The Reserve Bank estimates another 700,000 workers would have lost their jobs during the first six months of the coronavirus-induced recession if the federal government had not introduced the $101.3 billion JobKeeper scheme.
A research paper from RBA economists James Bishop and Iris Day released on Monday found the wage subsidy scheme, introduced at the height of the pandemic to help businesses pay staff, supported 3.5 million people at 900,000 businesses between April and July 2020. They estimated that of these people, one in five would have been made unemployed without the government assistance, pushing the jobless rate 5 percentage points higher to about 12 per cent.
Reserve Bank research shows one in five JobKeeper recipients would be out of work without the scheme.Credit:Louie Douvis
"We find that JobKeeper played an important role in cushioning the decline in employment over the first half of 2020," the report said.
"The actual fall in employment over the first half of 2020 was 650,000. As such, our estimates imply that overall employment losses would have been twice as large over this period without JobKeeper."
The first six months of the scheme cost $70 billion and the RBA found, on the assumption a similar number of roles were saved over the full period, the cost of saving each job was $100,000.
This compared favourably to other countries with wage subsidies, including the United States, the researchers said. There are some significant differences between global schemes introduced during the pandemic and the paper did not measure the costs and benefits of what it described as one of the most significant labour market interventions in Australian history.
JobKeeper, introduced in early 2020, gave employers $1500 a fortnight per eligible worker from the end of March to help keep them paid and connected to their jobs as swathes of the country was locked down to limit the virus' spread. The scheme has been extended several times, at lower rates, to help businesses as the economy starts to re-open.
Full-time workers' payments were cut to $1200 a fortnight from September 28 and will step down to $1000 a fortnight from January 4 until the end of March. Part-time workers' payments drop to $750 and $650 over the same two periods. The RBA report did not consider the effects of the scheme after August 2020.
The latest official unemployment data recorded a 7 per cent jobless rate for October with 961,000 people out of work, however, the number of those in paid work increased and the participation rate jumped. This was an improvement from a 7.5 per cent unemployment rate recorded by the Australian Bureau of Statistics in July when more than 1 million people were out of work at the peak of the crisis.
"Policymakers should not assume that the short-term effects of the scheme will necessarily persist," the RBA paper warned. "Indeed, the international literature suggests that wage subsidies, if maintained too long, can have adverse effects on incentives and impede the re-allocation of labour."
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