The true costs of JobKeeper
When COVID-19 struck, the Australian government – along with just about every government around the world – unleashed unprecedented support for workers who were at risk of losing their jobs due to the various health-related restrictions on business activity. One of the talismans of the Scott Morrison/Josh Frydenberg government’s response was JobKeeper, a scheme formulated by Treasury’s Jenny Wilkinson, for which she was later awarded a Public Service Medal.
Now, JobKeeper was expensive – $89 billion expensive, $38 billion (43%) of which “went to employers that did not suffer sustained downturns below threshold levels”. Borland and Hunt (2023) concluded that JobKeeper’s “cost per job saved was high and the impact most likely regressive”, i.e., it pissed away a lot of cash and the biggest beneficiaries were already relatively wealthy, so didn’t even need it.
But if it did its job and prevented economic calamity then all good, right? That’s the approach taken by the Albanese government, which recently released the results of its “Independent Evaluation of the JobKeeper”, concluding that:
“It played a critical role in addressing the extraordinary and unquantifiable uncertainty at the time of its introduction and averting the worst economic tail risks of the pandemic… It preserved employment, supported incomes and prevented large scale business failures during the pandemic.”
There’s lots more in the report itself, which wasn’t exactly “independent” – the terms of reference were designed by Treasury, and the review itself was conducted by a former Deputy Secretary of… yep, Treasury. Anthony Albanese knows not to rock the bureaucracy boat too hard, and he’s quite fond of JobKeeper ‘architect’ Jenny Wilkinson, quickly promoting her to Secretary of the Department of Finance.
Thankfully, the folks over at the “non-partisan” e61 Institute just released a report that tries to answer the government’s question of whether there “are lessons from JobKeeper about the use of wage subsidies in the future”. And boy are there plenty:
- 45% of the jobs covered by JobKeeper had been severed by March 2023.
- Job retention of workers whose jobs were ‘saved’ was “similar to jobs not covered by JobKeeper”, and for prime age workers it was even lower.
- People who didn’t receive JobKeeper have had stronger wage growth.
- JobKeeper recipients “reported a sharper decline in how well they use their skills in their job”, because the scheme preserved “existing business models in the face of a shock that accelerated digitalisation and experimentation with novel models of business, work and consumption”.
Firms didn’t want to fire their best workers, so JobKeeper ended up saving only the “more marginal” jobs – people who might have been better off elsewhere – tying them to “less productive firms translating into weaker income growth and poorer skills use”.
It wasn’t all wasted, though; the authors acknowledged that JobKeeper had benefits for the “first few months… [in] a time of great uncertainty”, but “should not be used during a typical recession”.
So while Josh Frydenberg likes to post on social media about how great JobKeeper was, as Treasurer he was the one responsible for letting it run for 9 months too long, in the process wasting tens of billions of dollars that could have been used on something more useful – like productive infrastructure, or about a year’s worth of interest payments on the debt he saddled us with.