The 2020-21 budget includes a big new program the government claims “will support around 450,000 jobs for young people”.
It’s a hiring credit, meaning firms will get up to $200 a week to employ someone. The $200 rate applies if the person is aged between 16 and 29 and $100 a week is available to hire someone aged 30 to 35. The person has to work at least 20 hours a week.
The program took pride of place in Treasurer Josh Frydenberg’s speech to parliament: “This budget is all about jobs.”
It suddenly seemed a lot smaller when I cracked open the budget documents. A $4 billion spending program over three years pales next to a tax cut that costs $18 billion in one year. (The budget was actually all about tax cuts.)
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But traditionally a $4 billion spending program is significant, so we should ask: is this program a good idea? Will it work?
Luckily for anyone asking this question, Melbourne University labour economics professor Jeff Borland has just updated his study of hiring credits.
“A wage subsidy is more likely to be paying for jobs that would have been created anyway when there are buoyant macroeconomic conditions,” he says in his note on the topic, dated August this year.
The economy may not seem buoyant right now, but it has stopped sinking.
Starting up a hiring credit program just when business is expected to be hiring anyway guarantees at least some of the money will be “wasted”. In this sense, the program is a little bit like the JobKeeper program that continued to support businesses to employ people even after their revenues returned to health.
The money goes to the bottom line. All businesses in Australia will be eligible, except the major banks.
Note carefully the terminology the government used. It described the program as “supporting” 450,000 jobs. Supporting does not mean creating, and it certainly does not mean those jobs would not have existed without it.
“The increase in employment is generally short‐term and much less than the number of subsidised jobs due to offsetting effects (such as subsidies paying for jobs that would have been created anyway) being substantial,” Borland says.
That said, moving people into work sooner rather than later is a good idea. Young people who spend time out of the labour market have worse long-term employment outcomes. They call this “scarring”.
Avoiding scarring is especially important for young people trying to move into the labour market for the first time. They need an opportunity to build job skills and to prove themselves to the employer, in the hope they will be retained even when the subsidy runs out. (Each new position created will be subsidised for a year.)
To help target the hiring credit at people who might not have been hired anyway, they must have been on youth allowance or JobSeeker in the preceding months to be eligible. Targeting the scheme at people who have been on JobSeeker is a good idea, Boland said.
“For jobseekers who are job-ready but who need an opportunity to demonstrate their capabilities to an employer, a hiring credit program that allows them to obtain employment can improve their longer‐term employment outcomes,” he says.
Employers in the new scheme need to prove that the person they are hiring is “additional”, meaning they can’t fire the people they have on staff and hire them back. Companies that shrank during COVID-19 may, however, be able to take advantage of the hiring credit as they return to their former size.
Overall it’s an expensive program that would never withstand scrutiny in normal times, but in these unusual times as we try to wean the country off JobKeeper it is probably a step in the right direction — a direction where most businesses eventually stand once again on their own two feet.
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Like most of their policies, the LNP spent most of their time coming up with a name for the scheme.
And what happens when the tens of thousands of zombie businesses out there, greatly inflated over the past 7 months, collapse during 2012. That is an inevitability. Most small businesses live financially month-to-month and there is no way many can sustain 9 months of inactivity and then ‘roar back to life’. Did Lewis Carroll have a hand in drafting this budget?
Trouble is, the effective or real rate of unemployment is already 13% plus with 10% plus underemployment and I haven’t included the 3.5 million on JobKeeper. Of which it is thought 1 million are really fully unemployed. Getting down to a real level of 6% unemployment? Best to say your prayers.
I used to work in the old Commonwealth Employment Service.The then Labour Market Program or subsidy to employers to take on employees was called Jobstart. At that stage the CES administered 115 different Labour Market Programs. All designed to artificially lower the unemployment rate. We now have Jobkeeper, JobSeeker, JobMaker (which simply transfers people on the dole to subsidised employment financed by former dole payments) and no doubt more. What’s changed? The re-bagging of old programs and pretending they are new is not the way to go.
I was surprised to learn that the enhanced JobSucker/Faker allowance was paying MORE than I get from my Super + reduced pension by a couple of tens of dollars per fortnight.
Now it’s being chopped back – but not to the poverty baseline – which is to be softened by two tranches of $250 in the months to come/new year.
As to the rest of the mad plans & claims from Fraudberg, it’s surely not meant to be taken seriously?
It was just to fill empty air and take up Parliamentary time, there being no agenda or national plan (pretend to) to legislate & implement. The numbers simply do not add up let alone the threadbare noxious neolib nostrums about extra investment leading to jos.
It is well documented that money given to anyone other than the very poor is spent on imported luxury good, share buy-backs and stock speculation.