New government support is JobKeeper in all but name
The Prime Minister’s announcement of a new round of economic support for NSW was immediately criticised for not being JobKeeper. But while it might lack the brand recognition of that earlier scheme, it will in fact operate very much like it, despite initial appearances to the contrary.
Just as with JobKeeper, a significant increase to the existing disaster payments will be welcomed by those who have lost hours, either directly or indirectly, due to the lockdowns. The previous $600-a-week payment for those who had lost more than 20 hours has been increased to $750 a week. And those losing between eight and 20 hours will now get $450 a week, up from $375 previously.
Scott Morrison addresses the media on Wednesday.Credit:Alex Ellinghausen
Overall, this is significant support. The full-time rate is almost triple the JobSeeker rate, and equal to the original JobKeeper rate. And workers who’ve lost hours at the lower end of either range will end up with more net income than the headline rate. There will always be calls for more support, but this will go a long way to bridging the gap caused by the lockdown.
Another critical move has been to extend eligibility for support to the roughly 320,000 people in NSW on income support payments like JobSeeker and Youth Allowance. Many work part time to supplement their payment, but have so far been ineligible for any additional support. Those who lose hours will be eligible for a lower $200-a-week payment on account of the fact their income support payment will also have risen with their falling hours.
But it’s the business support where things get murkier. To date, small- and medium-sized businesses with a fall in turnover of 30 per cent or more have been able to receive a cash-flow boost equal to 40 per cent of their payroll. While the rate hasn’t been increased, eligibility has now been extended to larger businesses â€" those with turnover up to $250 million a year, compared to $50 million previously.
What’s conspicuously absent is any mention of JobKeeper, the much-vaunted wage subsidy scheme that many â€"including ACTU Secretary Sally McManus and NSW Treasurer Dominic Perrottet â€" have long called to be resurrected. The government has doggedly resisted those urgings, opting for just about anything else so long as it’s not called JobKeeper. It seems to have perhaps been spooked by claims of corporate largesse under that earlier scheme.
NSW Treasurer Dominic Perrottet. Credit:Nick Moir
But, in effect, the package announced today will operate much as JobKeeper did. How, you say? Stood-down workers will receive exactly the same $750 weekly payment they received under the original JobKeeper, just directly from Services Australia rather than indirectly via their employer. Indeed, some workers will receive more on net if they retain some hours.
And what about businesses, and the big benefit of JobKeeper in maintaining links to their employees? Well, businesses only receive the cash-flow boost if they don’t lay anyone off. They can scale down hours, even to zero, but they must keep all their employees on the books, just like under JobKeeper.
Indeed, the Fair Work Act allows this under a public health order even for permanent staff. The subsidy is equal to 40 per cent of prior payroll, rather than current payroll, so businesses will still receive support to cover their fixed costs like rent even if they aren’t paying their employees.
In effect, the system works much as JobKeeper did, incentivising businesses to retain links with their employees, and filling the gaps in businesses’ balance sheets and workers’ bank accounts left by the lockdown. But the support can be switched on and off overnight, targeted exactly where it’s needed, and businesses’ eligibility can be assessed in real time, preventing the overpayments we saw under JobKeeper. This flexibility makes it much more fit for purpose.
So instead of obsessing over what it’s called, let’s focus on what it does. While there may be an argument for further support in future, this new support system is well judged to help employees and employers work together to end this lockdown as soon as possible. And rebound strongly on the other side.
Steven Hamilton is assistant professor of economics at George Washington University and chief economist at Blueprint Institute.
Steven Hamilton is chief economist at Blueprint Institute and assistant professor of economics at George Washington University.
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