Articles – The Centre for Independent Studies

RIP Jobkeeper

Robert Carling

02 April 2021 | IDEAS@THECENTRE

The corona-crisis has given birth to a mishmash of public policy programs with ‘Job’ in the title, but there is one fewer to think about now that JobKeeper has come to an end.

Looking back on the experiment, there are important questions to be answered about its objectives, design, efficacy, cost and unintended consequences, which should be canvassed in a rigorous ex-post review by an agency such as the National Audit Office or the Productivity Commission. There was certainly precious little ex-ante analysis in the rush to put the scheme in place.

But certain observations can already be made. The financial cost looks like being around $90 billion. To put this into perspective, it is almost three times what the federal government will spend this year on defence.

But to point out that JobKeeper has been massively expensive is not necessarily to condemn it. Millions of employer-employee relationships that might otherwise have dissolved were kept intact for a period of enforced hibernation of large swathes of the private sector. This was the key benefit of a JobKeeper-type scheme, which will limit the extent of long-lasting damage to the labour market — what is called ‘scarring’.

However, the design of the scheme was flawed in its generosity and in the eligibility test for employers, which enabled them to qualify for the entire first six months simply by demonstrating an actual or expected decline in turnover in one month or quarter.

In addition to the design flaws, JobKeeper distorted incentives for employers and employees in their decisions on reopening and restarting and for state governments in shutting borders. It has also kept zombie firms and jobs going. The cost of such distortions was bound to grow, the longer JobKeeper remained in place.

While such a scheme may have been fit for purpose in the unique circumstances of 2020, it is clearly time for it to be put to rest now that the economy and the job market have bounced back so strongly from the abyss.

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