The Federal Budget of 2020 was undoubtedly the most important in living memory. When the COVID-19 pandemic hit, the economy shrank by 7% in two quarters, the fastest decline in recorded history. Over one million Australians were thrown out of work, and subsequently tens of thousands have shifted from full-time, secure employment into casual and insecure work.
While this crisis is unprecedented, so is the opportunity it presents for genuine economic reform. With so much of the economy shuttered, the government had a clear opening to reconfigure for the better the policy settings that guide our economic activity. Prior to the onset of the pandemic, and the subsequent deep global recession, Australia’s economy was sluggish, with low productivity growth, record levels of insecure work and labour force underutilisation, a collapse in business investment and more than six years of wage stagnation.
After a six month delay due to the impact of the pandemic, the 2020 federal budget was an opportunity to craft the kind of economic reform that could address these endemic issues while also implementing urgent measures to restore jobs and incomes.
Unfortunately, the measures announced by the Treasurer on 6 October 2020 included little by way of genuine reform to restore an economy that could provide genuinely secure and well-paid jobs, and reverse years of economic decline to deliver growing living standards for working Australians. The opportunity to rebuild a more prosperous and inclusive economy, in which sustainable growth could be shared more equitably among the Australian people, was missed.
The $4 billion JobMaker Hiring Credit Scheme (the Scheme) is an example of the lack of vision and ambition for Australia’s future that characterized the budget as a whole. While apparently focused on the laudable goal of restoring employment to young workers who have been particularly hard hit by job and income losses in 2020, its design means that it almost certainly will not encourage the necessary corrections to the labour market that are needed to reverse the decline in job security and living standards that have plagued young Australians for more than a decade, and is in fact likely to entrench and exacerbate them.
Of more immediate concern, Per Capita has significant doubts as to whether the Scheme will deliver the 450,000 jobs the government anticipates over the next 12 months. The Scheme does not guarantee the creation of any jobs, as would a program of direct government job creation in the public sector. Instead the scheme operates with an overreliance on the private sector to lift employment numbers, and actually incentivises employers to give preference to low quality jobs.
The Scheme’s design will encourage insecure, casual employment, and reduce the prospect of the creation of permanent full-time jobs, which our economy desperately needs to lift wages and productivity. There are perverse incentives built into the Scheme that mean older workers in permanent full-time positions may be replaced by young workers on casual and part-time, fixed-term contracts.
Further, the Scheme fails to take account of the disproportionate impact of the recession on women’s employment, and will likely make it harder for women with childcare responsibilities to re-enter the labour force. Combined with other “gender-blind” elements of the federal budget, the Scheme is likely to contribute to a widening of the employment and income gaps between men and women in the labour market.
Finally, the Scheme’s design, in which employers are reimbursed the hiring credit after engaging a new employee, will disadvantage small businesses, especially those who have been shut down for extended periods of time due to the pandemic and who are, as a result, far less likely to be able to cover the additional payroll costs required to take on new workers until the hiring credit is provided.
Summary of Recommendations
We recommend that:
- The funding allocated to the JobMaker Scheme be redirected to a government employment program, with priority given to the recruitment of directly and permanently employed public sector workers in aged care, disability care and early childhood education and care.
Failing this, the Scheme should be adjusted to maximize the value of the public investment in private sector job creation by encouraging secure, long-term employment for young Australians.
Such adjustments should include:
- Reserving at least 60% of the hiring subsidy to apply only to new permanent part- or full-time jobs, to reduce the likelihood that the majority of jobs created will be casual and fixed-term contracts;
- For the remaining 40% of the hiring subsidy, tapering payments by the number of hours worked to encourage full-time employment;
- Increasing the subsidy to the full $200 per week to companies providing permanent contracts to workers over the age of 30;
- Creating a “returning to work” exemption from the $100 reduction in the hiring credit for women over 30 returning to work after childbirth or childcare; and
- Providing small firms with a three-month line of credit to allow them to engage in the Scheme.
Further, we recommend that the current rates of the JobKeeper wage subsidy and JobSeeker unemployment benefit be maintained until at least the end of the 2020-2021 financial year, until the medium-term impact of the recession and its effect on employment, particularly for prime aged and older workers, is better understood and the effect of the JobMaker Scheme can be assessed.
Finally, we recommend that the Government urgently revisit the design and implementation of the Restart Wage Subsidy aimed at supporting employment for older workers. Without effective support for employers to hire and retain older workers, they are likely to be even further disadvantaged by the implementation of the JobMaker Scheme.