Costly JobKeeper went on too long in Australia: report by the e61 Institute

As the federal government considers the findings of an independent evaluation of JobKeeper undertaken by former senior Treasury official Nigel Ray, a report by the e61 Institute concludes that while the program achieved its goal of protecting jobs and preventing large-scale business failures during the pandemic, its benefits dwindled after the first few months and it subsequently became a burden on the economy.

While it is estimated the scheme preserved up to 800,000 jobs, the e61 evaluation found that many would have survived the crisis regardless and the jobs saved by the program "were more marginal".

Report co-author Dan Andrews said a key goal of the scheme had been to ensure valuable employer-worker relationships were not lost because of the economic disruption caused by the pandemic.

But the e61 report found that almost half the job matches covered by JobKeeper had been severed by March this year and job retention rates under the program were comparable to those for jobs outside the scheme.

"If these were high value [job] matches, you would have expected to see more persisting after [the program closed] but the exits are exactly the same as the non-subsidised jobs," Mr Andrews said.

Furthermore, workers not covered by JobKeeper achieved bigger pay gains than those under its umbrella, which is the reverse of what would have been expected if the workplace relationships protected by the scheme had been as valuable as intended.

And JobKeeper recipients reported a sharper decline in how well their skills were used in their job.

"These facts suggest that employers would have held onto the highest quality matches during the crisis regardless, and the jobs that were saved by the JobKeeper program were more marginal," the authors said.

"Early in the pandemic there was probably a good rationale for doing it [JobKeeper]," Mr Andrews said. "[But] once the economy reopened...the wage subsidy stated to tie individuals to less productive firms, translating into weaker income growth and poorer skills use."

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Among other countries to introduce a job retention schemes during the pandemic was New Zealand, but it only kept in place for three months.

Study co-author Matt Nolan said there was a sound argument to have JobKeeper for the first six months, but the effectiveness of its extension from October 2020 was more doubtful.

"People who were in the latter stages of JobKeeper, even if they moved jobs, they were earning less than those in other workplaces," he said.

The JobKeeper scheme ran until March 2021 and became mired in controversy following revelations that several major companies drew millions from the program despite reporting strong profits.

Retailer Harvey Norman repaid $6 million of $20.5 million it received following sustained public pressure.

And The Saturday Paper has reported that the Qantas board is considering returning some of the $900 million in assistance it received.

Despite the huge taxpayer contribution to its operations, the airline dismissed 1700 ground staff at the height of the pandemic - a decision subsequently determined by the High Court to be illegal.

The JobKeeper scheme did not include a requirement for firms that suffered no loss to return payments.

In his evaluation of the program, Mr Ray described JobKeeper as "one of the largest fiscal and labour market interventions in Australia's economic history".

Around one million businesses and four millions workers took part of the program.

Mr Ray said JobKeeper provided certainty during the crisis and laid the foundation for a speedy recovery.

But, in a finding that supports the e61 research conclusions, the former Treasury official said that while in its initial stages the program supported productivity, "the extension phases...generally supported less productive firms and weighed on productivity growth".

The extension phases cost around $19 billion.

Mr Ray said a more flexible design for the policy, such as that adopted by other countries like New Zealand, would have enabled better targeting of assistance.

He was also critical of the scheme's "unusual" flat payment structure, which was "unfair and ...inefficient", and the decision to exclude temporary migrants and casuals who had been in their job for less than year.