Open Letter From Economists and Policy Experts: Wage Subsidy to Protect Jobs During Pandemic

by Jim Stanford

109 Australian economists and policy experts have signed an open letter, initiated by the Centre for Future Work, supporting a government wage subsidy to prevent mass unemployment during the coming economic downturn resulting from the COVID-19 pandemic.

The letter and the full list of signatories is reprinted below. It has been forwarded to Prime Minister Morrison.

Public Statement from Economists and Public Policy Experts:

A Wage Subsidy to Protect Jobs During the Coronavirus Shutdown

The unprecedented public health measures required to deal with the COVID-19 pandemic are causing a dramatic shutdown of work and production in several key sectors of Australia’s economy. Immediate full or partial closures of activity are occurring in several consumer-facing industries (such as hospitality, retail, airlines, recreation and personal services). But before long, spillover losses will be experienced in other sectors, too: including wholesale trade and logistics, manufacturing, business services, education, and others. Consumer and business confidence has been deeply shocked, and that will magnify the negative economic effects of the pandemic.

The coming recession will be unprecedented in Australian history – in both its speed and its depth. Without immediate action, we expect that 1-2 million workers, or even more, could lose their jobs in coming weeks. That would drive unemployment to 15% or higher, overwhelm income support programs, and leave hundreds of thousands of businesses unable to function – even after the immediate health danger passes.

This is a dangerous and dramatic moment in Australia’s economic history. It is imperative that the federal and state governments act immediately and powerfully to protect Australian workers and businesses from the worst of the coming downturn. Important steps have been taken to expand access and benefit levels for income support payments to Australian workers (including casuals, contractors, and gig workers) losing work because of the pandemic. This is a helpful, but on its own inadequate, response. Government must also act forcefully to prevent mass job losses in coming weeks – not just provide support to those who do lose work.

In this regard, we recommend that the Commonwealth government immediately implement a large-scale wage subsidy scheme, similar to those already enacted in several other industrial countries (including, variously, the UK, Denmark, New Zealand, the Netherlands, South Korea, and Ireland). Under these programs, government directly pays to employers (for a limited period of time) a majority portion of wages (between 70 and 90%) to cover the wages of workers who would otherwise be stood down from their positions. The measure can apply to non-standard workers (including contractors and self-employed). It can also be integrated with measures to support short time working as an alternative to complete redundancy. The wage subsidy is paid to firms experiencing severe losses of revenue and business (beyond a specified threshold). It would cover most of the wage bills for workers who can no longer work for economic reasons, up to a specified ceiling (perhaps the level of full-time median earnings). This program will be expensive – but governments everywhere have recognised that this unprecedented crisis requires them to do everything in their power to protect people, jobs, communities and the economy.

To date, Australia’s response to the pandemic has been uncertain, inconsistent and inadequate. Immediate, powerful action to keep millions of Australians in their jobs, instead of pushing them into an overloaded and complex Centrelink system, would significantly ease the pandemic’s painful economic effects. It would underpin financial stability for millions of households through the coming terrible weeks or months. And it would preserve the viability of hundreds of thousands of Australian businesses, allowing them to resume work and production as soon as the health restrictions are eased.

We the undersigned support the proposal for a strong wage subsidy program to keep workers in employment through the coming downturn, and we urge the Commonwealth government to implement such a policy quickly.

Download full list of signatories below.

Related documents

List of signatories

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