I have... some views about the JobKeeper scheme. Here in a thread. 1/13
This is a per-worker wage subsidy. @stanveuger and I called for a revenue-loss subsidy in our @FinancialReview op-ed on Wednesday, below. At that point the government had ruled it all out. I noticed some uncannily similar language in the presser. 2/13
afr.com/policy/economy…
afr.com/policy/economy…
This isn’t a bad second-best and much better than I expected. I was worried we’d subsidise firms without losses and thus increase their profitability. But the scheme makes some effort to target, limiting to firms with at least a 30-50% fall in revenue depending on turnover. 3/13
I was worried it was limited to full-time workers, but it also applies to part-time, long-term casual and self-employed workers. Which is great. It’s $1,500 per fortnight for 6 months. Firms are eligible for all workers employed on March 1, and must retain them throughout. 4/13
The package costs $130 billion, which is 12% of GDP over the 6-month period. That is very large. The government currently has $370bn in net debt, so this package alone will increase it by at least a third. So this line graph is going to jump by at least a third in 2019-20. 5/13 
But this is easily worth it. If we didn’t step in with support of this scale now, the recession would be so large and prolonged that net debt would increase by way more than a third. Acting now with bold fiscal support will help the budget over time. Journalists take note. 6/13
I think the flat per-worker subsidy is silly. The PM kept saying it’s “the Australian way”. And I guess it is the Australian way to do silly things. I can’t imagine it being due to ease of implementation. Because as I’ve shown it would be easy to just cover all of payroll. 7/13
This creates problems. On one hand they’re forcing firms to pay all workers at least the $1,500. So firms can’t use any amount above the normal wage to cover other expenses (as in the US). And there’s a stronger incentive to retain low-wage or part-time than other workers. 8/13
So you’re overcompensating for some workers and undercompensating for others. And firms who have a much bigger revenue drop than 30% will get the same subsidy as firms with a drop of exactly 30%. So it’s pretty crude and untargeted, so could have been much better designed. 9/13
There are perverse incentives generated by the thresholds. Firms need to have at least a 30-50% drop in revenue. There is an incentive to reduce true output to slip under the threshold, which will slow the recovery. There will also be gaming by delaying sales to slip under. 10/13
A bad feature is that it will make it hard for firms doing well and already struggling to attract workers (eg, supermarkets) to hire new workers. They will be trying to attract workers (some idle) in heavily subsidized jobs to unsubsidized ones. The shelves might stay bare. 11/13
I think it was a mistake to subsidize firms of all sizes. Only the banks are excluded. A simple calculation shows that as long as revenue drops by 50%, Qantas will get $100m a month for 6 months. I’d have preferred a case-by-case approach for large affected industries. 12/13
So it’s a mixed bag. I commend the size and scale. I’m glad they swallowed their pride and reversed course in the matter of a week. There’s lots to like. But a lot of it could have been better designed. And I’m not sure there’s much room to influence things at this point. 13/13
