent COVID-19 cases in social housing, which saw nine public housing towers in Melbourne’s north put into hard lockdown, brought this into sharp focus. These tower blocks accommodate some of the most vulnerable people in our community.

People living in these buildings experience high levels of unemployment and job insecurity, generally exist on low wages, have limited access to education, are often from migrant backgrounds, and in some instances are victims of trauma.

The fact we saw the virus spread through these towers should be no surprise given what we know about how it spreads in crowded conditions and shared spaces. Physical distancing is almost impossible when you have big families living in two-bedroom units.

An elderly person is assisted by a carer.
Aged care residents are at higher risk from COVID-19.

Importantly, for cultural and language reasons, generic health messaging may miss the mark for these groups.

These factors combine to put social housing residents at increased risk of contracting the virus.

Aged-care facilities

Another group this pandemic disproportionately affects is aged-care residents. In aged-care facilities we have a perfect storm: an environment conducive to virus transmission and residents who are among the most susceptible to serious outcomes from infection.

Add into the equation the well-documented system deficiencies and workforce issues that have plagued Australia’s aged-care sector, and we have another situation in which some of the most vulnerable in our society are disproportionately affected by COVID-19.

We’ve seen this in Australia and around the world. Once you have community transmission of COVID-19 it’s hard to keep it out of aged-care facilities, and once in, outbreaks in this setting can be difficult to stop.

Read more:
4 steps to avert a full-blown coronavirus disaster in Victoria’s aged care homes

African Americans in the United States

The disproportionate effect of the pandemic on the most disadvantaged, vulnerable and marginalised in society is not just evident in Australia, but throughout the world.

There is perhaps no better example than the plight of African Americans in the United States. Figures released in May reported Black Americans were dying at almost three times the rate of white Americans from COVID-19.

One of the main reasons Black Americans face a higher health burden from COVID-19 is their increased rate of accompanying health problems such as heart disease, high blood pressure and diabetes.

This burden is amplified by the fact many are excluded from the basic access to health care we take for granted here in Australia.

Read more:
We could have more coronavirus outbreaks in tower blocks. Here’s how lockdown should work

And it’s not only the health effects of the virus which hit the disadvantaged harder. These people are also much more vulnerable to the indirect economic impacts of the pandemic, by virtue of their lower financial resources to begin with.

Looking across the globe

COVID-19’s discrimination against the vulnerable also extends to entire countries. Poorer and less developed nations, such as in Africa and Latin America, will potentially suffer the most in the immediate and longer term.

With weaker health systems, scarcity of medical resources (less equipment such as ventilators, for example) and large, vulnerable populations, these countries are less able to cope with a crisis of this magnitude.

And beyond the demands placed on their health systems, these countries have less capacity to withstand the economic shocks of the pandemic. Its effects could well catapult them into further crises, such as food insecurity.

Read more:
Coronavirus discriminates against Black lives through surveillance, policing and the absence of health data

We know infectious diseases, like other health conditions, are highly influenced by the social determinants of health. That is, the conditions in which people live, learn and work play a significant role in influencing their health outcomes.

Broadly speaking, the greater a person’s socioeconomic disadvantage, the poorer their health.

In shining a light on these inequities the pandemic also provides an opportunity for us to begin to address them, which will have both short and longer term health benefits.The Conversation

Hassan Vally, Associate Professor, La Trobe University

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

JobSeeker supplement cut from $550 to $250 a fortnight after September

Michelle Grattan, University of Canberra

The unemployed will have their Coronavirus Supplement cut from $550 a fortnight to $250 after September, in an extension of the supplement that will run until December 31.

Those on JobKeeper will get $1,200 a fortnight from September 28 to January 3, with a lower rate of $750 if they worked less than 20 hours a week in February.

The full payment will fall to $1,000 a fortnight from early January, remaining until March 28. The second tier rate will fall to $650.

The present rate is $1,500 a fortnight for all recipients.

From late September, an unemployed person on the basic payment will go from receiving $1,115.70 a fortnight to $815.70.

Under the changes, those on JobSeeker will be able to earn up to $300 a fortnight compared with the present $106 before their income support is tapered.

“We will make further decisions about JobSeeker closer to the end of the year or potentially even in the [October] budget,” Scott Morrison said.

He acknowledged some elevated support will be needed into the new year.

“We need to make those decisions closer to the time, to have a better understanding of where the economy is at – remembering the JobSeeker arrangements has more an impact on incentives on the labour market. JobKeeper does not have those same disincentives,” he said.

“But I want to be very clear – I am leaning heavily into the notion that we would anticipate, on what we know right now, that there obviously would need to be some continuation of the COVID supplement post-December.”

The revisions to JobKeeper and JobSeeker, announced by Morrison and Treasurer Josh Frydenberg, recognise a continuing financial floor is vital while starting to wean businesses and individuals off the present levels of payments as the economy transitions.

The revision comes amid great uncertainty given the second COVID wave in Victoria, with that state on Tuesday announcing a tally of 374 new COVID cases and three more deaths.

The government has not changed the basic JobSeeker (unemployment) rate, although Morrison, under questioning at his news conference, did not rule out this being done later.

The existing higher JobKeeper and Coronavirus Supplement rates will remain until late September.

Tougher eligibility conditions will mean businesses will have to show the required turnover reduction to remain in the JobKeeper scheme.

Employers will have to demonstrate the turnover falls (30% for businesses with turnover under $100 million, 50% for larger ones) in the June and September quarters to be eligible for the December quarter payment.

They will again need to reassess their eligibility for the March quarter payment, showing they have had the relevant falls in the June, September and December quarters.

The number of people on JobKeeper, which has been supporting some 3.5 million workers, will reduce substantially under the new arrangements and as the economy improves. Frydenberg said Treasury estimated about 1.4 million people would remain eligible in the December quarter and one million in the March quarter.

Those on JobSeeker will have mutual obligation requirements reintroduced. From August 4 people will have to reconnect with employment services and undertake four job searches a month. They will be obliged to accept a job that has been offered though this process. There will be a higher rate of job search from the end of September.

The extension of JobKeeper will cost an estimated $16.6 billion on top of the earlier estimated $70 billion. The Coronavirus Supplement extension is costed at $3.8 billion.

Shadow treasurer Jim Chalmers said: “Labor is inclined to support what the Government has announced when it comes to JobKeeper.”

The Australian Industry Group said the new two-tiered JobKeeper payment “is a sensible adoption of the New Zealand wage subsidy approach”

It would “go a long way to sharpening the work incentives that were dampened by the flat rate of JobKeeper in the initial phase.

“While the phase-down of the amount of the subsidy will put more pressure on businesses, it is a fiscally responsible move and will help businesses transition to a greater degree of self-reliance in these extreme economic circumstances.”

The St Vincent de Paul Society questioned the different timeframes for the extension of JobKeeper and JobSeeker, and the reintroduction of mutual obligation requirements for JobSeeker.

“At the end of the day, COVID affects everyone and both those payments should be in place till the end of March. It’s not clear why the JobSeeker arrangements have only been extended to December this year,” CEO Toby oConnor said.

Read more:
Bowing out gracefully: how they’ll wind down and better target JobKeeper

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.

Bowing out gracefully: how they’ll wind down and better target JobKeeper

Steven Hamilton, Crawford School of Public Policy, Australian National University

The government’s revised JobKeeper scheme, announced today following a treasury review, fixes many of the flaws of the original design, providing support for businesses continuing to struggle as the economy recovers and for those thrust into renewed uncertainty amid isolated outbreaks and second waves.

Importantly, both JobKeeper (the A$1,500 per fortnight payment to hard-hit businesses for each worker they keep on the job) and the coronavirus supplement (the $500 per fortnight top-up to the JobSeeker unemployment benefit and a range of other payments) will continue as they are until they were due to expire in September, suggesting the government has decided the economy wasn’t strong enough for an early withdrawal.

Beyond that, they will continue at lower rates, for JobKeeper until the end of March, and for the coronavirus supplement until the end of the year.

The extended JobKeeper will be more modest, better targeted, and better in tune with the needs of the businesses receiving it. But it remains to be seen if even this withdrawal of fiscal stimulus will be too rapid for what looks to be a fragile economic recovery.

Rolling eligibility

The big change to JobKeeper will be a move to rolling eligibility. The original scheme was a one-shot game. You applied, indicated that you expected to lose 30% of your revenue (50% for big businesses) and got JobKeeper for the full six months.

Given many of the businesses that qualified (and over one half of all businesses covering about one third of all workers did) will have been impacted only mildly or for only a short time, many will have in fact profited handsomely from the design as it was.

To prevent this profiteering, the scheme should always have retested eligibility every month or quarter. As it is, all businesses report their actual and expected revenues to the Tax Office every month, but this doesn’t affect their payment.

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

From the end of September, organisations seeking JobKeeper will be required to reassess their eligibility with reference to their actual turnover in the June and September quarters of 2020. If they had a big enough decline, they will get to keep JobKeeper for the rest of the year.

If they want it beyond this year until the end of March 2021, they will need to reassess their eligibility based on their actual turnover in the previous three quarters.

Continuing into 2021

The original scheme was cobbled together in late March before the first wave of coronavirus had peaked, and before we knew how long it would last or what damage it would wreak. For much of the country, the fallout was more modest and shorter-lived than had been expected.

But the full-blown Victorian second wave and the ember attacks in New South Wales highlight the precarious nature of the recovery.

And with the virus still raging across much of the world, international borders may remain closed until mid-2021, which will devastate sectors of the economy such as tourism and education.

Moreover, withdrawing all the fiscal support at once — the so-called “fiscal cliff” — might have put our fledgling recovery at serious risk.

Read more:
What’ll happen when the money’s snatched back? Our looming coronavirus support cliff

Extending JobKeeper by another six months but at a more modest level) and with tighter targeting is prudent and pragmatic, and far better than driving off the fiscal cliff.

As businesses recover, they will organically drop out of the scheme, keeping support flowing to those worst-affected into 2021.

But this still represents a large withdrawal of stimulus from the economy, reducing the incomes of many workers at a time of great fragility.

The government should seriously consider introducing alternative support measures, like broad business tax relief and cash stimulus, to further support the recovery.

Two speeds

The original flat payment structure – paying eligible businesses $1,500 per fortnight for every worker, regardless of each workers’ earnings or work hours – was always a baffling design choice.

It meant that a quarter of the workers covered got more money than they had been earning before. Unrelated to hours worked, the $1,500 per fortnight payment made it hard to entice casual workers to work more hours.

The updated two-tier structure along the lines of New Zealand’s will offer $1,200 per fortnight for all eligible employees who were previously working 20 hours or more per week, and $750 per fortnight for employees who were previously working less than 20 hours a week.

After January 4, those payments will shrink to $1,000 per fortnight and $650 per fortnight.

Remaining flaws, but no dealbreakers

There is no doubt JobKeeper has propped up some businesses that were not viable even before the recession. When it comes, this “creative destruction” will be one of the few silver linings of the recession, something Australia has missed out on for three decades.

The lower payment rates will reduce but not eliminate support for zombie firms. This adds to the case for not extending the scheme beyond its new March end date, so long as by then viable businesses can stand on their own feet.

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

An oddity is that after the changes the payments to people on the JobSeeker (Newstart) and other payments including Youth Allowance, Farm Household Allowance, Parenting Payment and Special Benefit will be higher than those under JobKeeper to people working up to 20 hours per week.

JobSeeker with the coronavirus supplement will fall from $1,100 to $815.50 a fortnight, while the JobKeeper payment for people working fewer than 20 hours a week will fall from $1,500 to $750.

On the face of it, it means that until December someone working up to 20 hours per week will get less money ($750 per fortnight) than someone out of a job and working zero hours ($815.50).

But the person on JobKeeper might be able to get extra support.

Government sources suggest that in some circumstances people can get both the lower JobKeeper and some JobSeeker, guidance that sits alongside the bald statement on the Services Australia website that “most people can’t get both”.

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

The apparent disparity mightn’t last for long. Come Christmas, JobSeeker is set to be busted back to somewhere in the region of its present $565.70 as the coronavirus supplement ends.

In his press conference, Prime Minister Scott Morrison held out hope of a permanent increase beyond then but offered no details. It was not a question the government was contemplating “at this point”.The Conversation

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

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