Do we keep him on? As Josh Frydenberg’s employers, should Australians put Josh on JobKeeper? Or JobSeeker, which is only a few bucks less, after admin fees and tax? It is crunch time for Australia’s biggest rescue package. Michael West reports.
“Frankly, I think the banks should be publicly shamed,” declared Peter Dutton last week. “We’ve put in place a regime where they can offer that finance (for small business) and they should … The banks need to step up”.
Dutton’s bank lashing might have been construed in political circles as the ambitious Home Affairs minister having a crack at Scott Morrison and Josh Frydenberg for concocting a scheme which is, frankly, flawed.
Can the banks be blamed for failing to lend to businesses whose income has vanished overnight? As for processing 500,000 loan applications in the space of a few weeks … this is yet to be seen.
It is crunch time for JobKeeper, the centrepiece of the Government’s $300 billion coronavirus bailout. First payments are supposed to go out next week.
Design is the rub. The JobKeeper scheme requires employers to fill out a form for their employees. As we Australians are Josh Frydenberg’s employers, the question is, would we fill out the JobKeeper form for Josh? Or should we consign him to JobSeeker instead?
The six million Australians originally mooted for JobKeeper, looks like more than double those who may actually get it, according to latest reports. Same deal for business, with little over half those expressing interest, still in line for the scheme. It is fluid, JobKeeper applications have been extended, and the numbers will change.
For employees, JobKeeper is better than JobSeeker. It’s $1,500 a fortnight. But once tax is taken out ($192 of PAYG withholding) and if the employer charges a $100 admin fee as some are reported to have done, it’s $1,208 for JobKeeper versus $1,115.17 for JobSeeker. Many employers will not charge an admin fee which will have made it worthwhile for workers to have pursued the boss to fill out the form rather than hopping straight onto JobSeeker.
Still, there are gaping holes. It will prove overgenerous to some who were not paid $1,500 a fortnight anyway, while cutting more than a million casual and migrant workers out of the picture.
Designed for bosses, not workers
Do we sign the form for Josh? That depends on who you are. Many employers would keep Josh on their books because, as revealed here, the Treasurer has concocted a scheme which allows them to:
* keep their workers’ PAYG tax, rather than pass it on to the Tax Office,
* shed their staff without paying redundancy and other entitlements such as super, sick leave and long service leave,
* have the flexibility to engage them again, or not.
It also allows the Government the luxury of keeping millions of Australians out of its unemployment statistics, which will only include those on JobSeeker. Politically, it makes the job figures look good, even for April as it was backdated to early March.
One aspect of the package, which appears to have been hitherto ignored, is that it incentivises employers to keep their higher paid workers and jettison those on lower wages. Employers get to keep the tax you see, and better-paid workers pay more tax.
For a worker on $15,000 a year or less, no assistance is given. For a worker on more than $50,000, the employer picks up a monthly benefit of $800. Was the package deliberately designed this way? Redolent of former treasurer Joe Hockey’s famous remark, “Poor people don’t drive”, it seems to go to that notion that the Government doesn’t really like poor people.
#SME Bus & #NFP mth benefit for retaining 1 extra employee depends on e/ee’s salary:
Ann. Salary Mth benefit
$35k. $321#ausecon #ausbiz #auspol pic.twitter.com/oOHqLuWQZA
— 13foot7 (@13foot7) March 23, 2020
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Josh Frydenberg never quite explained why, why he went back to Treasury for more, or why the $125 billion subsequently became $130 billion.
The Treasurer told ABC Four Corners the other night that he pushed Treasury for more money when designing JobKeeper, but never quite said why.
DAVID SPEERS: Josh Frydenberg commissioned Treasury to come up with a costing for a wage subsidy.
JOSH FRYDENBERG: They came back to me with a series of options. One of the options that they put to me had an amount lower than a $1,500 amount.
DAVID SPEERS: How much?
JOSH FRYDENBERG: A few hundred dollars lower than the $1,500 amount. Bearing in mind the huge cost of such a broad based scheme. I said to them on that phone call, this was a break glass moment for the Australian economy. This was a time to give the Australian people a psychological boost and we had to stretch. We had to stretch as far as we could because we wouldn’t be able to have two bites at this. We had to put our best foot forward at the first instance, so they did some further work. Then they came back to me with the number. The initial number was $125 billion.
It would seem Frydenberg may have realised that, unless he made JobKeeper materially more attractive than JobSeeker it would suffer a low take-up as the hordes of newly jobless would opt for the latter, blowing out his monthly unemployment numbers and leaving workers estranged from their employers.
It also rendered the scheme more susceptible to rorters. Despite reports of rorting – and the inevitability that the scheme will be rorted – the take-up is now being mooted at far less than original estimates; that is, three million Australians rather than six million, according to Assistant Treasurer Michael Sukkar.
Whether this is “job well done” by Josh – as the Government will not be on the hook for far less than the touted $130 billion – is yet to be seen.
It is too early to judge the success of JobKeeper even if it costs only a fraction of estimates because the point of the scheme is not to save money but to save Australian businesses and protect the economy. It will only be in the aftermath of the coronavirus that Australians will be able to judge whether Josh should be on JobSeeker or JobKeeper.
Reports from business so far are divided. Many are saying the package has saved them.
As the crisis ramped up in late March, business faced an avalanche of costs. If they fired their workers to get costs down, they were in the gun for redundancy payments, long service leave, sick leave, superannuation payouts.
Jobseeker however allowed them to avert all these costs, lump them onto the national budget and be entirely flexible in whether to put workers back on once the crisis was over. Payments in arrears however, and the expectation that the banks would come to the party with small business loans to fund payroll, are significant issues.
“By no means perfect” is the way the Treasury Secretary Stephen Kennedy described the scheme earlier this week, indicating it remained a work-in-progress. The biggest hole in JobKeeper, from a social perspective, is that – of Australia’s 13.7 million workforce – it cuts out 1.1 million casual workers. Migrant workers are out too, so there are massive social challenges, challenges thankfully countervailed by the doubling of the pitiful Newstart allowance, now JobSeeker.
It is sadly ironic that the policy push for many years to deregulate the workforce, expediting the gig economy, has culminated in a rescue package which ignores this very sector of the workforce which the Government has encouraged to grow. Casuals don’t cost anything to sack. It is only those workers which cost business in entitlements – redundancies and so forth – which are covered, which reinforces the view that JobKeeper has been firmly designed in favour of economic rather than social outcomes, of saving businesses rather than workers.
Meanwhile, although so far spurned by some 400,000 businesses which had originally expressed interest, the scheme amounts to a large subsidy for many businesses. They are under no obligation legally to keep workers on when the scheme ends but enjoy optionality at the expense of taxpayers.
It will have saved many businesses already. Others whose customers disappeared and to whom the banks would not lend to cover their payroll, will not survive. The damage will not be evident for some time.
During the writing of this story, a contact called saying her accountant was urging her to get on JobKeeper as she was eligible. “But I’m doing okay. I’ve got two houses,” she said.
Another called yesterday, a student, saying his mates are rolling in it: “They were never paid anything like $1,500 a fortnight … now they get that as well as their other income”.
In the wash-up, it will emerge that this scheme has been rorted from pillar to post by people who don’t need it while some of the poorest among Australians have been, again, cut out of the gravy train.
The Government is tweaking it though, as Stephen Kennedy says. And to be fair, emergency rescue packages are never going to be perfect. There will inevitably be flaws. Yet the trickle-down ideology of a government seemingly keener to rescue business rather than people may come back to bite, particularly dragging the reluctant banks into the picture to make up payroll.
So, let’s fill out the JobKeeper form for Josh. We still have the option of letting him go when the virus is over.