The JobFaker plan destined to fail

The 2020 federal budget presented Australians with a new scheme to get the economy moving - a year of subsidised wages. The federal government has allocated $4 billion for businesses hiring new workers as part of the JobMaker plan. But like all subsidies, these government funded paychecks will help some and hurt others. 

Age matters. Businesses which hire workers aged 16-29 will receive weekly payments of $200 per employee. But if that business hires workers aged 30-35, the government will only hand out $100 weekly payments. Businesses that bring on workers over 35 get nothing.

If anyone wanted to kick off a generational war between Millennials and Gen Z, this sure beats TikTok.

Not all newly hired 16-35 year olds are eligible for the wage subsidies. If a young person hasn’t been living off of the government dole (Jobseeker, the Youth Allowance, or the Parenting Payment) for the last few months, their employer must leave the subsidy on the table and pay their whole wage. 

Then there are those who were never eligible for JobKeeper yet did not want to leave good jobs. Essential workers for businesses such as Woolworths and Coles will now have to compete for shifts with new, untrained staff who may be themselves axed when the benefit ends. 

Like JobKeeper and JobSeeker, the new program is a blunt tool which will do little to improve the core strength of the economy.  It aims to distort incentives and bribe businesses to hire. But more likely than not, the wage subsidies will warp the economy in ways we don’t expect and won't appreciate.

The ATO suspects thousands of businesses took advantage of the $70 billion JobKeeper wage subsidy. The public tipped off the tax office to questionable activity more than 8000 times, and the ATO found 2200 employees made their way onto multiple applications for payments. Policymakers shouldn’t be surprised that people are working the system for ‘free’ money, and they should expect people will do the same with the JobMaker wage subsidies.

When billions are up for grabs rational people will put more effort into getting the government money than producing goods and services which benefit society. Paying people to dig holes and fill them in (or in this case fill in thousands of government forms) does no one any good. 

To make the situation worse, at the same time the government is paying businesses to hire young people, they are paying people not to work with JobSeeker.

Young people have no clear incentive to work more than 20 hours a week while JobSeeker still guarantees the fortnightly income of $815 and all the leisure they could want. JobSeeker allows recipients to earn up to $600 a fortnight without affecting the maximum payment. A young person could receive as much as $1415 a fortnight by working less: 15 hours a week at minimum wage. If that person were to find a job they would have to work 35 hours a week at minimum wage to make as much as they were watching Netflix and working 15 hours a week in the same job.

While businesses may receive an extra $200 a week for hiring, workers receive little additional benefit. Workers must put in at least 20 hours a week on average in their new jobs for their employers to benefit. However,  as soon as a worker adds a 16th hour to their work week, they lose money.

Then there are those who were never eligible for JobKeeper yet did not want to leave good jobs. Essential workers for businesses such as Woolworths and Coles will now have to compete for shifts with new, untrained staff who may be themselves axed when the benefit ends. 

The best we can hope for is that some creative rorters are able to get a hold of the money and start circulating it through the domestic economy.

JobMaker serves one purpose: getting people back to work. However, it's unlikely to have the impact policy makers hoped due to conflicting incentives. Instead, the policy will distort a fragile economy and put young workers at a disadvantage in a year’s time.  Young Australians want a strong economy with secure, sustainable jobs, but have instead received a year of insecure employment for less money than they are promised just to stay home.

This article first appeared in MyChoice on 20 October 2020.