A longer JobKeeper will keep people in fake jobs

The $60 billion JobKeeper underspend has the government considering extending the duration of the wage subsidies beyond six months for coronavirus-crippled industries such as tourism and aviation.

But lengthening the support for businesses that cannot afford to stand on their own two feet by late September will impede the necessary shift of people out of dead-end illusory jobs that are sadly never returning. It will consign people to fake jobs for longer.

With international borders to be largely closed into next year for the typical 9 million foreign annual arrivals, tourism, aviation and international education will be weak well into 2021 and their employment levels will be lucky to return to 80 per cent capacity in the next few years.

Continuing the $1500 fortnightly wage subsidies will deter underutilised workers from picking themselves up and reskilling for new jobs in a post-COVID-19 economy that will look different to the pre-virus landscape.

University of Melbourne economist Roger Wilkins says the economy and labour market need to restructure.

“International travel is going to be virtually non-existent for at least a year and probably longer,” Wilkins says.

“The problem with JobKeeper is it may be tying people to jobs that there may no longer be an economic basis to.

“We’re creating rigidities in the labour market that could cost us.

“Keeping JobKeeper going creates a real incentive for people not to find new work.”

There may be an economic case to gradually withdraw, or what Treasury secretary Steven Kennedy calls "taper" JobKeeper around the time of its scheduled September 27 expiry.

But last Thursday Kennedy also warned of the pitfalls of trying to target it too much.

"As soon as you get into targeting, either by a threshold or by a sector, you have a lot of messiness around the edge – which sectors are in, which sectors are out, just exactly how things apply," he says.

"Then, administratively, you have to be able to administer the arrangement.

"But in terms of if sectors were recovering strongly and others weren't, that would be a very relevant consideration for the review of JobKeeper that we're doing at the moment for the three months."

It would be almost impossible to define what a "tourism" business is.

To be sure, suddenly turning the tap off on more than 3 million JobKeepers when there is already 1.6 million unemployed JobSeekers could flood the labour market with jobless people all at once.

So phasing down the $1500 fortnightly wage payments in the months ahead could help businesses adjust with less of a shock.

A phase down could be done by requiring employers to reapply from July onwards, to retest if their monthly or quarterly revenue is still down by at least 30 per cent.

Anecdotally there is evidence that some businesses have artificially suppressed their monthly cash flow by deferring invoices to qualify for the six-month wage handouts.

The monetary value of the taxed $1500 fortnightly payments could be reduced towards the untaxed JobSeeker unemployment benefit, which is set to be lowered by the government from the temporarily doubled amount of $1100 a fortnight.

University of Queensland economist John Quiggin says a gradual winding down of JobKeeper in its current form, starting soon and extending well past six months, is required, "leading to a restructuring of employment and social welfare policies to deal with the post-pandemic global economy that is still taking shape".

More than likely the government will be forced into setting JobSeeker (the old Newstart unemployment benefit) higher than the stingy old $560 a fortnight.

The Reserve Bank of Australia tips unemployment to remain high, at 9 per cent by Christmas.

Not everyone receiving JobSeeker will be the proverbial "dole bludger".

If the economy is still weak later in the year, reallocating some of the $60 billion to skills, infrastructure investment and tax reform could be more productive.

As viable businesses gradually recover the government must ensure the generosity of the $1500 fortnightly JobKeeper and $1100 JobSeeker don't discourage people from finding real jobs.