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The federal government has reduced or removed the supports that helped millions of Australians survive the pandemic. JobKeeper’s end could cut 150,000 jobs and push millions into poverty, particularly women and children. By Mike Seccombe.

Poverty and the end of JobKeeper

Treasurer Josh Frydenberg and Prime Minister Scott Morrison in Canberra.
Credit: AAP / Lukas Coch

Two weeks ago, with his government buffeted by daily allegations of rape, sexual harassment, misogyny and cover-up, Scott Morrison stepped up before the Canberra media to spin a small bit of good news.

The prime minister cited just-released jobs data from the Australian Bureau of Statistics, which showed unemployment was down from 7.5 per cent at the peak of the Covid-19 recession to 5.8 per cent.

This outcome, he said, was testament to the government’s “wise” actions in support of the economy. But it was time for the end of the biggest of those supports, the $90 billion JobKeeper wage subsidy program.

And so, on Monday this week, JobKeeper support was withdrawn, despite the fact that some one million people were still being supported by it.

“It has done its job,” Morrison pronounced at that March 18 press conference, with all the certitude of George Bush declaring “mission accomplished” in Iraq.

Other government support measures, largest among them tax cuts and infrastructure spending, would now be adequate to mop up the remnants of recession and get Australians back to work, the prime minister promised.

“For us as a government, together with the treasurer and our entire team, it’s always been ultimately about jobs,” he said. “We want to see more Australians in work because we know when an Australian has a job, it is good for their wellbeing. It is good for their hope. They can plan for their future. They are in control when they are in a job.”

Unfortunately for Morrison, his efforts at highlighting a positive message did not get the media coverage he hoped for. Focus remained largely on the government’s scandals.

More fortunately for Morrison, these scandals also ensured the evidence given to a senate estimates committee by the secretary of the Treasury, Dr Steven Kennedy, was not reported as prominently as it might otherwise have been.

Kennedy told estimates the end of JobKeeper would see up to 150,000 jobs disappear. Those most likely to lose work were low-income workers on low hours – in essence, part-time workers. But, he warned, the consequences would be broadly felt.

Which is to say the government that claims to be “always and ultimately about jobs” has decided to sacrifice tens of thousands of them in the interests of saving money.

Furthermore, coincident with the end of JobKeeper, the government cut back the rate of JobSeeker benefits, which would flow to those rendered newly jobless by the end of JobKeeper, as well as those already without work, to just $44 a day.

As a consequence, those modestly encouraging employment numbers cited by Morrison will inevitably deteriorate over coming months, as many businesses close and let workers go. And the number of Australians living in poverty will swell.

Australia has no official definition of poverty, and so estimates depend on which measure you use.

By the calculation of The Australia Institute, which uses the Henderson poverty line – a formula developed for a 1973 inquiry into the subject – more than one million people, including 220,000 children, fell into poverty in the 12 months to the end of March 2021. It estimates another 155,000 will be added after the axing of JobKeeper, a total of some 4.5 million people.

By the measure of the country’s peak welfare group, the Australian Council of Social Service (ACOSS), which sets its poverty line at 50 per cent of median income, the impoverished will number more than three million after the cuts to JobSeeker and JobKeeper. Disproportionately, these will be women, as well as one million children.

The impact will be felt across society, not only by the poor, as the changes will suck demand out of the economy more generally, slowing the pace of recovery, which had been relatively good until now.

It’s a sad state of affairs – socially as well as economically – says Cassandra Goldie, chief executive of ACOSS. As difficult as the Covid-19 year was, for a while, the prime minister’s assertions that we were all in this together rang somewhat true.

“I was really struck by what we’re capable of doing, when we want to,” Goldie says, reflecting on Australia in mid-2020. At this time, the government had effectively doubled welfare payments and was supporting the jobs of millions of tenuously employed workers. There were moratoriums on the pursuit of distressed debtors and evictions, and childcare was – for four brief months – free.

The Morrison government decided to nearly double benefits in March 2020, when concerns about unemployment began to be felt by middle-class voters. It added a $550 a fortnight coronavirus supplement to a range of welfare benefits.

Of course, the JobSeeker scheme was far from perfect and was clearly influenced by politics. For example, Goldie deplores the fact that about a million people in Australia on temporary visas, including international students, were excluded from both JobSeeker and JobKeeper, leading to “destitution and homelessness” for those stuck here in the pandemic.

But for citizens who got the more generous JobSeeker payment, she says, “it transformed people’s lives”.

She refers to data collated by Associate Professor Ben Phillips, principal research fellow at the Australian National University’s (ANU) Centre for Social Research and Methods, which was provided to a senate inquiry into the likely effects of cutting JobKeeper.

Before Covid-19, Phillips showed, the poverty rate for people receiving unemployment benefits was 88 per cent. When the JobSeeker payments were doubled, this dropped to 26 per cent.

With the extra money they could afford adequate food, pay their rent, worry less about “eking out a meagre existence”, on welfare and think instead “about what to do next, in terms of education, training, work”, says Goldie.

She says the period of increased benefits served as a “real life experiment” that disproved the dole bludger myth, a statement backed by the research of University of Melbourne economics professor Jeff Borland.

Borland, Australia’s leading labour market economist, told the senate he found “no evidence the higher JobSeeker rate in 2020 has had any appreciable effect on incentives to take up paid work”.

It turns out that it is not necessary to design a system that makes it “challenging to subsist” to motivate poor people to look for work, as Christian Porter suggested when he was Social Services minister.

What people need is jobs. And the most recent ACOSS data shows there are eight times as many JobSeeker or Youth Allowance recipients as there are job vacancies in Australia.

Nonetheless, the government has progressively whittled back the extra benefit, from $550 extra a fortnight to just $50 more than benefits had been before the pandemic.

On Phillips’ calculation, that will push the poverty rate among the unemployed back up again – to 85 per cent. And most of those driven into poverty will be women.

“The coronavirus supplement applied to [and now has been cut from] both people on the JobSeeker allowance and those on the Parenting Payment. So the combined effect of that was about 60 per cent female,” Goldie says.

This week, attempting to reset his scandal-plagued government, Morrison reshuffled his cabinet, giving new job titles to a raft of women, and promising the government would apply a “gender equality lens” to a broad range of policy.

It is about time, in the view of Goldie and many others, who say this government has been particularly unsympathetic to women’s interests since it was first elected in 2013, with Tony Abbott as leader.

“One of the first things this Coalition government did in 2013,” says Associate Professor Elizabeth Hill, an economist at the University of Sydney, “was remove from the federal budget a section that required measures to be assessed against their impact on women.”

And Morrison’s response to the Covid-19 recession was notably gender-blind. In a piece written for The Australian Financial Review following last October’s budget, the chief executive of the Grattan Institute, Danielle Wood, described it as “blokey”.

“We look at those areas that have received direct support – construction, the energy sector, Defence, manufacturing, all of those areas where the government has put direct money into a particular sector – they tend to be male-dominated sectors,” Wood wrote.

“The sectors that have been hit really hard: hospitality, tourism, the arts, recreation, administrative services tend to be actually slightly more female dominated.”

And yet they had not received the same level of direct government assistance.

Hill suggests that in some sectors that employ a lot of women, such as tertiary education, this appeared to be driven by political prejudice. The government specifically amended its JobKeeper package to ensure universities were not supported.

In other sectors that were particularly badly hit by the recession, such as accommodation and food services, significant numbers of workers were excluded because they had been employed as casuals, for less than a year. This disproportionately affected young and female workers.

“You’ve got a governing political party that deems itself to be ‘good economic managers’. And yet they haven’t been able to see, or they’ve been unwilling to see, a very different Australian economy compared to the ’80s and the ’90s, and a very different labour market,” Hill says.

“You’ve had disproportionate stimulus being pumped into sectors that are actually in decline in terms of their contribution to GDP … [and] policy initiatives that are not giving you the biggest employment bang for your stimulus buck. I find that astounding.

“You don’t have to think of it in gender terms at all. Just think about this in orthodox economic terms and employment terms.”

There are many examples. For one, the government put an extra $1.2 billion towards boosting the training of apprentices. Apprenticeships are 70 per cent male.

Perhaps the standout case, though, was the massive support given to the construction industry, including $2 billion devoted to the government’s HomeBuilder scheme, which provided grants for the renovation or construction of housing.

Bureau of Statistics data showed construction was one of the sectors least damaged by the recession – in terms of hours worked – yet was one of the largest recipients of JobKeeper subsidies. The government stimulus now is widely seen as a factor driving an astonishing increase in house prices.

Back in May, at the height of the pandemic, Roger Wilkins, professorial fellow at the Melbourne Institute of Applied Economic and Social Research, collated data on the people and parts of the economy worst hit by the recession.

Those sectors he defined as “directly hit” were largely forced to cease operations as a result of public health measures, and included hospitality, air travel and tourism, creative arts and entertainment, and sports and recreation.

Secondarily hit industries were those that continued operating, but experienced “precipitous” declines in business: store-based retail, tertiary education, mechanics and motor vehicle retailing, and accommodation.

Women accounted for 53 per cent of people employed in directly affected industries and 65 per cent of workers in secondarily affected industries.

Affected workers also were disproportionately young, less educated, more likely to be in poor physical and mental health, had higher rates of disability and were financially disadvantaged.

“In short,” wrote Wilkins, “those most exposed to the economic shutdown are also those least able to cope with it.”

Things have changed considerably since May 2020, however.

JobKeeper did help speed up the economic recovery, even though a substantial portion of the $90 billion spent by the government – at least 20 per cent and probably much more, according to analyses – went to businesses that did not need help. Ultimately this money ended up in the pockets of wealthy business owners, executives and shareholders.

“In the first couple of months,” says Jeff Borland, “there was clearly a much bigger impact on women than men in terms of lost hours of work, but by late last year, it got back to being pretty even.

“Still, I think it’s fair to say that until we have the health situation sorted out, female employment remains more vulnerable.”

But the health situation is clearly not yet sorted, as has been driven home this week by the Covid-19 outbreak in Brisbane and subsequent lockdown.

As well as trumpeting his government’s economic management at that media conference a fortnight ago, Morrison boasted of the government’s “foresight” in acquiring vaccines, and declared that “the vaccination program continues to accelerate”.

But not nearly fast enough to reach its own targets.

The state and federal governments have blamed each other for the slow progress but, notably, the strongest criticism of the Morrison government has come from its Coalition counterparts in New South Wales.

Dr Stephen Duckett, health program director at the Grattan Institute, says the federal government is primarily to blame for having “stuffed up” the rollout.

Duckett ticks off various failings, including inviting six million people in phase 1B to contact their GPs about getting inoculated “without first telling the doctors to expect the phone calls, or when they would get vaccines, or how much they would get”. There was also the promise of a national booking system that didn’t eventuate, as well as generally poor management of the logistics.

This, Duckett says, is a threat not only to public health but to the economic recovery.

Assuming all goes well, says Borland, the bump in jobless numbers caused by the end of JobKeeper may be smoothed out in a few months, and Australia could return to February’s 5.8 per cent unemployment rate.

That’s still a long way behind where it was a year ago – 5.1 per cent – and even that, in the view of many economists, including those within the Treasury and Reserve Bank, is nowhere near good enough to fix Australia’s longer-term economic malaise.

The government’s last budget set a target of getting unemployment to be “comfortably below” 6 per cent. But, says Borland, that target should actually be in the low 4 per cent range. Only then is the country likely to have wage growth.

For years it has been increasingly apparent that the headline rate of unemployment is no longer the best measure of the labour market, because it does not show underemployment – the number of people who are in work but would like to work more.

“If I was in charge, I’d be setting an underutilisation target, rather than an unemployment target,” Borland says.

This number is easily calculated by determining “the total number of hours that people in the labour force are willing to supply and subtracting from it the amount of hours they are actually working”.

Before Covid-19 hit in earnest, in February last year, the underutilisation rate was 7.3 per cent, says Borland. By this February, it had jumped to 8.4 per cent.

“So,” says Borland, “I think we need to worry about the ending of JobKeeper and the adjustment to that. But that’s not the end of the policy problem.”

Peter Martin, a visiting fellow with the Crawford School of Public Policy at the ANU, and an economist and former journalist, says that econocrats within the Treasury are well aware of this issue.

The evidence can be seen in the budget’s medium-term fiscal strategy.

Where the wording once reflected the government’s obsession with debt and deficits, the last budget included a minor but significant change, stipulating that while the medium-term strategy would be to achieve balance, this would be contingent on unemployment falling “comfortably below 6 per cent”.

This was a positive sign, but not enough, says Martin. Not if Australia is to cope in the radically altered economic environment since the pandemic began, in which other governments around the world are intervening far more and spending far more on recovery.

If the wording of the fiscal strategy statement remains the same in next month’s budget, says Martin, “that’s a very bad sign”.

“They need to change that phrase, ‘6 per cent’ to something else. They need to change it to say something like ‘until unemployment is low enough that we have inflation of 2 to 3 per cent and wage growth of 3 to 4 per cent’.”

Within Treasury, he says, there now is a large body of opinion that the government should continue spending until those targets are reached.

Whether the government will grasp the opportunity for such a major reset of policy, though, is doubtful. Nothing in Morrison’s “mission accomplished” pronouncements give great hope.

But Peter Martin thinks Treasurer Josh Frydenberg is smarter and understands the challenge at hand.

The pandemic has served to highlight a whole raft of issues beyond health – issues of gender and economic stagnation and growing inequality.

But it has also provided cover for the government to spend up big and begin to address them.

JobKeeper may be dead, having more or less “done its job”, as Morrison put it. But the job is far from done.

This article was first published in the print edition of The Saturday Paper on Apr 3, 2021 as "Jobs just for the boys".

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Mike Seccombe is The Saturday Paper’s national correspondent.