THREAD: The Australian government’s announcement of a huge program to support wage payments by employers through the coming COVID-19 recession is important, and will significantly moderate the employment and income consequences of the pandemic...2
The government has reversed its initial opposition to the concept. This is a tribute to the effective lobbying and organising of many stakeholders, in particular the efforts of the ACTU @unionsaustralia ...3
Unlike other countries which will subsidise wages on a proportional basis (eg. 80% in the UK), this scheme features an unusual flat-rate payment structure. Businesses will receive the same flat amount ($1500/fortnight) for each supported worker...4
No matter how much a worker earned before the crisis ($100/wk?), or how many hours they worked (5 hrs/wk?), their employer will receive the same amount for each: $1500/fortnight. For millions of workers, that means their employer will receive more than they actually earned...5
For many others (particularly higher-wage full-time workers), the effective rate of subsidy will be low: $1500/fortnight is just over half of the median full-time weekly wage. And it’s an even lower share for higher-wage workers (its 39% for someone earning $100,000/yr) ...6
Therefore, this is effectively a lower rate of wage subsidy than is being applied in other countries. The UK’s plan is 80%; Netherlands up to 90%; Denmark up to 90%; Canada 75%; Ireland 70%; South Korea 70% ...7
This flat-rate structure could lead to many unintended consequences. Details of the program rules and administration are yet to be announced, but here are some initial questions and concerns ...8
For example, an employer with many part-time workers, each working short shifts, could choose to consolidate shifts across a smaller number of workers. That way they extract more hours of work for each $1500 payment ...9
That would undermine the goal of preserving as many jobs as possible...10
Employers might also press higher-wage workers to accept jobs at the new $1500/fn threshold. The govt says vaguely that “prevailing workplace arrangements” should continue to apply, but isn't explicit that wages can't be cut. Many employers will try to renegotiate wages down...11
Even after the 6 month program has ended, employers may continue using that $1500/fn rate as a “new normal,” likely citing financial hardships and uncertain economic conditions, and ask workers to continue to accept it...12
Employers seem to have full freedom in choosing whether to apply for the subsidy or not. They will likely also be able to choose which employees they want to claim subsidies for: by location, by department, even by individual...13
The government money would then be used to subsidise and retain only those employees which the employer wants to retain. This will likely lead to ‘cherry-picking’ as employers use the program to wean their staff...14
Allowing employers to decide which workers benefit from a publicly-funded income support program is a risky precedent. Workers for whom employers do not make an application will then be pushed onto overloaded Centrelink...15
The requirement that casual workers must have been continuously employed with their current employer for at least 12 months is likely to exclude a majority of Australia’s 2.6 million casual workers...16
Most casual workers experience interruptions in employment history due to seasonal or other business fluctuations, or regular high job turnover in their sectors. This restriction will significantly limit access to this program...17
For all these reasons (employer cherry-picking, consolidating short-hour workers, excluding most casuals) we suspect that fewer workers will be covered by the scheme than the government prediction (6 million)...18
As the program’s details are being finalised, close attention should be paid to ensuring that:
1. All of the $1500 must be forwarded to *each* worker who qualifies (so employers can't skim subsidies that are excess to previous incomes). This will be hard to police. ...19
1. All of the $1500 must be forwarded to *each* worker who qualifies (so employers can't skim subsidies that are excess to previous incomes). This will be hard to police. ...19
2. Workers earning over $1500/fn (ie. most workers) must continue to receive their previous wage, and employers cannot cut wages while the program is in place...20
3. Workers should have rights to appeal if they feel they have been unfairly excluded from the wage subsidy. If employers refuse to apply for the subsidy for workers who would qualify, workers should be able to access the subsidy directly...21
We will be following further announcements related to the scheme closely, and will provide further analysis and comment as more information is available. See our website for more COVID-19 research & analysis: futurework.org.au #THEEND
