It seems quite likely that we will soon see the introduction of a wage subsidy along the lines of that announced by Boris Johnson (himself now testing positive!) in the UK. That is, a payment to employers equal to 70 or 80 per cent of workers’ pre-crisis wages, in return for keeping them on for some period. That would be better than doing nothing beyond what has already been announced, but I have two big problems with it.
First, it is paid to companies rather than workers. The ACTU is touting this as benefit, on the grounds of administrative simplicity, but I suspect that there is lots of potential for abuse through complex corporate structures. Second, it creates essentially arbitrary distinctions between workers. If you happened to work for a company that closes and stays closed, or if you were already unemployed you are out of luck. A final issue (on which opinions may differ) is that the benefit depends on previous salary, rather than being the same for everyone.
I’m thinking about an alternative model. Rather than paying money directly to employers, we should allow recipients of benefits like Newstart to use their benefit as a wage subsidy, either with their current/most recent employer (this would be specific to the pandemic emergency) or with a new employer. This would give workers more freedom and more agency, and could potentially form part of a Jobs Guarantee, which is, I have argued, the natural complement to a Guaranteed Livable Income (the term now being used by advocates of BI/UBI/GMO schemes in Australia). In particular, it could be sustained beyond the current emergency, which is not the case for the wage subsidy ideas.
There are plenty of issues to be addressed in the long run version of the voucher idea, such as the problems of additionality and churning (ensuring that the employer is creating new jobs, rather than replacing existing workers with voucher-holders). But such issues have been addressed in other contexts, with some success.
John Quiggin 
It’s important to go for a Universal Basic Income (UBI) and a Job Guarantee system. All UBI money must go directly to unemployed people and pensioners, “unalienated” as the term is. In the case of the Job Guarantee persons must must work for it in the public service, obviously. The JG can be used to set an effective minimum wage floor. Bill Mitchell and his team have done a lot of work on the shape of a JG.
Assistance and subsidies of all types to all private businesses must be set to nil. They must be given nothing by the state. The act of going into private businesses indicates the desire to accept the markets as they are and as they might be in future, and to operate and profit or go broke within them. Any assistance of any kind to a private business is a moral hazard and economic distortion.
Any private business which goes broke under those conditions must be allowed to go broke. Owner’s with no business any more and no income may apply for the UBI or JG like anybody else. Where a broke or bankrupt business is a strategic necessity or natural monopoly it must be nationalized.
Canada has announced a 75% wage subsidy. Ours is coming.
Given that some of these businesses ie services are not going to be in any kind of demand for a while at least (airlines, some insurance, hospitality, etc.) wage subsidy through these businesses seems like a crazy idea. The government throws some money at the business (and worker for a short time) while we shut our eyes and pretend that nothing has changed.
And our government even had a couple of months to prepare and potentially avoid the pandemic, But we shut our eyes then too. The nearsightedness is unbelievable.
But then our government is not there to think ahead or act, but simply to react. And I guess we deserve it as a country because it is what we have been voting for as a country (And the victims as always will be the poor and the disadvantaged) and given our love of corporate culture which we have let inform all our thoughts.
If paid to companies rather than workers the administrative simplicity the ACTU touts most probably is attached to their own vested interests in the status quo of employee union membership fee and superannuation guarantee automated deductions being paid to affiliated unions and to affiliated union co-managed industry super funds. Benefits to keep flowing to their snout in the troughs, and their position in the rotten game of mates maintained.
Also if the benefit is at the previous salary, and if the majority by far of workers are lower paid, as is the case, and therefore due to affordability if nothing else they are not and have not been union members, again as is the case, at least the self-interested ACTU would be expecting to keep the funds rolling in from somewhere around the number of their current relatively high paid members. Follow the money and/or the ACTU’s nest-feathering players’ self-interests in the corporate, industrial, moneyed, political, and ALPlib game of mates.
Yes, it should be the same flat rate paid to all directly.
The ACTU position here is more than a little like the yesterday stated REIA position on proposals for government payment of rents. They hold that the payments should be made to the real estate agents and not directly to the renters, nor to the land lords!
Well said Svante. I think this is in part the reason why Australian workers find themselves in the current situation.
Obviously wage subsidies aren’t going to help businesses that have no revenues because they have been shut down by government decree.
But there’s plenty of others who will be helped. Now is not the time to be quibbling over details.
Business is lining up for handouts as usual. Then they do what QANTAS did. Stand down all the workers AND deny sick leave and carer’s leave for those already on it. That is an act of sheer bastardy. Or they do what billionaire Solomon Lew is doing. They go on a rent strike. Against billionaire landlords no less! No honor among capitalists I guess. If you take a loaf of bread for nothing that’s stealing. If you take free rent as a tenant in a tenants’ rent strike, that’s stealing. But if you take free rent as a billionaire that’s okay if you can get away with it.
https://lafm.com.au/social-media-news/103030-lew-we-wont-pay-rent-during-shutdown
So much for the PM’s early plea to business, “Pay your bills, pay your suppliers, blah, blah blah.”
When big business is raking in the money everyone must abide by the rules of legal law, commercial law and the economics of the “free” market. When they are losing money they want tax holidays (well they want those all the time), subsidies (well they want those all the time), extra extra help and also to be able to break the rules and laws as soon as they see fit for their own self-interest.
It’s been disgraceful to see, the blatant opportunism and selfishness of the capitalists as they fight for the new billions coming out of the government spigot and try to deny as much as possible actually going to workers and beneficiaries. MMT / Functional Finance / Keynesian pump priming / printing money.. these were were all wrong, wrong, wrong according to the capitalists and their mates (cheap QE money was nice though) until they looked like going broke and then suddenly these same capitalists are saying “we are all socialists now – at least if it’s socialism for the rich.. It’s okay to print endless money so long as you give it all to businesses, corporations and the rich via one money circuit or another.”
I don’t know why people stand for this transparent bull-dust from the rich elites.
Cormann said that the Federal Government could not implement a wage top up or social living wage on the basis that it would take too long to built a structure to implement the UK proposal.
https://www.canberratimes.com.au/story/6699921/businesses-set-for-hibernation-pm/
He seems to be totally ignorant of the fact that the ATO knows who we are, what we do, how much we earn, where we live and more importantly – our bank accounts to parachute money directly.
I suspect that given the PM has said that he is not Kevin Rudd, he will not use the relief method Rudd used. A shame that it is the most effecient – if you excuse the few hundred that the ATO would not have known to have died and thus do not need the top up.
Delivery to business also fits Morrison’s “he will fight for every job” mantra. https://twitter.com/annajhenderson/status/1243391105195855875
It is just a shame that he refuses “to fight for every person”.
Why not now: Jobs Guarantee Payment (or any of the other acronyms) seems perfect for current times. Full time employers can reduce their payments to employees by the same amount. Part time employers can … negotiate a new contract from the date the Jobs Guarantee Payments start. Retirees can continue with their retirement income from whatever source. And everyone over 18(?) gets money. Over time, taxes can be increased to reduce the impact on the budget, if necessary.
Milton Friedman would be pleased.
Svante: good to see you right across all the anti-union, keep-wages-low talking points. You’re right, a crisis like this is an excellent time to defund unions as well as forcing them to stop organising for a few months. With any luck by the time the pandemic is over the few remaining unions will be dead. Then Scotty from Marketing can get back to converting all workers to itinerant day labourers. Never waste a crisis, they say.
Interesting how some other countries have permanently lifted wages and benefits, some are even pushing companies to employ their staff directly, but here it’s a temporary boost to benefits and no lift to minimum wage or employment protections. Maybe we need some of the wildcat strikes that are happening in the US to remind the powerful that it’s much easier to negotiate with a union than actually implement their “each contract is between one worker and one employer” fairytale.
Courtesy of ==> macrobusiness.com.au/2020/03/weekend-reading-28-29-march-2020/ ===>
https://www.theage.com.au/politics/federal/foreign-investment-board-braces-for-chinese-takeovers-of-distressed-australian-assets-20200326-p54e3z.html
openpolitics.com/2020/03/14/was-corporate-profit-growth-inflated-by-financial-engineering/
Moz,
the self-seeking union elites killed off unionism themselves. They hollowed out the unions, when they wholeheartedly sold out and screwed workers en masse to eagerly join in the neoliberal game of mates. Hawke, Keating, Kelty and all the contemptible time-serving apparatchiks onwards sowed the seeds of the abundant alienation, suspicion, detestation, and disinterest they reap. They are always more interested in fighting and cannibalising each other seeking benefits for themselves than they are in their members. Face to face with oblivion, they now from time to time have shown a little interest in fighting for their members, but too little, too late, and mainly for the pr media coverage.
You are correct about the intended and likely outcome for workers after this – classic economic shock therapy to be applied in the interests of the rich – if we let them! The union structures will still be around still doing their fake business. Perhaps they’ll be in a more subservient role than the partnering with the rich they’ve become accustomed to, but the rich will still keep them around for their usefulness in worker control.
I believe the cycle has yet a long way to go before we see Labor again shooting workers and widespread wildcat striking here, sadly, what with the oligarch subservient duopoly misgovernment and unions, and the financially engineered massive personal debt situation.
Morrison and Frydenberg are announcing the wage subsidies in the next few days, maybe tomorrow.
In this crisis, what is unthinkable one day becomes orthodoxy in no time at all.
It would be nice if they increased the Disability Support Pension *now*, to the rate that the “new” Newstart is at. DSP recipients are copping a world of hurt, and with supply issues developing, and the special needs that DSP recipients have, it seems prudent to boost the DSP forthwith.
Don, they haven’t changed the NewStart rate, they have temporarily added an extra payment. That will stop whenever they think they can get away with it. The extra payment will go to DSP recipients as well. There’s quite a list:
https://www.dss.gov.au/about-the-department/coronavirus-covid-19-information-and-support
Hi Moz, thanks for the link.
There is an Income Support Supplement of $550 for New NewStart, AUSSTUDY and ABSTUDY, but not for Disability Support Pension recipients, from the look of it. Of course, both DSP and Newstart are tragically low as it is, and should be permanently raised.
With respect to a basic income support by the guvm’nt, current and recent employees have TFNs if they have filed income tax with the ATO. Sole traders and self-employed should have an ACN, ABN, or TFN. If you are in any way on myGov, you should have an ID for that. If you are registered with Centrelink, you will have a CRN. With the data matching the guvm’nt already does, it shouldn’t be that challenging to set up a system that utilises one of these Identities for making a direct bank transfer to your nominated bank account, on a regular basis. For instance, the ATO already makes tax refund payments direct to a nominated bank account. Newstart, AUSStudy and DSP recipients already have the necessary set up for regular payments to a bank account. Why hasn’t the guvm’nt moved in this direction?
Could the solution to additionality and churning questions be a kind of auction/clearinghouse approach? The agency would ask for bids for subsidised workers and make up the difference between the bid and a living wage. They would then have the right to hire a worker (through the same clearinghouse) for one year. I’m sure arrangements could be made relating to the continuation of the contract and the termination of the employment.
The job markets run by the agency could be separated into industries, with a specific number of jobs in each industry. So, for instance, in a Robinson Crusoe example, they’d offer 1 subsidised place in hospitality and employers would bid for the right to employ someone. Suppose the cost of a living wage was $30,000, but a cafe felt they would only benefit $15,000 by hiring a new worker, that’s the amount they’d bid in their tender. If there was a pub that felt they could benefit $16,000, they’d bid that amount and would thus be successful, with the government making up the remaining $14,000.
The employer would then recruit in the normal way, with interviews and so on. If someone was unsuccessful for a certain number of applications there would be some point at which they’d be given a job without interview, which would be wholly subsidised by the government. It could even be possible to have different “tiers” of jobs. So some jobs are for people who have failed fewer than five applications, some are for people who have failed fewer than ten applications, and so on. Employers would be aware that they were bidding for passed-up workers and so offer lower bids.
Note that entry to the system would be open to employers of all types. Many of the employers in some sectors – health, environment, science – might be government agencies while in others – hospitality, logistics – they would mostly be private firms.
Another important point is that there should be no coercion. The decision to take a job, or even enter the system should be entirely optional. For that reason there might be some industries (cleaning, for instance) in which there were more jobs than applicants. That would be expected and in effect would equate to a raising of the amount an employer would need to bid for a successful tender, because employers would know they needed to be at the top of the pile to have any chance.
Don, sorry, you’re right. The big list is for the $750 one-off payment, I misread.
The job vouchers idea is an absurd idea. It will be gamed by small business, big business and the rich owners.The LNP COALition only believe in socialism for the rich. The poor can go hang themselves according to the LNP’s actions. The LNP only ever provide anything to the poor out of fear that the “peasants” might revolt.
The UBI (Universal Basic Income) and JG (Job Guarantee) are the only way to go. All welfare must go directly to the poor and unemployed in inalienable payments. Business get their money when these people of necessity spend.
I’m wondering how the total cost of wage subsidy compares to the total cost of UBI?
Environmentally destructive businesses should not be saved during this crisis. A prime example is tourism. It astonishes me that tourism has become such a sacred cow. Tourism is responsible for 8% of global greenhouse emissions. Tourism after all is a discretionary “industry”*. It is not an essential activity. Given that the continuing rise of greenhouse gas emissions is rapidly generating a climate emergency, then all unnecessary sources of greenhouse emissions must be curtailed.
If after the implementation of proper CO2 emissions pricing and the withdrawal of all subsidies, some tourism survives as a business, then this is fine. However, perverse incentives to keep tourism activities afloat and then running again after the crisis at the inflated levels we have known should not be part of any recovery plan. COVID-19 recovery needs to be combined with a restructure of national economies away from unsustainable activities. The over-mobility of persons in terms of international travel is the reason why this virus spread so fast and with such deadly effect all over the globe. International tourism is a net disutility in an over-crowded world facing recurrent zoonotic disease threats and catastrophic climate change.
Of course, the question arises of how to reemploy persons and redeploy assets previously devoted to tourism. This must be addressed. Safety nets must be available to people as they are moved to tasks more necessary for a sustainable economy. A national bush-fire service and national environmental corps for example would provide some re-employment. Better programs to house and feed the aged, indigent and homeless would also be appropriate.
Where would the money come from? This is the wrong question. The correct question is this. Where would the real resources come from? The real resources (people and fixed assets as property, plant and equipment) already exist. They simply need to be re-deployed to the new purpose. Less foreign currency might be earned but let us examine that assumption.
International tourism contributes about A$12 billion to the Australian economy. It’s difficult to find how much Australians spend on overseas travel but some preliminary figures I found suggest Australians spend at least A$36 billion on overseas travel. So a cessation of international travel would be an enormous net boon to Australia in terms of foreign exchange. The COVID-19 epidemic could save us A$24 billion per annum in this regard! Of course, it will cost us much and grievously in other regards. But there are also big savings both in pollution and foreign exchange.
Tourism. It’s bad for the planet and it’s bad for Australia.
> I’m wondering how the total cost of wage subsidy compares to the total cost of UBI?
It will be lower, prebably significantly, because not everyone gets the wage subsidy and the subsidy is capped, albeit to a higher level than plausible UBI. Even if you take the Paul Fritjers “only workers matter” approach, paying even 50% of the workforce slightly more than the UBI in subsidies is still cheaper than paying everyone the UBI (I assume the tax take is equivalent in both cases). But if the UBI goes to all adults (or all voters, or even all citizens) it will be significantly more expensive. It’s easy to forget how few people work with “5% unemployment” (similar to how few people vote with “universal suffrage”).
“Tourism is responsible for 8% of global greenhouse emissions….”
Tourism globally has now crashed; oil consumption and price has crashed; ocean shipping (the largest 15 ships of which emit as much ghg globally as all the ice powered cars) has crashed… What’s left? Commerce and industrial activity are way down globally, if not shut down already. I suspect coal and gas burning for electrical power generation and other industrial applications would also be well down, and as a consequence those ghg emissions would also be markedly down globally (just what proportions of electricity and fossil derived electricity are usually consumed by the industrial/commercial and the residential sectors? And now with people confined to home burning up their intertubes adding to the usual hefty proportion of electricity consumed by the internet globally?)
Overall ghg emission levels (other than fugitive gas, I suspect) must have currently dropped remarkably. The emission levels of the related anthropogenic aerosols that find their way to the highest altitudes must also have dropped dramatically. The skies in many places are clearing, are clearer than has been seen in decades. How clear, and for how long?
Those anthropogenic aerosols in the high atmosphere responsible for holding global averaged temperature down currently by more than one degree Celsius will precipitate out in around three months… What will the knock-on effects of the sudden consequent rise in global temperature be? Will the temperatures over Australia, for example, rise by an averaged one degree, or by much much more.
Will we see Guy McPherson’s prediction of consequent wars, and ultimately global ecological, agricultural, civilizational, and population collapse leading to an all encompassing extinction event come to pass?
Only three months, or thereabouts to wait and see. Morituri te salutant. Yes, strap in anyway, coz hopefully the terminal crash won’t be all terminating..
Morrison’s “solution” is convoluted.
Michael Sukker on Q&A has just advised a questioner to maintain an application for the dole while an application for the wage subsidy is also processed. We are going to see people who will end up with multiple payments and a Centrelink debt. Whose fault will that be?
Another questioner highlights that the advice being given to small business will land them in trouble with the Fair Work Commission.
Another questioner asks how does one claim the wage subsidy if they have a small number of work hour with multiple employers.
A panelist laments that others will fall through the cracks and experience extreme hardship – “but don’t worry the government will crank up more support down the track”
Other workers, who are paid cash will miss out.
Problem is that Morrison sees some people more worthy of support than others which is why we don’t have a single universal payment for all people earning under a certain amount.
I would recommend examining the James Boyce article published in The Monthly called “The Devil and Scott Morrison”. https://www.themonthly.com.au/issue/2019/february/1548939600/james-boyce/devil-and-scott-morrison
The comments about refugee suffering being “part of God’s plan” and that in the Pentecostal war against Satan some people cannot be saved have some real resonance with Morrison’s attitude to Coronavirus itself and how he fights it.
Morrison’s world view is not economics, it is something more disturbing.
I liked this sentence: “Pentecostalism is … the perfect faith for a conviction politician without convictions.”
I read that as “without real world convictions”.