Bills Digest No. 23, 2020–21
PDF version [700KB]
Matthew Thomas
Social Policy Section
Geoff Gilfillan
Statistics and Mapping Section
6
November 2020
Contents
Purpose of
the Bill
Background
Committee
consideration
Policy
position of non-government parties/independents
Position of
major interest groups
Financial
implications
Statement of
Compatibility with Human Rights
Key issues
and provisions
Concluding
comments
Date introduced: 7
October 2020
House: House
of Representatives
Portfolio: Treasury
Commencement: The
day after Royal Assent
Links: The links to the Bill,
its Explanatory Memorandum and second reading speech can be found on the
Bill’s home page, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at November 2020.
Purpose of
the Bill
The purpose of the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 (the Bill) is
to amend the Coronavirus
Economic Response Package (Payments and Benefits) Act 2020 (the Payments
and Benefits Act) to enable payments to be made to help improve
people’s prospects of gaining paid employment or to increase workforce participation,
between 7 October 2020 and 6 October 2022.
The Bill also allows for the establishment of a scheme
related to one or more of the payments intended to help improve people’s
prospects of gaining paid employment or increasing workforce participation.
Background
The Bill seeks to give effect to the JobMaker Hiring
Credit that was announced as part of the
2020–21 Budget.[1]
The details of any scheme created under the Bill will be contained in rules rather
than in the Payments and Benefits Act. What the Bill enables is broader
than the measure announced in the Budget.
The JobMaker Hiring Credit is a wage subsidy program for
people up to 35 years of age. The Government expects the measure to cost ‘$4.0 billion
over three years from 2020–21’.[2]
Under the JobMaker Hiring Credit, eligible employers who
are able to demonstrate that a new employee is additional (by proving a higher
employee headcount and payroll) will receive a credit of up to $200 per
week for employees aged 16 to 29 years and $100 per
week for an employee aged 30 to 35 years.[3]
The credits, which are claimed quarterly in arrears by the employer, are paid
for a period of ‘up to 12 months’.[4]
In order to qualify for a credit, a job seeker must have worked ‘a
minimum of 20 hours per week, averaged over a quarter’, and have
been in receipt of a working age income support payment for at least
one month out of the three months prior to their being hired.[5]
Job seekers are able to be employed on a permanent, casual or fixed-term basis.[6]
Treasury estimates suggest that the JobMaker Hiring Credit
will support around 450,000 positions for young people, resulting in around
45,000 additional jobs.[7]
Further details on the JobMaker Hiring Credit are set out
in the Government’s fact sheet and the Treasury submission to the Senate
Committee inquiry into the Bill.[8]
The stated objective of the JobMaker Hiring Credit is to
help ‘accelerate growth in the employment of young people during the
COVID-19 recovery. This will improve their economic, health and social outcomes
and reduce the scarring from long term unemployment’.[9]
Essentially, the JobMaker Hiring Credit seeks to create additional jobs and
reduce the risk of young people becoming dependent on income support by
providing an incentive to employers to bring forward their recruitment
decisions and fill new positions with young people.[10]
The targeting of the JobMaker Hiring Credit towards young
people is also in recognition of the fact that this group has been
disproportionately affected by the impact of the COVID-19 pandemic, compared
with other age groups.
Youth employment and unemployment,
post-COVID-19
People in younger age groups have been the most affected
by COVID-19, with larger decreases in employment and bigger increases in
unemployment than other age groups. This is in large part because the youth
labour market is characterised by higher levels of employment in service
industries that require close interaction with consumers. It is these
businesses that have been hardest hit by the COVID-19 restrictions.
Employment for people aged 25 to 34 years fell by 157,300
(or 5.1 per cent) between March and September 2020 while employment for people
aged 15 to 24 years fell by 149,600 (or 7.7 per cent). There have been signs of
a modest recovery in employment for those aged 15 to 24 years more recently
with an increase of 31,600 in the two months to September 2020. However, there
are fewer signs of improvement for those aged 25 to 34 years (up 5,400). See
Chart 1.
Total employment fell by 425,100 or 3.3% in the six months
to September.
Chart 1—change in employment
by age—March to September 2020
Source: ABS, Labour Force,
cat. no. 6202.0, Table 22, seasonally adjusted
People aged 25 to 34 years recorded the biggest increase
in unemployment between March and September 2020 (up 78,500 or 50.9 per cent)
with only a very small decline (of 2,600) in the most recent two months. Young
people aged 15 to 24 years experienced the next biggest increase in
unemployment (up 47,600 or 18.7 per cent) in the six months to September 2020
but a substantial fall in unemployment for this group has occurred in the past
two months (at 41,300). See Chart 2.
Total unemployment reached just over 1 million in July 2020
but has since fallen to 937,400 in September. Total unemployment is up by
221,600 or 31.0 per cent since March.[11]
Chart 2—change in
unemployment by age—March to September 2020
Source: ABS, Labour Force,
cat. no. 6202.0, Table 22, seasonally adjusted
People aged 15 to 24 years experienced the largest
increase in their unemployment rate (up 2.9 percentage points to 14.5 per
cent) followed by those aged 25 to 34 years (up 2.6 percentage points to 7.3
per cent). See Chart 3.
Chart 3 —change in unemployment
rates by age—March to September 2020
Source: ABS, Labour Force,
cat. no. 6202.0, Table 22, seasonally adjusted.
Committee
consideration
The Bill has been referred to the Senate Economics
Legislation Committee for inquiry and report by 6 November 2020.[12]
Policy
position of non-government parties/independents
Australian Labor Party (Labor)
Labor has criticised the JobMaker Hiring Credit scheme on a
number of grounds.
Shadow Employment Minister, Brendan O’Connor, has
expressed concern over the lack of detail—and, in particular, the lack of
safeguards—in the Bill. Relatedly, Mr O’Connor has criticised the
open nature of the Bill, which allows for the Treasurer to create new
employment schemes that could result in the Government ‘directing
payments to specific and politically favourable companies, donors or
electorates’.[13]
Another issue raised by Mr O’Connor has to do with
the interaction between the JobKeeper subsidy and the JobMaker Hiring Credit.
He appears to be concerned that, following the removal of the JobKeeper subsidy,
many businesses will not be in a position to increase their employee headcount
above previous levels and thus gain access to the hiring credit.[14]
Mr O’Connor has insisted that Labor needs to see
further details relating to the operation and integrity of the scheme,
including details of safeguards to ensure against older workers being replaced
by younger, subsidised workers, and Treasury modelling of its likely impacts.[15]
The Greens
The Australian Greens are highly critical of the JobMaker
Hiring Credit.
Adam Bandt has argued that, under the scheme, taxpayer
monies that could be directly invested in creating jobs and lifting wages will
instead be used to part-pay large corporations’ wage bills.[16]
Mr Bandt has also criticised the lack of protections and
safeguards in the Bill.[17]
Position of
major interest groups
Business groups
Judging by submissions to the inquiry into the Bill and
media statements, many larger Australian businesses and business representative
organisations are, on the whole, supportive of the JobMaker Hiring Credit.[18]
For example, the Australian Chamber of Commerce and
Industry (ACCI) has stated that ‘as a key policy of the Federal Budget,
the JobMaker Hiring Credit is a welcome, practical measure to help address
rising youth unemployment which has been exacerbated by the COVID
pandemic’.[19]
ACCI chief executive James Pearson is said to have stated that the JobMaker
Hiring Credit would ‘tip the balance for many employers in favour of
putting someone on … wage subsidies will have a particular impact in
industries where restrictions are easing but growth is slow or inconsistent.
Accommodation and food services firms have shed around 140,000 jobs since
March. They will need to hire staff as more restrictions are eased’.[20]
Business support for the hiring credit is not universal,
however, with the Council of Small Business Organisations Australia (COSBA)
having expressed a number of concerns with the scheme from the perspective of
small and medium sized enterprises (these are canvassed in the Key issues
and provisions section below).[21]
Unions
Australian unions have highlighted a number of perceived concerns
with the Bill and the JobMaker Hiring Credit scheme.
Chief among these are that the scheme’s safeguards
are insufficient to ensure against employers ‘rorting’ the scheme,
and are to be specified in rules rather than the Bill, and that the scheme, as
it is currently configured, will result in an increase in part-time and
insecure work.[22]
Further details of Australian unions’ positions are outlined in the Key
issues and provisions section, below.
Australian Council of Social
Service (ACOSS)
ACOSS is broadly supportive of the JobMaker Hiring Credit.
It has recommended a number of changes to the scheme, the most substantive of
which are a proposal to target credits based on duration of unemployment and to
increase subsidies for positions offering longer hours.[23]
For further details of ACOSS’ position, see the Key issues and
provisions section.
Financial
implications
The Explanatory Memorandum estimates that the JobMaker
Hiring Credit program enabled by the Bill will involve a cost of $4.0 billion
over the 2020–21, 2021–22 and 2022–23 financial years.[24]
Statement of Compatibility with Human Rights
As required under Part 3 of the Human Rights
(Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed
the Bill’s compatibility with the human rights and freedoms recognised or
declared in the international instruments listed in section 3 of that Act. The
Government considers that the Bill is compatible.[25]
Parliamentary Joint Committee on
Human Rights
The Parliamentary Joint Committee had no comment on the
Bill.[26]
Key issues
and provisions
The Payments and Benefits Act was legislated primarily
to enable the provision of payments under the JobKeeper Payment scheme.[27]
The Bill essentially extends the payments that can be made under the Payments
and Benefits Act so as to give effect to the JobMaker Hiring Credit scheme.[28]
Item 3 inserts proposed subsection 7(1A),
the effect of which is to enable the Commonwealth to make rules that provide
for payments to help improve people’s prospects of gaining paid
employment or to increase workforce participation during a relevant period.
Item 2 of the Bill inserts the definition of the term relevant period
into section 6 of the Payments and Benefits Act. This will be the period
between 7 October 2020 and 6 October 2022. Proposed subsection 7(1A) provides
for the making of rules about the establishment of a scheme related to one or
more of the payments enabled by the Bill.
Lack of program detail and
protections in the Bill
Some stakeholders have expressed concern about the lack of
detailed information on the JobMaker Hiring Credit, and safeguards against its
misuse by employers, in the Bill.
According to the Explanatory Memorandum:
Rules will be made by the Treasurer to establish the JobMaker
Hiring Credit scheme, including setting out:
- which
employers qualify for the payment;
- the
employees to which payments relate;
- the amount
payable and timing of payments; and
- the
obligations for recipients of the payment.[29]
The rules would take the form of a legislative instrument.[30]
Section 42 of the Legislation Act
2003 allows for the disallowance of legislative instruments by
Parliament. A legislative instrument can be subject to disallowance if either a
Senator or Member of the House of Representatives moves a motion of disallowance
within 15 sitting days of the day that the legislative instrument is tabled.
The motion to disallow must be resolved or withdrawn within a further 15
sitting days of the day that the notice of motion is given. However, if there
is no notice of motion to disallow a legislative instrument, then there is no
debate about its contents.
The Scrutiny of Bills Committee examines each Bill
introduced into the Parliament with regard to, among other things,
‘whether any delegation of legislative powers is appropriate’ and
‘whether the exercise of legislative powers is subject to sufficient
parliamentary scrutiny’.[31]
The Committee has not yet reported on the Bill.
The Government appears to have chosen to include program
rules and requirements in a legislative instrument rather than the Payments
and Benefits Act itself largely as a means to increase its ability to
respond to changing circumstances. According to the Treasury submission to the
inquiry into the Bill, ‘implementing the policy design through rules will
provide flexibility to respond to any unintended consequences, and a rapidly
changing labour market, while still allowing consultation to ensure that the
rules will work as intended’.[32]
The question is: has an appropriate balance been struck
between the need to allow for flexibility in the scheme and the need for
Parliamentary oversight and strong protections against potential employer
exploitation?
Issues associated with wage
subsidies
Perhaps the main issue associated with wage subsidy
programs is that they can potentially have distortionary displacement effects.
For example, subsidies may be associated with ‘deadweight effects’,
as employers hire job seekers with a wage subsidy that they would have hired
anyway.
Another problem is that wage subsidies can result in
worker substitution, with job seekers eligible for the subsidy being hired at
the expense of existing workers and other job seekers who are not eligible for
a subsidy. Sometimes wage subsidies are used with the primary objective of
achieving equity objectives and in these instances the substitution effect is
less of a concern. However, in the case of the JobMaker Hiring Credit, the key
objectives are additionality—the creation of new positions—and
ensuring that young people do not remain on income support.
A further issue with wage subsidies is that they may lead
to employers who do not take advantage of wage subsidies losing business to
those that do.
A number of studies have found positive employment effects
for youth wage subsidies, but this is very much contingent on the design and
implementation of the programs.[33]
If a wage subsidy program is to yield positive outcomes—in this case the
creation of additional, lasting employment at a reasonable cost to
government—then it is important that the program should be well designed.
According to labour market economist, Jeff Borland, among
other things, wage subsidy programs need to:
- have
subsidies that are matched to the state of the macro-economy (typically with
higher subsidies in worse economic conditions)
- target
those job seekers who are hardest hit in times of economic downturn (in this
case, primarily young people who, as a result of their lack of employment
experience, often have lower levels of initial productivity)
- be
of sufficient duration to ensure that job seekers have an opportunity to gain
work experience and skills and demonstrate their value to employers
- be
structured to safeguard against potential employer exploitation
- impose
minimum and maximum hours per week for which a subsidy would be paid and
- be
as simple as possible to administer so as to maximise employer take-up.[34]
Are program safeguards sufficient
to protect against worker substitution?
In its submission to the inquiry into the Bill, Treasury has
provided details of JobMaker Hiring Credit scheme features that are calculated
to ensure the scheme is not misused by employers, along with their rationale.
The main features are:
- additionality
criteria under which employers will be required to demonstrate that their staff
head count and total payroll exceeds a baseline amount at 30 September 2020
(these criteria are intended to mitigate against the possibility of worker
substitution)
- a
requirement that the job be at least 20 hours a week averaged over a quarter
and the spreading of the credit across 12 months rather than providing it
up-front (to counter the risk of employers exploiting the scheme)[35]
- limiting
eligible employees to those who have recently been on income support (to
counter the possibility of businesses classifying independent contractors or
family members as employees to claim the credit)
- requiring
businesses to hold an Australian Business Number (ABN), be up to date with tax
lodgement obligations, be registered for Pay As You Go (PAYG) withholding and
reporting employee payroll information to the Australian Taxation Office (ATO)
through Single Touch Payroll (STP)(to limit the risk of new businesses making
non-genuine claims)
- not
allowing new businesses to claim for their first employee (that could
potentially be themselves)
- making
payments in arrears (to ensure that scheme requirements are met before credits
are paid) and
- use
of the STP system to claim credits and ATO data matching with Services
Australia.[36]
Treasury also notes that the Payment and Benefits Act
contains integrity rules[37]
that ‘authorise the Commissioner of Taxation to take action against
contrived arrangements entered into to gain the benefit of the JobMaker Hiring
Credit’, and that the unfair dismissal and general protections provisions
of the Fair Work
Act 2009 provide additional protections.[38]
The above protections are insufficient to allay the
concerns of some critics of aspects of the proposed scheme. A number of submissions
to the inquiry into the Bill have argued that the headcount and payroll
additionality tests are inadequate to safeguard against worker substitution.[39]
This is largely because, as Per Capita explains:
… because the stipulated minimum hours of employment to
qualify for the scheme are just 20 per week, an employer could retrench one
full time (40 hour per week) worker and hire two subsidised part-time or casual
workers on a marginally increased hourly rate and still meet the additionality
criteria under the scheme.[40]
Some commentators have proposed changes to the scheme that
could help to deal with this potential problem. For example, ACOSS has
recommended that hiring credits should be included when calculating a
business’s overall payroll, thereby reducing any ‘financial benefit
for employers from restructuring their workforce to take advantage of the
subsidy (without actually increasing the paid working hours of employees
overall)’.[41]
ACOSS has also recommended that integrity measures used to reduce the risk of
displacement in other wage subsidy programs should be included in the JobMaker
Hiring Credit scheme’s rules.[42]
The Australian Manufacturing Workers’ Union (AMWU)
has advocated that the scheme be amended to ensure that hours of employment for
existing workers must not be reduced by any employer seeking to access the
subsidy. It has also suggested that the problem of worker substitution could be
partly solved by removing the incentive for business to hire workers on 20
hours a week.[43]
Were such a change to be made then this would also help to address another
significant concern with the scheme; namely, that it will result in an increase
in insecure work.
Promotion of insecure work
In its submission to the inquiry into the Bill, Treasury
provides the rationale for the 20 hours per week on average requirement:
This seeks to increase the work experience level of someone
that was previously on income support, with a view to increasing their future
longer term employment opportunities. This level of hours seeks to strike a
balance between providing that opportunity, lifting overall employment
opportunities, and making the subsidy accessible and attractive to employers to
take on employees that may have less experience.[44]
In its current form, the hiring credit could indeed
maximise employment opportunities for young unemployed people and reduce the
number of income support recipients. However, a number of commentators have
argued that this would be at a significant cost to many young workers, as well
as to overall employment conditions, and, ultimately, the economy as a whole.
Under the scheme as it stands there is an incentive for
employers to hire part-time rather than full-time workers as a means to
maximise the number of credits claimed and reduce labour costs. This, some
argue, will result in an increase in already high levels of part-time and
insecure work, especially among young people.
For young workers in low paid jobs or to whom junior rates
apply, the Australian Council of Trade Unions (ACTU) has expressed the concern
that 20 hours a week of work will provide insufficient income to cover basic
living expenses.[45]
Per Capita has argued that by encouraging the creation of insecure, casual
employment, the scheme’s design will ‘reduce the prospect of the
creation of permanent full-time jobs, which our economy desperately needs to
lift wages and productivity’.[46]
A number of proposals have been made for changes to the
scheme that, it is argued, would help to create good quality jobs and an
inclusive and sustainable recovery.
The AMWU has recommended that the scheme should be amended
to pay higher credits to employers that offer good quality jobs—that is,
jobs that are full- or part-time rather than casual or contract employment,
well remunerated and ongoing. It has also suggested that the higher rates of
subsidy could be paid to encourage improved employment conditions in industries
that have traditionally relied on temporary visa workers, and to attract
private sector investment in areas that are likely to drive future
productivity.[47]
ACOSS has similarly argued that hiring credits—along
with all other wage subsidies—should be doubled for positions averaging
30 hours a week or more. It argues that this change could be achieved
‘without imposing excessive administrative burdens on employers or the
ATO’, given that ‘the scheme already requires information on
average hours worked to enforce the minimum threshold of 20 hours a
week’.[48]
Per Capita has suggested that the incentive for employers to hire part-time and
temporary workers could be reduced by reserving at least 60 per cent of the
hiring subsidy ‘to apply only to new permanent part- or full-time jobs’,
and by tapering the scale of the remaining 40 per cent of the subsidy according
to the number of hours worked by subsidised employees.[49]
The Grattan Institute has proposed as an alternative to
the JobMaker Hiring Credit a generalised incremental payroll rebate. Such a
rebate would subsidise any increase in a business’s payroll expenditure
by allowing a percentage of expenditure rebate on incremental payroll growth
above a baseline point in time. As such, it would ‘encourage expansion of
hours worked by existing staff, and would not bias job creation towards
part-time instead of full-time roles’.[50]
Professor Jeff Borland has pointed out that such a scheme could result in the
subsidising of increased wages and not necessarily increased hours or numbers
of people employed.[51]
As such, it would not provide the same incentive to hire new employees that a
measure like the JobMaker Hiring Credit does.
Discrimination against older workers
and job seekers
A majority of submissions to the inquiry on the Bill acknowledge
that young people have been particularly hard-hit by the COVID-19-related
recession, and that, based on the experience of past economic downturns, they
are likely to suffer the most from long-term consequences should unemployment
remain at current high levels.
Nevertheless, a number of commentators have pointed out
that a significant number of older Australians are also unemployed, and that
they, too, are a vulnerable group in the labour market.[52]
This is because, among other things, older people typically experience greater
difficulty than younger people in re-entering employment once they become
unemployed.[53]
As it stands, the JobMaker Hiring Credit scheme is likely
to benefit young people at the expense of older job seekers. It offers an
obvious incentive to hire younger job seekers rather than older job seekers.[54]
A solution to the bias inherent in the scheme would be to
remove the age limit for the hiring credit, and this has been recommended by a
number of stakeholders.[55]
However, such a change would inevitably undercut the main objective of the
scheme; namely, the creation of new jobs for younger workers who would
otherwise struggle to gain employment and who are the most likely to suffer
from the scarring effects of unemployment.
While it argues for the retention of some targeting
towards young people (young people aged under 25 years who have been unemployed
six months or more), ACOSS has recommended that the hiring credit should also
be made available to all long-term unemployed job seekers (those unemployed for
12 months or more). Alternatively, it has suggested that the hiring credit
could be targeted at young people under the age of 35 years and unemployed for
six months or more, with existing wage subsidies being expanded through an
uncapped subsidy pool.[56]
Likelihood of JobMaker Hiring
Credit success
The hiring credit is intended to put businesses in a
position to hire additional young employees. A key issue determining whether or
not they are able to achieve this is if employers are able to pay wages before
they receive the subsidy or are uncertain if prospective employees will reach
the 20 hour benchmark.
Another important issue in determining the success or
otherwise of the JobMaker hiring credit has to do with the trade-off between
ensuring that additional jobs are being created (increasing administrative
requirements) and maximising take-up of the subsidy.
The ACCI has argued that the less onerous eligibility
criteria of the JobMaker Hiring Credit, when compared to the Youth Bonus wage
subsidy, should see stronger take up of the hiring credit.[57]
However, while the hiring credit may be relatively
appealing to large businesses, some smaller businesses may baulk at the
administrative requirements associated with the scheme.[58]
Judging by submissions to the inquiry on the Bill from the Council of Small
Business Organisations Australia (COSBOA) and the Institute of Public
Accountants (IPA), aspects of the scheme such as the quarterly reporting and
additionality requirements may deter some small businesses from taking up the
hiring incentive, without additional incentives.[59]
COSBOA claims that feedback from its member organisations:
… indicates that the Hiring Credit wage subsidies are
too low. Given the apparent complexity of the Hiring Credit administration
process, for small businesses in particular the subsidy amounts are
insufficient to motivate additional hiring. If the Government’s goal is
to motivate large-scale additional hiring by Australian businesses, to reduce
unemployment by 450,000, COSBOA believes the subsidy rates will need to be at
least 50% higher than the proposed amounts.[60]
ACOSS has proposed a potential means of both increasing
JobMaker Hiring Credit take-up and reducing administrative costs to businesses.
This would involve the use of a labour market intermediary (between employer
and employee) to ‘help improve the matching of prospective employees and
employers, offer any support required, and help preserve the integrity of the
scheme’.[61]
As ACOSS sees it, the use of intermediaries (such as jobactive employment
service providers) could provide the ‘best of both worlds’ by
combining ATO administration of the subsidy (including handling applications
from employers) and use of intermediary organisations to recruit people on
income support payments as potential employees and to offer any support needed
by employers or employees to improve the prospects of a successful
placement’.[62]
Concluding
comments
Young people are typically harder hit by economic
downturns than are mature age people, and the COVID-19-induced recession is no
exception.
In this context, it is clear that something needs to be
done to tackle the immediate problem of youth unemployment, and the possibility
that it may become long-term.
Wage subsidies can help to encourage the hiring of
disadvantaged job seekers by firms, but this is highly dependent on the state
of the economy and the design and execution of wage subsidy programs.
In the case of the JobMaker Hiring Credit, for which a key
objective is additionality, a balance needs to be struck between protecting
against worker substitution and ensuring that administrative requirements are
not so onerous as to discourage businesses from taking up credits.
To the extent that the JobMaker Hiring Credit scheme is
specifically targeted at young people, it will, by definition, disadvantage
older job seekers, to some extent.
A number of submissions to the inquiry into the Bill have
made suggestions and proposed changes that could enable the scheme to better
achieve its objectives and encourage employers to offer workers more hours.
[1]. See
Australian Government, ‘Part 2: Expense
measures’, Budget measures: budget paper no. 2: 2020–21,
p. 162.
[2]. Ibid.
[3]. Ibid.
[4]. Ibid.
[5]. Ibid.
Working age payments include the JobSeeker Payment, Youth Allowance (other) and
Parenting Payment.
[6]. JobMaker
hiring credit, fact sheet, n.d., p. 3.
[7]. Senate Economics Legislation
Committee, Official committee Hansard, 26
October 2020, p. 56; Treasury, Submission
to the Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
[Submission no. 14], 23 October 2020, pp. 4–5. This is in
line with some estimates of the effectiveness of wage subsidies in general.
Based on the findings of a survey of employers who had made use of wage
subsidies under the Job Services Australia wage subsidy program, the Department
of Employment, Skills, Small and Family Business calculated that the subsidies
had resulted in an increase in additional jobs of 10.6 per cent. Department of
Employment, Skills, Small and Family Business (DESSFB), The evaluation of Job Services Australia 2009–2012, DESSFB, [Canberra], n.d., p. 148.
[8]. Australian
Government, Budget 2020–21, JobMaker
hiring credit, fact sheet, n.d.; Treasury, op. cit.
[9]. JobMaker
hiring credit, fact sheet, n.d., p. 1.
[10]. In
support of the JobMaker Hiring Credit Prime Minister Scott Morrison has argued
that ‘youth unemployment sets people up for a life of welfare dependency
… An Australian starting out their working life on welfare is a sentence
of disengagement from Australian life. And I don’t want to see any young
people start out their working life on welfare. I want them in a job. I know
their parents want them in a job. I know their grandparents want them in a
job’. S Morrison (Prime Minister), Transcript,
press conference, Australian Parliament House, ACT, media release, 8
October 2020.
[11]. Australian
Bureau of Statistics (ABS), Labour
Force, cat. no. 6202.0, ABS, Canberra, 2020.
[12]. The
terms of reference, submissions to the Senate Economics Legislation Committee
and the Committee’s final report (when published) are available on the inquiry
homepage.
[13]. B
O’Connor, ‘Second
reading speech: Economic Recovery Package (JobMaker Hiring Credit) Amendment
Bill 2020’, House of Representatives, Debates, (proof), 19
October 2020, p. 120.
[14]. Ibid.,
p. 121.
[15]. Ibid.,
pp. 121–122.
[16]. A
Bandt, ‘Second
reading speech: Economic Recovery Package (JobMaker Hiring Credit) Amendment
Bill 2020’, House of Representatives, Debates, (proof), 19
October 2020, p. 135. A certain amount of deadweight loss—with subsidies
being paid for jobs that would have been achieved in their absence—is
inevitably associated with wage subsidies. According to Department
of Employment, Skills, Small and Family Business analysis of Employer
Incentives Survey 2011 results, 31.9 per cent of wage subsidies paid out under
the Job Services Australia wage subsidy program were
deadweight. DESSFB, op. cit.
[17]. Bandt,
‘Second reading speech’, op. cit., p. 136.
[18]. Woolworths
is reported to have indicated that it does not intend to participate in the
JobMaker Hiring Credit program. Its stated reasons for this decision are that,
firstly, the company does not believe it would be appropriate to claim the
assistance given its record sales during the COVID-19 pandemic, and, secondly,
it does not wish to undercut existing employees’ hours through the hiring
of subsidised workers. Coles chief executive, Stephen Cain, is said to have
indicated that Coles intends to make use of the subsidies. D Powell, ‘Woolies
plays fair and opts out of JobMaker scheme’, The Sydney Morning
Herald, 15 October 2020, p. 33.
[19]. Australian
Chamber of Commerce and Industry (ACCI), Submission
to the Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
[Submission no. 7], October 2020, p. 1.
[20]. G
Chambers and J Stensholt, ‘Employers
vow to hire more staff’, The Australian, 8 October 2020, p. 1.
[21]. Council
of Small Business Organisations Australia (COSBOA), Submission
to the Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
[Submission no. 2], 19 October 2020, p. 1.
[22]. See,
for example, Australian Council of Trade Unions (ACTU), Submission
to the Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
[Submission no. 8], 23 October 2020, pp. 3–4.
[23]. Australian
Council of Social Service (ACOSS), Submission
to the Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
[Submission no. 10], 22 October 2020, p. 2.
[24]. Explanatory
Memorandum, Economic Recovery Package (JobMaker Hiring Credit) Amendment
Bill 2020, p. 3.
[25]. The
Statement of Compatibility with Human Rights can be found at page 9 of the
Explanatory Memorandum to the Bill.
[26]. Parliamentary
Joint Committee on Human Rights, Human
rights scrutiny report, 12, 2020, Australian Parliament, Canberra,
15 October 2020, p. 24.
[27]. Explanatory
Memorandum, Coronavirus Economic Response
Package (Payments and Benefits) Bill 2020, p. 3.
[28]. While
the Explanatory Memorandum claims (at page 7) that the amendments contained in
the Bill ‘are restricted to facilitating payments under the JobMaker
Hiring Credit scheme’, proposed subsection 7(1A) of the Bill explicitly
allows for ‘one or more’ kinds of payment to be made, and for the
establishment of a scheme to support such payments.
[29]. Explanatory
Memorandum, Economic Recovery Package (JobMaker Hiring Credit) Amendment
Bill 2020, p. 7.
[30]. The
Treasurer is authorised to make rule by legislative instrument by section 20 of
the Payments and Benefits Act.
[31]. Senate
Standing Committee for the Scrutiny of Bills, ‘Role
of the Committee’, Australian Parliament website.
[32]. Treasury,
op. cit., p. 2.
[33]. M
Caliendo and R Schmidl, ‘Youth
unemployment and active labor market policies in Europe’, IZA
Journal of Labor Policy, 5(1), 2016; J Kluve, ‘Youth
labor market interventions’, IZA World of Labor website, December
2014; J Kluve, S Puerto, D Robalino, J Romero, F Rother, J Stöterau,
F Weidenkaff and M Witte, Do youth
employment programs improve labor market outcomes? a systematic review’,
Discussion paper series, IZA, Germany, October 2016. Few evaluations of wage
subsidy programs measure the deadweight effects and worker substitution that
can be associated with wage subsidies.
[34]. See
J Borland, The
use of hiring credit wage subsidy programs after COVID-19, Labour
market policy after COVID-19, Committee for Economic Development of Australia,
September 2020. See also: J Borland, ‘Wage
subsidy programs: a primer’, Australian Journal of Labour
Economics, 19(3), 2016, pp. 131–144.
[35]. Wage
subsidies are typically structured with a relatively small up-front payment and
most of the subsidy paid at the conclusion of the payment period or paid in
regular instalments to avoid the possibility of employers taking on job seekers
for shorter periods while the subsidy is available, and then either putting
them off or reducing their hours when the subsidies have run out.
[36]. Treasury,
op. cit., pp. 5–6.
[37]. Section
19 of the Coronavirus
Economic Response Package (Payments and Benefits) Act 2020. The Explanatory
Memorandum, Coronavirus Economic Response
Package (Payments and Benefits) Bill 2020, p. 45 sets out the integrity rules
and how they apply to schemes under the Payments and Benefits
Act.
[38]. Treasury,
op. cit., p. 6.
[39]. See,
for example, ACTU, op. cit., pp. 3–4.
[40]. Per
Capita, Submission
to the Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
[Submission no. 11], October 2020, p. 8.
[41]. ACOSS,
op. cit., p. 15.
[42]. The rules would ‘require prospective
employers to undertake in writing not to displace existing employees with
subsidised workers, confirm that the position is an ongoing job lasting beyond
the subsidy period, and promptly notify the ATO if the employment ceases or
eligibility conditions (e.g. a minimum of 20 paid working hours a week, on
average) are no longer met; exclude from the scheme commission-based
employment, self-employment (independent contractors), subcontracted positions,
immediate family members of the employer; [and] establish a timely, accessible
and fair mechanism to investigate complaints and suspend or cancel and recover
wage subsidies in the event of a breach of the scheme’s requirements, or
of relevant Commonwealth or State/Territory laws (including employment
standards), and where appropriate exclude those breaching these requirements
from the scheme’. Ibid., pp. 15–16.
[43]. Australian
Manufacturing Workers’ Union (AMWU), Submission
to Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
[Submission no. 12], 23 October 2020.
[44]. Treasury,
op. cit., p. 5.
[45]. ACTU,
op. cit., p. 5.
[46]. Per
Capita, op. cit., p. 3.
[47]. AMWU,
op. cit.
[48]. ACOSS,
op. cit., p. 11.
[49]. Per
Capita, op. cit., p. 11.
[50]. Grattan
Institute, Submission
to the Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
[Submission no. 20], n.d., p. 16.
[51]. J
Borland, Evidence
to the Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
(proof), 2 November 2020, p. 5.
[52]. See,
for example, Council on the Ageing Australia (COTA), Submission
to the Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
[Submission no. 18], 23 October 2020.
[53]. Australian Law Reform Commission (ALRC), Access all ages—older workers and Commonwealth laws, final report, 120, ALRC, Sydney, 2013, p. 55.
[54]. This
is irrespective of whether employers lay off older full-time workers and
replace them with part-time or casual young workers in order to gain a subsidy
or subsidies.
[55]. See
ACTU, op. cit., p. 6, COTA, op. cit., COSBOA, op. cit., and Grattan Institute,
op. cit., p. 11.
[56]. ACOSS,
op. cit., p. 10.
[57]. ACCI,
op. cit., p. 3.
[58]. In
its submission to the inquiry into the Bill Per Capita observed that ‘the
design of the Scheme requires the Australian Taxation Office to calculate
hiring credits to employers, 12 weeks in arrears. Such an arrangement naturally
favours large companies that can absorb the upfront costs, while small
businesses may struggle to take on higher payroll commitments, even in the
short term. This is especially true for many of the small retail and
hospitality businesses that have experienced a period of extended shut-down due
to the pandemic, and who would otherwise be the most likely employers to hire
young workers under the Scheme … effectively, the design of the Scheme
will promote assistance to companies that need it the least.’ Per Capita,
op. cit., pp. 8–9.
[59]. COSBOA,
op. cit.; Institute of Public Accountants (IPA), Submission
to the Senate Economics Legislation Committee, Inquiry into the Economic
Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020 [Provisions],
[Submission no. 19], October 2020.
[60]. COSBOA,
op. cit.
[61]. ACOSS,
op. cit., p. 13.
[62]. Ibid.,
pp. 13–14.
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