Monday, December 4, 2023

JobKeeper cost more the longer it went on, finds e61 Institute report

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“We find that the match value of jobs saved by JobKeeper was similar to other available jobs in the economy, and that income growth has been weak for individuals who were tied to firms in the later stages of the scheme,” e61’s Dan Andrews, Matt Nolan and Lachlan Vass said in a report.

“These facts indicate that the benefits of such schemes are limited when alternative jobs are available – and that there are real costs associated with tying individuals to unproductive firms.

“This suggests that traditional macroeconomic support should be prioritised to fight future economic slowdowns, especially those that are demand-driven.”

Treasury review

A separate report commissioned by Treasury released last month found the $88.8 billion JobKeeper scheme played a critical role in steering the Australian economy through the pandemic, despite a handful of costly design flaws.

Former Treasury official Nigel Ray found that making profitable companies pay back JobKeeper could have undermined the pandemic-era support scheme and damaged confidence.

Qualification for JobKeeper when it was announced on March 30, 2020, when the economy went into lockdowns, required firms to demonstrate their turnover was projected to fall by more than 30 or 50 per cent by September 2020, depending on their size.

The prospective eligibility criteria meant $8.9 billion in payments were made to businesses that went on to experience an increase in turnover.

Firms qualified for an initial six months, followed by a stricter qualification criteria for up to another six months.

Mr Ray said JobKeeper should have been more flexible, allowing eligibility to switch from prospective to retrospective revenue criteria after three months, minimising the prevalence of profitable firms receiving the subsidy.

One of these was JobKeeper’s initial flat payment structure of $1500 per employee per fortnight. While providing each participant with the same benefit was simple, the report said it was inefficient.

Any future wage subsidy should be proportionate to earnings, as was the case in other advanced economies, the review concluded.

Any future government implementing a wage subsidy should also include a public register so it would be possible to see which companies received taxpayer support, the Ray review said.

The report said JobKeeper was an outlier when it came to transparency, with Britain, Canada, Ireland and New Zealand having either a register or other disclosure requirements.

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