Tue Jun 15

The end of JobKeeper wasn't a blip. It might have cost nearly 100,000 jobs

Written by: Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

At its peak, more than 3.8 million ^[1] Australians were on JobKeeper — three in every ten Australian workers.

Adding in those workers already employed by government, it meant four in every ten received a paycheck that originated from government, more than in Russia ^[2].

Yet when JobKeeper ended at the end of March, it looked like a mere blip in employment. The unemployment rate actually fell, for the sixth consecutive month.

The Bureau of Statistics said the cutoff had no “discernible impact ^[3]”.

Treasurer Josh Frydenberg went further ^[4]. The economy had “strengthened, even after the end of JobKeeper”.

Since the end of JobKeeper 132,000 ^[5] people had come off income support.

The treasurer is right. After March the number of Australians on JobSeeker and related payments fell 9%^[6].

Changed rules pushed people off benefits

But it’s possible for people to come off benefits at the same time as people are losing jobs, especially if something else is driving them off, as it was at the end of March.

At the end of March the coronavirus supplement that topped up unemployment benefits stopped ^[7]. The payment dropped from $715.70 to $620.80 per fortnight.

And job seekers were once again required to search for a minimum of 15 jobs a month, climbing to 20 from July.

While burdensome for employers (if all of Australia’s job seekers actually apply for those jobs, employers will be lumbered with 17 million applications per month, climbing to 23 million) it’s also unhelpful for job seekers.

There’s evidence to suggest job seekers get real jobs sooner ^[9] if they don’t have to go through charades.

The “dob in a job seeker ^[10]” hotline will have further dissuaded them from applying for benefits.

These changes make the drop in the number of claimants understandable, much more so than the suggestion they got jobs, which in net terms they did not. Employment fell after the end of March, by 30,600 ^[11] according to Bureau of Statistics figures which will be updated on Thursday.

As many as 97,000 fewer workers?

How is a drop in employment consistent with a drop in the unemployment rate?

The unemployment rate fell to 5.5% in April not because employment grew, but because 33,600 people who had previously identified themselves as unemployed dropped out of contention, changing their status to “not in the labour force”.

Had they continued to not work but continued to describe themselves as “unemployed”, the unemployment rate would have been 5.7%.

And it would have been higher still if those shifted to zero or reduced hours with the end of JobKeeper had been called unemployed. Employment fell 0.2%, but hours worked fell 0.7%.

My rough maths suggests this means the number of Australians actually working might have fallen by 94,100.

An analysis prepared by Melbourne University employment specialist Jeff Borland ^[13] for the Fair Work Commission puts the number of jobs lost between 45,000 and 97,000.

He gets 45,000 by comparing the number of people who left employment between March and April this year with the number who left between March and April in previous years.

He gets 97,000 by comparing the average (rapid) growth over the previous four months as we emerged from recession with the growth between March and April.

One in 11 JobKeeper jobs

A touch over one million ^[14] Australians remained on JobKeeper to the end, suggesting that as many as ten in every 11 of them kept their jobs when JobKeeper ended. One in every 11 might have lost their jobs.

The end of JobKeeper wasn't a blip. It might have cost nearly 100,000 jobs

Young workers run the risk of being scarred. Mangostar/Shutterstock

The Australians most knocked around were the youngest. Since the end of JobKeeper, women under the age of 30 have on balance lost jobs ^[15] while women over that age have continued to gain jobs.

Men under the age of 40 have lost jobs while men over that age have gained them.

The treasury’s deepest concern about jobs since the start of COVID (it mentions it right at the top of that section of the budget) has been scarring ^[16].

The unlucky young people who happen not to secure jobs during downturns can fail to secure them for years, being passed over by newer, fresher young people who are barely affected.

Even where these people get jobs, if they enter the market when the youth unemployment is five percentage points higher than normal, they can expect to earn roughly 8% less in their first year, and 3.5% less after five years. It takes about a decade for the effect to fully disappear, and it’s worse for women than men.

Vacancies, plus mismatch

Australia’s record-high vacancy rate (2%^[17] of all jobs were vacant at the end of March) makes it look as if scarring needn’t be much of a concern. But jobs are vacant for reasons.

It might be that the mix of jobs we will need is changing, or that employers can for the moment no longer rely on migration to give them the mix of skills they want. Or it might simply be that the general bounceback in jobs has been so fast that the right employers and the right workers are still working out how to find each other.

Many businesses will die as a result of the end of JobKeeper. Businesses are forever dying. Some have been kept alive for longer than they would have been, and some have exited JobKeeper into a changed environment.

We’ve managed to end JobKeeper without a catastrophe, but that doesn’t mean there hasn’t been damage, and it doesn’t mean young lives won’t be scarred.

After a textbook exit from a recession — the sharpest V-shaped recovery ever — it would be awful if we left a slice of young Australia behind.