JobMaker needs to be more ambitious - Grattan Institute

JobMaker needs to be more ambitious

by Brendan Coates, Tim Helm, Matt Cowgill

26.10.2020 report

Submission to the Senate Economics Legislation Committee inquiry into the Economic Recovery Package (JobMaker Hiring Credit) Amendment Bill 2020, 26 October 2020

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The eligibility criteria for the Federal Government’s hiring credit scheme are too narrow and preclude important opportunities for accelerating employment growth.

Eligibility for JobMaker should be broadened to cover new employees of all ages, not just those younger than 35. And the requirement that new hires were previously on JobSeeker (or a related payment) should be abolished.

Other aspects of the design of JobMaker could also be improved. Many of the almost one million employers on JobKeeper will be effectively excluded from the scheme; this could be remedied by excluding employers’ JobKeeper receipts from the payroll baseline test.

The test itself should be more demanding: the current requirement for payroll to increase only by the amount of the hiring credit claimed will create incentives to convert full-time jobs to part-time and make the scheme less cost-effective.

And the low, fixed-rate credit of $200 a week (or $100 a week for 30-to-35 year-olds) for new employees will bias the scheme towards part-time and low-wage jobs, providing little incentive for firms to employ full-time staff.

Fixing these flaws would improve JobMaker. However a better model altogether would be an incremental payroll rebate, which would encourage employment growth across all possible margins, creating stronger incentives to hire full-time workers and expand hours for existing staff. Such a scheme would generate more employment, albeit at substantially higher cost, and be much simpler to administer.

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