Jobs for all idea is not a keeper

The pandemic’s economic carnage has understandably heightened concern over employment prospects — especially for young workers and those displaced from industries facing an uncertain future. This has seen the government increasingly urged to make JobKeeper … a keeper.

Agitators also claim there’s a need to sustain the elevated payment levels of JobKeeper and JobSeeker — citing prolonged shutdowns in Victoria which have hiked demand for the wage subsidy. Both payments are soon due to begin at tapered rates.

The scheme has offered critical support in uncertain times. But the longer it persists, the more it undermines the private sector-led recovery. And a stronger private sector will pull our economy out of the corona doldrums — not a stronger welfare handout.

Some have warmed to increased government activism in labour markets, seeing the temporary wage subsidy as forerunner to more enduring and ambitious intervention.

The most disconcerting proposal is for a job guarantee — an unconditional and universally available job offer, funded by the federal government — to replace traditional unemployment benefits (at far greater expense).

But there could be no greater economic albatross to sabotage recovery. It’s a post-Keynesian nonsense that all citizens are “entitled” to a job, and that such responsibility lies with government. Together with the “modern monetary theory” it is seen by some as the game-changer for radical idea.

Proponents say that “meaningful” work would be made available to all, with recipients earning the equivalent of the minimum wage (higher than the tapered JobKeeper and considerably higher than regular unemployment payments), and resulting in a more productive and skilled workforce.

They also argue this would reduce “inherent instability” in market economies — since, in theory, a jobs guarantee would be counter-cyclical (cushioning the private sector void in labour demand in downturns, and vice versa).

But even with the most sympathetic reading, a jobs guarantee is still the wrong prescription to the pandemic-hit labour market.

While jobs may well be created, almost as many will be destroyed, since government crowds out private employers. Why would the private sector compete with a permanently underwritten government provider?

What’s worse is that even if there were jobs to be created, this will only be via “busy work”, of little value to the wider economy.

Moreover, it means that there’s little prospect those in guaranteed jobs will become equipped with marketable skills to gain private sector employment — further entrenching welfare dependency.

And the productivity-draining effects are inescapable; for those in guaranteed jobs, as well as those in comparable ones.

First, with any universal job guarantee, work must be offered to even the most unskilled (and unmotivated) — those with little incentive to upskill and improve private sector employability. And guaranteed job security would blunt performance incentives, as well as the reallocation of workers to meet demand.

The productivity drain will also be felt more broadly, with low-skilled workers attracted to guaranteed jobs. Why remain in the private sector where there’s a threat of dismissal?

By failing to genuinely create jobs, the scheme just becomes a more expensive, and less effective, form of welfare — with even weaker incentives for training. And by stalling productivity, the private sector becomes less vibrant when we need it to spring back to life.

The government must keep tapering the JobKeeper scheme and set the course for retracting this unprecedented intervention into the economy. The recovery can be supported only through the unleashing of markets — not the permanent expansion of government — in resurrecting jobs.

The only guarantee of a jobs guarantee is that it will make a sick economy terminal.