Federal Treasurer Josh Frydenberg defined last week’s budget in the following terms: “There is no economic recovery without a jobs recovery. There is no budget recovery without a jobs recovery. The budget is all about jobs.”
He also claimed to have reflected an enduring value: “The power of aspiration. We owe it to the next generation to ensure a strong economy so that their lives are filled with the same opportunities and possibilities we have enjoyed.”
Yet, this budget conspicuously lacks aspiration. The focus is on headline job numbers – more “just a job”, not necessarily a meaningful and sustainable job.
The overwhelming budget objective is to just get out of the hole, the “most severe global economic crisis since the Great Depression” – to just get back the jobs we have lost, and then to move forward to count “new” jobs.
But, forward to what? No real vision or longer-term objectives or strategies – we are left with a feeling that any job will do, and we should all be satisfied with that!
Schemes such as JobKeeper, the JobMaker hiring credit, and the wage subsidies for apprentices are all short-term incentives and, as demonstrated by past experience, tend to be gamed by some businesses.
For example, some large businesses have been able to exploit JobKeeper by having the government fund their workers, boosting their profits and, in some conspicuous cases, underwriting bonuses for senior executives. The other schemes may see subsidies paid when the workers/apprentices would have been employed anyway.
The JobMaker hiring credit, focused on young Australians aged 16-35, is a welcome recognition that this cohort has been particularly hard hit by the recession. But benefits are only temporary, likely to encourage part-time rather than full time appointments, and may discriminate against older workers.
Also, a majority of job losses have been women whose participation rate has been lagging pre-COVID. Effective reform of childcare would have enhanced female participation generally, and created more jobs for females in that sector, recognising that about 97 per cent of childcare workers are women.
The budget forecasts that the economy will recover 950,000 jobs over the next four years – based, of course, on the crucial assumptions that the virus “behaves”, and that there of a widespread application of a COVID-19 vaccine by end next year.
The government predicts a further 100,000 positions for apprentices at a 50 per cent subsidy, while 400,000 people will be on the JobMaker wage subsidy.
It is assumed that will get the unemployment rate back to about 5.5 per cent by 2024, with the participation rate rapidly returning to just below its former (and historically high) level.
These predicted job trends depend heavily on two very important transitions. First, the transition from direct wage support provided by JobKeeper – which presently supports about 3.5 million workers, roughly a quarter of the workforce – to indirect support through personal tax cuts and various business incentives, which relies on households and businesses having the confidence to spend and invest.
This is clearly a gamble, with the permanent tax cuts focused on the wealthier taxpayers, who will be more inclined to save and reduce their debt, rather than spend.
The second transition is from government to private sector jobs.
The Coalition created some one million jobs in the three years from December 2016-19, partly due to a surge in major city residential construction (apartments), but mostly in service sector jobs, especially the NDIS, and about a quarter of them in the health and social care sector.
Nearly a quarter of a million jobs were added in the education, health and social care sectors, with government funding Gonski and health, in particular. Further, nearly all the jobs went to women – which is why female participation surged nearly two percentage points in that period. This transition is also a significant gamble. As the Australia Institute has demonstrated recently, direct government investment in services creates lots of jobs.
For example, spending about the same amount as the cost of the tax cuts across university education, child, health and aged care, and the creative arts would create 7-12 times as many jobs as the tax cuts can be expected to create.
Finally, the government has missed an opportunity to create meaningful job pathways, especially for our youth, by not basing its recovery strategy on say the visionary transition to a low carbon Australia by mid-century with jobs in renewables, electric vehicles, regenerative agriculture, green buildings and industrial processes, and the like.
Jobs? Maybe. Same opportunities? No.
First published at the Canberra Times on Thursday 8 October 2020.
Other Budget Forum 2020 articles
Blink and You’ll Miss It: What the Budget Did for Working Mums, by Miranda Stewart.
Economic Stimulus through a Gender Lens: Why the Budget Did Not Deliver, by Helen Hodgson.
Progressivity and the Personal Income Tax Plan, by Sonali Walpola and Yuan Ping.
Training Subsidies and Market Failures, by John Freebairn.
Getting Coherence into the Equity Debate – Part 3, by Andrew Podger.
Getting Coherence into the Equity Debate – Part 2, by Andrew Podger.
Getting Coherence into the Equity Debate – Part 1, by Andrew Podger.
What Has Volunteering Got to Do With the Budget? By Sue Regan.
Asymmetric Taxation of Business Income and Losses, by John Freebairn.
Economic Security for Older Partnered Women and Widows: Fixing Gaps in Australia’s Superannuation System, by Monica Costa, Helen Hodgson, Siobhan Austen and Rhonda Sharp.
Heroic Assumptions in Budget Omit One Major Threat: A Global Debt Crunch, by John Hewson.
Dream Budget or Not? by Shumi Akhtar.
Will Instant Asset Write-Offs Boost Jobs? by Michael Coelli.
It’s Not the Size of the Budget Deficit That Counts; It’s How You Use It, by Steven Hamilton.
Looking for Bold Reform? Get Rid of Payroll Taxes, by Robert Breunig.
It’s Time to Meet Key Social Policy Challenges in COVID Recovery, by John Hewson.
Meet the Liveable Income Guarantee, a Budget-Ready Proposal That Would Prevent Unemployment Benefits Falling off a Cliff, by John Quiggin, Elise Klein and Troy Henderson.
COVID-19 Strengthens Australians’ Belief in the Fair Go, Government Should Support the Vulnerable, by Emma Dawson.
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