We can’t keep a job that won’t earn its keep – but we can keep more if we opt for JobTweaker has been saved
We can’t keep a job that won’t earn its keep – but we can keep more if we opt for JobTweaker
Analysis by Deloitte Access Economics shows JobKeeper was the difference in preventing at least half a million Australians from becoming unemployed. But it’s due to expire, and Australians can’t keep a job that won’t earn its keep.
11 May 2020: The introduction of JobKeeper, and the recasting of JobSeeker, was the economic lifeline Australia needed. These policies favoured speed over elegance, and they got the balance right for most people.
Before the JobKeeper announcement, Deloitte Access Economics had forecast an unemployment rate of more than 12% in the coming 2020-21 financial year. After JobKeeper, we revised that down to peak at 8.5% in 2020-21 – a change in our numbers that implies more than half a million jobs were saved by JobKeeper.
But there’s still a huge challenge ahead. We forecast unemployment will not return to pre-COVID levels of around 5% until late 2024.
And with certain states and certain regions waiting far longer still, getting unemployment down while phasing out JobKeeper is the key policy challenge for the government.
While Treasury is no doubt working up options to put on the table, we recommend that the federal government should opt for what we call ‘JobTweaker’ – tweaking JobKeeper to shore up a strong recovery.
The aim is to save more jobs that can be saved, while recognising that there will be some we cannot save. Australians cannot keep a job that won’t earn its keep, but we can keep more if we tweak JobKeeper.
For JobKeeper to stop abruptly, all it would have done is have kicked the unemployment can down the road.
We’re stepping out of the public health measures cautiously. Let’s not cut off the economic lifeline before we actually save what we’re meant to be saving.
And there’s a good chance that the original $130 billion cost of JobKeeper won’t be fully spent: it’s costing was put together at a time when things were looking bleakest, the more successful the measure has been the cheaper it has become, and many businesses – and people – thought that they qualified for JobKeeper when they didn’t.
This means a JobTweaker approach could potentially have a minimal impact on the budget bottom line. Every taxpayer dollar is vital. And so, it is vital that we make sure the $130 billion this nation is spending gets maximum bang for buck.
In designing the phase out, Deloitte Access Economics considers that:
- The dignity of work will reign: Lots of good things will happen regardless of how JobKeeper is phased out. People want to work, and businesses want to reopen. We all want to get back to ‘normal’. So, the incentives generated by JobKeeper and JobSeeker are important, but the dignity and purpose of work and individual aspirations are even more important.
- Timing is everything: Different types of businesses will be opening in different states at different times, but JobKeeper is due to expire all at once on 27 September 2020. That means a complex problem will be addressed with a one-size-fits-all response. We can do better than that. We need to ensure there isn’t a mass shift from JobKeeper to JobSeeker because some businesses simply can’t sustain reopening or afford to keep their employees.
- So, complexity is key: Where a one-size-fits-all approach on the way into hibernation worked, one size will not fit all on the way out. Different businesses and different occupations will open up at different times and at different speeds.
- No zombies: One pandemic is enough for a lifetime and there is a risk that JobKeeper, as a measure designed to preserve jobs, could eventually create ‘zombie firms’ that neither fully recover, but don’t go bankrupt. This would slow the broader recovery. But so too would a sudden stop to all support.
So, Deloitte Access Economics advocates making it smaller, but for longer. JobKeeper eventually needs to go – it costs a lot, it may cause competitive problems between firms, and its relationship with JobSeeker with respect to incentives to work is complicated.
But there is a clear case for the government to consider some tweaks in the review it has scheduled for end-June. Some ideas include:
- Phase JobKeeper out in line with a turnover measure over the short-term and in line with reopening steps. As turnover increases with economic activity, the JobKeeper payment steps down from $1,500 per fortnight to $0 until turnover begins to return to the pre-COVID levels. Just like the turnover drop made them eligible for JobKeeper in the first place, a turnover recovery could make them ineligible.
- Or more simply, the payments could be withdrawn slowly from $1,500 a fortnight to lower amounts on succeeding fortnights: to $1,200, then $900, $600 and finally $300 – adding eight weeks and a further $20 billion to its cost – or potentially just using up the already ‘unsubscribed’ amount.
- Even more narrowly, the government could take a targeted and more sectoral approach. For instance, it replaced JobKeeper with a $600 a fortnight supplement for just over three months (beyond September) for businesses that fit narrower criteria and have been hit the hardest: 20 workers or fewer, and working in industries such as air transport, food and accommodation and arts and recreation. Such a measure is estimated to cost around $1.5 billion – a much smaller share of the unsubscribed JobKeeper pie, but equally sustaining a much smaller share of the economy.
Whatever path is chosen, public policy will need to be on its game because not everyone has been affected in the same way:
- Australia has some workers whose normal work life has been disrupted and they will look to return to their normal employment arrangement quickly during recovery. These workers have relied on supports like JobKeeper.
- We have workers who are temporarily unemployed and cannot seek or gain work elsewhere. These workers have relied on JobSeeker. They will need support and the training system will need to work hard to get them back to work quickly.
- We have workers who now face the reality that structural change may have wiped out where they used to work and/or their skills have become redundant. A more substantive effort is needed to find these people, and equip these workers for the version of the Australian economy that emerges from the pandemic.
- There are business owners who are relying on temporary income and business supports during forced closures but will seek to reopen.
- And there are business owners who will not seek to reopen in recovery or will try and fail to. Their employees may get JobKeeper now but will be displaced eventually.
Deciding the fate of JobKeeper is no small thing, and no part of the economic recovery task is straightforward.
But we do know this: the fight against the virus is morphing into a fight against unemployment. And it’s a fight Australia can’t lose.
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