by It seems quite likely that we will soon see the introduction of a wage subsidy along the lines of that announced by Boris Johnson (himself now testing positive!) in the UK. That is, a payment to employers equal to 70 or 80 per cent of workers’ pre-crisis wages, in return for keeping them on for some period. That would be better than doing nothing beyond what has already been announced, but I have two big problems with it. First, it is paid to companies rather than workers. The ACTU is touting this as benefit, on the grounds of administrative simplicity, but I suspect that there is lots of potential for abuse through complex corporate structures. Second, it creates essentially arbitrary distinctions between workers. If you happened to work for a company that closes and stays
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John Quiggin considers the following as important: economic policy
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It seems quite likely that we will soon see the introduction of a wage subsidy along the lines of that announced by Boris Johnson (himself now testing positive!) in the UK. That is, a payment to employers equal to 70 or 80 per cent of workers’ pre-crisis wages, in return for keeping them on for some period. That would be better than doing nothing beyond what has already been announced, but I have two big problems with it.
First, it is paid to companies rather than workers. The ACTU is touting this as benefit, on the grounds of administrative simplicity, but I suspect that there is lots of potential for abuse through complex corporate structures. Second, it creates essentially arbitrary distinctions between workers. If you happened to work for a company that closes and stays closed, or if you were already unemployed you are out of luck. A final issue (on which opinions may differ) is that the benefit depends on previous salary, rather than being the same for everyone.
I’m thinking about an alternative model. Rather than paying money directly to employers, we should allow recipients of benefits like Newstart to use their benefit as a wage subsidy, either with their current/most recent employer (this would be specific to the pandemic emergency) or with a new employer. This would give workers more freedom and more agency, and could potentially form part of a Jobs Guarantee, which is, I have argued, the natural complement to a Guaranteed Livable Income (the term now being used by advocates of BI/UBI/GMO schemes in Australia). In particular, it could be sustained beyond the current emergency, which is not the case for the wage subsidy ideas.
There are plenty of issues to be addressed in the long run version of the voucher idea, such as the problems of additionality and churning (ensuring that the employer is creating new jobs, rather than replacing existing workers with voucher-holders). But such issues have been addressed in other contexts, with some success.