A new research paper by RBA economists James Bishop and Iris Day has examined how many people the government’s scheme managed to keep employed through the COVID crisis.
The $101.3 billion JobKeeper initiative, which rolled out at the end of March in response to COVID, first saw businesses with a decline in turnover receive $1,500 in wage subsidies per worker fortnightly.
Since 28 September however, the amount of JobKeeper companies can receive has been slashed and tiered according to hours worked by employees. The maximum amount now is $1,200 per fortnight until 4 January, when it will decline to $1,000. The scheme has been extended until 28 March next year.
The primary objective of JobKeeper, as implied by its name, was to keep employees in their jobs through the crisis, as a way to combat rising unemployment.
But the RBA’s baseline estimate is that one in five JobKeeper recipients would not have stayed employed through April to July if it had not been for the program – preventing the termination of at least 700,000 additional workers during its first four months.
Around 650,000 people had become unemployed during the period.
Meanwhile 3.5 million individuals were covered by the JobKeeper payments between April to July. The first phase of the program, a six-month period from March to September, provided $70 billion in support.
The RBA economists have suggested this would mean that each employee-employer relationship saved by JobKeeper cost $100,000 over the six-month period – compared to other countries, such as the US where the estimated cost per job saved was US$224,000.
The unemployment rate sat at 7 per cent in October, according to the latest ABS labour force data – slightly lower than July, when it had been 7.5 per cent.
Underemployment in October was 10.4 per cent, declining from July’s 11.2 per cent.
“Our findings have implications for policy,” the RBA’s report read.
A better understanding of the effects JobKeeper has on employment could provide guidance to policymakers on extending or withdrawing the costs of the scheme.
It also could be considered for forecasting around the withdrawal of the support measures, particularly around labour market outcomes and economic growth.
But, the RBA’s research paper stated that it has not considered the employment effects from August onward, including JobKeeper 2.0, or the effectiveness of the program in alleviating the longer-run effects of labour market scarring.
“Indeed, the international literature suggests that wage subsidies, if maintained too long, can have adverse effects on incentives and impede the reallocation of labour,” the paper said.
