Research published by Australia’s central bank says jobkeeper stopped 700,000 additional employment relationships being lost in the first half of 2020, and overall job losses would have been twice as large without the wage subsidy.
The paper by Reserve Bank of Australia economists James Bishop and Iris Day, published on Monday, found the wage subsidy rolled out as the economic shock from the coronavirus pandemic hit played an important role in cushioning the decline in employment over the first half of the year.
“Our baseline estimate is that one in five jobkeeper recipients would not have stayed employed during this period had it not been for jobkeeper,” it said. “At the aggregate level, this implies jobkeeper prevented at least 700,000 additional employment relationships being lost in the short term.”
Bishop and Day estimated that receiving the jobkeeper payment increased an employee’s probability of remaining employed by about 20%.
The RBA estimate is similar to Treasury’s assumption that Australia’s unemployment rate would have been five points higher if there was no wage subsidy.
Treasury, however, assumed that all the fiscal stimulus provided during the pandemic – cash payments to households, income support and investment incentives for businesses, loan guarantees and regulatory measures – had saved 700,000 jobs, whereas the RBA paper assigned that to jobkeeper alone.
The RBA paper estimated that each employee-employer relationship saved by jobkeeper cost taxpayers $100,000 – a headline figure it said appeared to compare favourably to other wage subsidy schemes, like the paycheque protection program in the United States which had an estimated cost each job of US$224,000.
The authors speculated the difference may derive from tighter targeting of the Australian jobkeeper scheme.
The wages subsidy cost $101.3bn, making it the largest single measure in the Covid-19 stimulus package.
The RBA paper examined the impact of the first six months of the program – from 30 March to 27 September – when the subsidy was paid as a flat $1,500 a fortnight for each eligible employee.
The authors said the subsidy was one of “the largest labour market interventions in Australia’s history”.
Over the opening six months, the program supported 3.5m workers in 900,000 businesses “and undoubtedly played a crucial role in cushioning the decline in employment and incomes over the first half of 2020”.
The jobkeeper payment was accompanied by the jobseeker payment – an effective doubling of Newstart. The Morrison government is cutting both benefits and requiring businesses to requalify for jobkeeper based on their actual earnings.
