JobKeeper: where is the package heading?

May 1, 2020
Australian $100 notes

On April 14, the federal Treasury revealed that, due to the COVID-19 pandemic, the government was preparing for the unemployment rate to double from around 5%, or go higher.

“Treasury expects the unemployment rate to rise to 10 percent in the June quarter from 5.1 percent … [but] In the absence of the $130 billion JobKeeper payment, Treasury estimates the unemployment rate would be 5 percentage points higher and would peak at around 15 percent.”

The June unemployment projection of 10% are those people destined for the government’s $1100 a fortnight JobSeeker program, colloquially referred to as “the dole”.

If Treasury’s projections are correct, and unemployment was to blow out to 15% in the June quarter without JobKeeper, this would total an extra 5% of unemployed workers that businesses would have been forced to retrench to keep their companies afloat during the economic crisis.

To avoid such high unemployment and excessive numbers accessing the dole, the government has brought in the $1500-a-fortnight JobKeeper program. Recipients will not feature in the unemployment figures.

The estimated 5% of workers destined to receive JobKeeper, rather than JobSeeker, amount to 700,000 workers according to the Australian Bureau of Statistics’ March unemployment figures.

A simple calculation shows that the weekly JobKeeper payment of $750 for 700,000 workers results in a costing of $525 million per week or $13.65 billion over the program’s six-month life.

Both the Prime Minister and the Treasurer claim that JobKeeper is aimed at 6 million workers. But, a simple calculation of their figures shows that JobKeeper’s $750 weekly payment total $4.5 billion a week, or $117 billion over 6 months.

Why is there such a massive discrepancy?

Why is the government budgeting its JobKeeper program on “6 million workers” while the projected unemployment rate without JobKeeper would be an extra 700,000 workers?

There are three possible explanations.

The first is that Treasury has underestimated the potential unemployment figures, which is doubtful. Treasury’s estimates are usually in the ball park. Its figures may show 1 million or even 1.5 million people would have been retrenched by the June quarter, however, due to means testing and waiting periods, only 700,000 workers would qualify for the dole. But even then, this figure is still nowhere near the 6 million workers that JobKeeper advertises it will reach.

A second explanation is that the $130 billion JobKeeper package is not going to be spent in its entirety. By the April 30 deadline, only around 500,000 businesses had signed up. The Treasurer had estimated some 900,000 companies would register. So, this is a possible explanation for part of the discrepancy.

A third explanation is that a vast majority of the package is heading into company coffers to pay for existing profit-making, working employees that would not have been retrenched without JobKeeper. The result: a $50 billion or maybe even a $100 billion dollar free handout to companies.

I am a union organiser in the manufacturing sector. One company where I organise has around 120 employees. It is applying for JobKeeper. It will claim JobKeeper payments for all its workers, including management employees, thereby subsidising its wages bill by $90,000 a week, totalling $2.34 million over six months.

Since March 1, around 25% of its workforce has been forced onto rotating schedules of annual leave, while the remainder continue to work making the business a profit.

Once the company receives JobKeeper and the employer receives $750 a week for each of their 120 employees, the temptation will be to slash its wages bill further by returning all 120 workers back to work, but reducing their hours, effectively making them part time employees.

The company will also receive $750 per week for every employee who took forced leave over the last month and for leave that the employees will take during the coming months of the JobKeeper program. Workers will not have their leave replaced.

I organise two other companies facing similar scenarios and a fourth that has increased its production but will still qualify for JobKeeper because it has closed some of its interstate centres. Those workers at the closed down centres should at least receive JobKeeper.

Many union organisers in manufacturing have similar stories.

The government is gearing up for an austerity program against workers and the community to recoup the money it spent on JobKeeper.

I hope my second explanation – that the JobKeeper package won’t be spent in its entirety – is correct. But I fear the companies will line up their wheelbarrows and fill them to the brim until the package is depleted. Time will tell.

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