JobKeeper can’t be forever but is needed a little longer

The Morrison government’s historic JobKeeper wage subsidy program has proved a vital lifeline for the recession-ravaged Australian economy throughout COVID.

So, as shutdowns and border closures persist into 2021, it’s only prudent to ask whether the current March 28 expiry date should be extended yet again, albeit in some modified form, for COVID-affected businesses.

It’s easy to hand out goodies in a crisis. It’s much harder to take them away when the crisis has passed.
It’s easy to hand out goodies in a crisis. It’s much harder to take them away when the crisis has passed.Credit:Dionne Gain

Government ministers remain adamant JobKeeper is a “time-limited” program, pointing to the potential pitfalls of propping up unviable jobs. But they also remain open-minded to the need to remain “agile” to the evolving situation.

Proponents of extending the payment warn of a looming “fiscal cliff” if support is not extended, with JobSeeker coronavirus supplement also set to expire at the end of March.

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I adamantly support a permanent increase to the base rate of JobSeeker beyond March. I am less sure about extending JobKeeper, but I can see a case, which I’ll get to.

First, let’s consider the cons of extending JobKeeper.

The main potential pitfall is that the program, by stapling workers to their existing employers, stops the “re-allocation of labour”. That is, people are supported to remain in jobs that might not otherwise be viable. Might these workers be better off exploring new job opportunities in industries with brighter futures, particularly with job advertisements now back at pre-pandemic levels?

Of course, precisely which jobs can be classed as viable or not-viable in today’s world is a rapidly moving feast – at the whimsy of both a highly unpredictable disease and the sometimes even more unpredictable responses of governments to it.

We just don’t know how closely the post-COVID economy will resemble the pre-COVID one. Some businesses currently recieving JobKeeper will certainly fail. But others will make it through. With multiple vaccines now in play, the day on which some businesses can survive unassisted is surely closer. Would it not be wise to bridge that gap, of possible?

But if you do accept further support may be prudent, it’s valid to ask whether JobKeeper is the best way to do it.

JobKeeper is a federally funded payment. But it is states who call the shots about border closures and lockdowns. Arguably, state governments and their emboldened Premiers should be forced to shoulder more of the fiscal responsibility for their actions. During Victoria’s second wave lockdown, the Andrews government did just that, delivering multiple support payments for affected business.

Extending JobKeeper at the federal level would require the passage of new legislation and redesigned eligibility rules. Under the existing test, businesses need to prove they have suffered a 30 per cent or more decline in revenue in the previous quarter, compared to the same quarter a year prior.

Lockdowns that only last for a couple of days may not push firms over that line. And the impact of border closures is harder to foresee. The timing of the current border closures – coinciding with holiday periods – is particularly damaging for the hospitality and domestic travel industries.

To round out the “cons” side, jobs and other figures suggest our economy is, in fact, coping a little better than expected. Businesses are learning to adapt to COVID protocols and/or moving online. Meanwhile, tax cuts and interest rate cuts continue to flow, making talk of a “fiscal cliff” overblown.

And yet, bearing all that in mind, there is a case to be made for extending JobKeeper a little longer.

The government is right that, in principle, it should remain a temporary program. An economy cannot be frozen in time forever and the $100 billion price tag for taxpayers is not irrelevant.

It is also important for future responses to crises that stimulus packages are seen to be “temporary, timely and targeted”. Politically, it’s easy to hand out goodies in a crisis. It’s much harder to take them away when the crisis has passed.

When JobKeeper was invented last April, we had no idea if a successful vaccine could be invented for COVID-19. Mercifully, time has shown that it can.

As vaccines are rapidly rolled out across the world, we can be confident that the coronavirus crisis will, indeed, end at some point.

So, knowing that, why not extend the helping hand to businesses just a little longer to get them through from April until full vaccine roll out?

The cost of government debt is low and the cost of the scheme so far has been much less than initial estimates.

Amid all the uncertainty, it seems wise to at least not rule out extending a payment that has proved so successful to date in protecting jobs and livelihoods.

JobKeeper is not without its design pitfalls. But as a way of saving jobs and pumping money into the economy, it works. Talk of a “fiscal cliff” may be overdone, but mere idea of support ending prematurely could deal an unnecessary blow to confidence at a fragile time.

Of course, it’s hard to be definitive. Much can change in three months, which is why the government is wise to remain agile.

I’ve written previously that, in the long term, JobKeeper is not a keeper. And it’s not. The need for it will pass.

But perhaps, until then, we can afford to keep it around a little while longer. It’s at least worth considering.

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Source: Thanks smh.com