JobKeeper package could leave many workers out of pocket, University of Newcastle professors warn

The federal government's $130 billion JobKeeper package does not go far enough, Professor Bill Mitchell said.

JobKeeper payments are planned to begin in the first week of May, but the professors are concerned that workers will lose wages and be burdened with extra debt.

The JobKeeper payment involves the Australian Tax Office paying eligible employers $1500 a fortnight to enable them to pay their employees' salary or wages.

But there are concerns that some workers under the JobKeeper scheme will only receive $1500 a fortnight, even if they usually earn more than that amount.

"Understandably, no employer will pay a worker their full wage - which may be well above $1500 a fortnight - if a worker has been stood down," University of Newcastle Emeritus Professor of Economics Martin Watts said.

Professor Mitchell added that many companies intending to use JobKeeper may struggle to secure the cash flow to cover wages above the government subsidy of $1500 a fortnight.

A federal Treasury spokesperson said: "If an employee earns more than $1500 per fortnight, employers should continue to pay them their regular salary or wages.

"Any amount paid above $1500 per fortnight is not subsidised by the JobKeeper payment. Employers are required by employment law to pay their employees for hours worked.

"For example, if an employee earns $3000 per fortnight for a 38-hour week (and is still working all of those hours), then the employer must pay them $3000 ($1500 of which will be provided to the employer through the JobKeeper payment)."

A statement on the Fair Work Ombudsman website, which the Australian Tax Office directed the Herald to, states that employers qualifying for JobKeeper can direct eligible employees to "work fewer hours or days (including no hours) in certain circumstances".

"When an employee is subject to a JobKeeper enabling stand-down direction (to not work on certain days, to work for a lesser period, or to work for a reduced number of hours), the employer must pay them either the JobKeeper payment or their usual pay for any hours that the employee does work - whichever is more."

Professor Mitchell said the JobKeeper package was "a poorly constructed piece of policy".

He said it did "not support enough people".

"You've got 8 or 10 per cent of your labor force who aren't covered by JobKeeper. They don't qualify because they didn't have a casual job for more than a year," he said.

"You've got a million workers out of 12 million out of the workforce."

Professor Mitchell said the labor market had a "degree of precariousness, dislocation and uncertainty" before the coronavirus crisis.

"They designed a fiscal stimulus that reinforces that," he said.

He said the JobKeeper payment should have been paid "directly to the workers and then the workers could decide what they want to do with it".

The professors said an alternate option would be for the government's stimulus package to fully cover people's wages, with reasonable caps for those on higher incomes.

"Unless the government wants to preside over a major recession, which is already being foreshadowed on the basis of Treasury data, workers need to be fully reimbursed for losses in wage income during the interruption to economic activity," Professor Watts said.

"Otherwise consumer spending will fall significantly."

Professor Watts said it should be emphasised that when normal economic and social life resumes, "we want to hit the ground running".

Furthermore, the professors said the government could introduce a "job guarantee" scheme for the unemployed in which a job would be provided for "any worker who wants one".

Examples of such jobs could be bushfire recovery work, infrastructure improvements and fruit and vegetable picking.

Such a guarantee could give people the option of being employed and earning a minimum wage.

Under such a scheme, the idea would be that jobs were created locally so people wouldn't have to commute or relocate.

"These are the lateral ways of thinking that if you had a job guarantee, you could put people to work in all sorts of new areas," Professor Mitchell said.

"That sort of work could be done with social distancing."

The professors fear that those who lose income will end up with extra debt once the economy resumes, given that some costs like rents and mortgage repayments are being pushed back during the lockdown, not necessarily forfeited.

If households were burdened with additional debt, then there was a "high likelihood of a deep and ongoing recession", Professor Watts said.

"Deep recessions become entrenched and economic recovery takes a long time, which impacts very adversely on particular groups in the community, including the young and workers close to retirement, with both groups finding it hard to secure employment.

"Many more businesses could close forever."

Asked about the extra debt that a larger stimulus would create, the professors said this should not be a concern.

"Nobody should be worried about the debt," Professor Mitchell said.

Now that the Reserve Bank was buying massive quantities of government debt, he said the debt amounted to "one side of government owing the other side of government".

He said the notion that taxes would have to rise or future generations would be burdened to pay back the debt was "totally inaccurate".

"It's the left pocket of government owing the right pocket," he said.

"It will get paid back. The Treasury will instruct a payment to the Reserve Bank when the debt matures, so there's an accounting entry."

The professors aren't suggesting that this type of government spending could go on forever.

The spending applies to a suite of policies to address the coronavirus crisis.

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