Beyond JobKeeper: how to tackle unemployment post-coronavirus

To tackle the problem of long-term unemployment as a result of the coronavirus, the Federal Government should take 5 important steps according to UNSW Business School labour markets expert Raja Junankar

Australia has been significantly affected by the economic slowdown of some of the major world economies as a result of COVID-19.

China – a major destination for our exports of minerals, a key contributor to our education sector and a main source of several intermediate inputs into Australian production – has caused a ripple effect on the Australian economy.

The lockdown in China led to a sudden fall in the imports of critical intermediate products that forced the closure of Australian production. As a result, many firms that rely on imports from China have had to shut down production, make their workers redundant or stand them down.

The closing down of many establishments by government decree, the increase in unemployment and the cutting back of hours of work in many industries have resulted in a decrease in household income. Additionally, a substantial loss in consumer and business confidence is expected to cause a fall in investment in real capital goods.

The impact on the Australian economy

There have been massive changes in the economic and social structure of Australia since the pandemic began. The economy consisted of a neoliberal free-market economy with dominant private oligopolies that controlled many critical sectors of the economy.

But with the implementation of lockdown measures and what is classified as ‘essential’, many shops, cafes, restaurants, retail stores and hotels are deemed non-essential and are closed down indefinitely while the pandemic is still causing illness and deaths.

The Coalition government's response to the crisis has led to the abandonment of a balanced budget, its policies of keeping unemployment benefits at poverty level and its policies on free markets. It is nationalising the private hospital and childcare sectors and the aviation industry. This is a sad state of socialising the losses of the private sector whilst privatising its profits.

Wuhan China lockdown-min.jpg
Wuhan, Hubei/China: the lockdown in China led to a sudden fall in the imports of critical intermediate products. Image source: Shutterstock

Unemployment benefits have almost doubled, with the Newstart allowance being renamed the JobSeeker payment, worth $1500 per fortnight.

Private hospitals are being taken over by the government as a precaution to treat casualties of the pandemic. In effect, the hospitals are being nationalised, as they would have made huge losses with elective surgeries put on hold.

And private childcare centres are having the fees of each child registered before the pandemic and lockdowns paid by the government.

The impact on unemployment

COVID-19 is also having a devastating impact on the labour market, with unemployment forecast by the Australian Treasury to rise to 10 per cent by June, while some economists are predicting an increase of the unemployment level to as high as 20 per cent.

Government policies to limit the rise in unemployment include the JobKeeper stimulus and financial support including loans to avoid firms going bankrupt.

But as unemployment rates increase, more and more of the unemployed will become long-term unemployed (having been unemployed for 12 months or longer). A large proportion of these casual workers are likely to be unskilled workers, women, and young people.

Many casual workers who were not employed by their employer for 12 months or longer (and migrants on temporary visas) will suffer during this pandemic as they are not eligible for the JobKeeper payment.

The government should also have an equity share in firms such as Qantas which might get bailed out the government. Image source: Shutterstock

The Prime Minister, Scott Morrison, and Treasurer, Josh Frydenberg, have stated very clearly that all the government subsidies will be withdrawn, and the economy will return to its free-market ways. They believe the economy will wake from hibernating and return to the state it was before the pandemic.

But it is difficult to see how the clock can be turned back.

Many of the changes to the welfare system will need to be retained. For example, before the coronavirus shock, unemployed workers had to sign a mutual obligation contract that required them to apply for 20 jobs per month to retain their unemployment benefit.

Many of these people suffered a ‘robodebt’ assault when the government instructed Centrelink to recoup payments from workers who did not satisfy their contract, either in terms of earning more than a means test allowed, or not satisfying their job-search obligations. Centrelink used its data to determine who had broken the rules and would be given a balance to repay, however, many of these so-called robodebts were incorrect because they used incorrect data on earnings.

In a post-coronavirus economy, mutual obligation contracts for the unemployed will have to be adjusted to be reasonable.

The truth about the JobKeeper subsidy

The JobKeeper subsidy is a lifeline to many private firms (including many oligopolistic behemoths), with very few restrictions on the way they comply with the legislation. It also has the added benefit of keeping thousands of workers employed and away from Centrelink queues and keeping the published unemployment rate artificially low.

But one can argue: should the JobKeeper subsidy be targeted and means-tested? Should the scheme be monitored, and firms be required to maintain the workers on their payroll for another six months after the end of the subsidy? Why should large successful and profitable firms be subsidised by the taxpayer?

Australian economy-min.jpg
Prime Minister Scott Morrison and Treasurer Josh Frydenberg have stated that the economy will return to its free-market ways. Image source: Shutterstock

Recommendations on how to tackle unemployment

Although we do not know exactly when the government will re-open the economy, we need to have a set of policies that are ready for that time. We need a suite of policies that are clearly sequenced.

To tackle the problem of unemployment and long-term unemployment as a result of the coronavirus, the government should:

  1. Retain the JobSeeker payment (including the coronavirus supplement of $550 per fortnight). This will help to raise the old NewStart allowance to above the poverty level and maintain aggregate demand.
  2. Provide a training guarantee scheme for all the young unemployed, the thousands of young people will have left school, university and TAFEs, and have looked for employment unsuccessfully. These traineeships should be provided at a minimum wage for at least 12 months in the public and private sectors, focusing on skills for the future.
  3. Require that all the workers who were on the JobKeeper subsidy be re-employed by their employers for at least six months. Firms that do not do so should be made to repay the government subsidy they had received.
  4. Guarantee a job, in the public or private sectors, for all long term unemployed.
  5. Invest in public infrastructure including housing for homeless people, care homes for the elderly and the renewable resources industry, to employ many of the workers who have lost their jobs in the pandemic. This should be started as soon as possible after the pandemic has been declared over.

The government should also have an equity share in firms that have been saved from bankruptcy by government handouts. For example, the government should get a share of equity in Qantas.

What will the recovery look like?

Some politicians are hoping for a V-shaped recovery – that is, the economy would bounce back immediately and grow rapidly.

But the reality is that the recovery is likely to be slow and prolonged and the projection will look more like a U-shaped recovery with a very flat-bottomed U.

The policies that will be needed will have to be ready well in advance to generate the desired substantial fiscal boost.

Raja Junankar is an Honorary Professor and a member of the Industrial Relations Research Centre at UNSW. This article is a contribution to a publication by the Economic and Labour Relations Review. A shorter version was submitted to the GO8 Road to Recovery Report.


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