However flawed, JobKeeper promises need to be kept, writes Steven Hamilton.
JobKeeper was always quick and dirty. Its design was far from perfect, with shortcomings I and others cautioned against.
These were forgiven in the face of an impending calamity, but the health interventions have worked so well that the generosity of this economic intervention, costing some $20 billion a month, is being questioned. Some Coalition MPs have suggested wrapping it up before its September cut-off date. The Prime Minister has said a review will address some ‘‘anomalies and issues’’.
So where does the JobKeeper scheme fall short and how could it be tweaked? The big flaw in JobKeeper is that it is paid as a fixed amount for each worker, regardless of the hours worked or wage earned or what other costs the business has to cover.
The COVID-19 economic crisis stems from businesses losing money and laying off workers due to a lack of customers – either voluntarily or by government fiat.
The ideal response, while intended to preserve jobs, would focus on revenue – replacing lost revenue on the condition that businesses maintain their workers’ hours and wages.
The inferior JobKeeper design will certainly save some firms and their workers’ jobs, but those with low margins and large fixed costs such as rent are undercompensated while others are overcompensated.
Forcing firms to pay the entire subsidy to their workers (even where it means giving them a pay rise) limits their ability to use it to offset other costs. And leads to all sorts of inequities among workers.
If the scheme must be tied to payroll, there are far better ways to do it. It could instead cover a portion of total payroll up to a ceiling with some additional support for non-payroll costs.
There has been widespread confusion about eligibility. Most businesses qualify if they declare that they expect turnover to fall by at least 30 per cent in the coming quarter (or month if turnover is more than $20 million). But reasonable expectations are hard to police. If things go better than expected and they end up not needing so much support, they get to keep the subsidy for the entire six-month period, regardless.
A better approach would be to pay businesses up front some portion of total payroll for the same time period in the previous year. Then, after the fact, what they are eligible for could be calculated based on actual payroll.
This would be simpler, clearer, better targeted and solve the cashflow problems, where businesses need to pay workers before they get the JobKeeper payments.
The scheme is set to end after six months on September 27 regardless of economic conditions. Some businesses in some sectors are already back at work and others will come back soon. But some, such as those affected by the international travel ban, will be out of action until next year. For those businesses that recover quickly, support will be provided long after it is needed. But for some others, the maximum six-month time frame will be too short.
Short-term casuals, most temporary visa holders, workers at certain foreign-controlled businesses, and employees at most universities were left out despite many of them working in the hardest-hit industries.
There was never a good reason – morally or economically – to exclude these people, and the budgetary constraint has turned out not to be an issue. If changes to JobKeeper are to be made, these people should be included.
The JobKeeper legislation is merely a shell, with the details at the discretion of the Treasurer, who can make whatever changes he sees fit. But whether he should do so is a tough call.
There are clear flaws, and for many businesses it could be wound up earlier as the outlook has changed for the better. But the government made a clear commitment to these millions of businesses and workers. The last thing anyone needs right now is to have the government pull the rug out from under them.
Steven Hamilton is a visiting fellow at the Tax and Transfer Policy Institute at the Australian National University. An earlier version of this article appeared in The Conversation.