As the global pandemic sees business shed hundreds of thousands of jobs, Alison Pennington outlines an urgent case for government to provide wage subsidies, guaranteed incomes, and an expansion of public jobs.
The coronavirus pandemic is unleashing a deep recession. Predictions of 15% unemployment in coming months will leave 3 million people out of work (including the 1.8 million unemployed or who had given up looking for work pre-crisis). Centrelink queues stretching for hundreds of metres. Hospitals preparing for the onslaught of hospitalisations.
While thousands were losing their jobs, Scott Morrison was in Parliament defending the government’s paltry “wage subsidy”. The government’s plan to keep workers in jobs? Businesses with a turnover of less than $50 million will be able to keep the income tax paid by their workers. For a typical earner the subsidy is a measly 20% of income – far below UK’s plan to subsidise 80% of all workers’ wages. Australian unions are demanding it be matched.
Not only does Morrison’s plan let employers raid revenues (so workers actually pay the subsidy!), it falls perilously short of stemming the tide of joblessness.
There are two other major design problems: First, subsidies pegged to an employee’s income taxes will encourage employers to hold onto higher-income workers (since they pay more tax), and to shed the lower paid and more insecure workers (who pay lower or no taxes). Second, there are no conditions on businesses to actually keep workers once they have received the subsidy – they can lay people off after they pocket the benefit.
Australia’s “wage subsidy” thus amounts to public support for income inequality. The first tranche of government support sent 75% of its total benefits directly to business. Now, 70% of the second announcement will go directly to business (and that doesn’t include an additional $125 billion to support credit flows and business lending); only 30% went to workers in the form of much-needed increases to social security payments.
These distributional outcomes are hardly surprising from a Coalition government still beholden to neoliberal market fundamentalism. Their response represents the continued upward redistribution of wealth to businesses. Meanwhile, the Australian people face the challenge of their lifetimes.
We must understand this historic moment and make plans to ensure workers stay in jobs and don’t go backwards. Climate change already presented an urgent case for structural change to the organisation of our economy. COVID-19 is shock forcing us to make these plans real now.
How do we get through this pandemic and reconstruct the economy? We must do everything possible to keep workers in jobs now, but we must lift the quality of those jobs, and create hundreds of thousands of new ones in the public sector. Public sector jobs will anchor our future economy.
Lifting Up Essential Workers
Some of our lowest-paid workers will still be working during the lockdown – including cleaners, and workers in supermarkets, pharmacies, petrol stations, and freight and logistics. While we stay in our homes, these workers will be copping high viral loads, many on low pay.
At this point government has no plans to lift the quality and pay of essential workers keeping critical services going – including nurses and healthcare workers, and low-paid, casual workers across retail and services. Some US jurisdictions have classified supermarket workers “emergency personnel” and immediately extended benefits. Instead, our government has the ear of retail employers who are trying to freeze wages, and block the minimum wage increase.
Australia’s borders have closed on hundreds of thousands of temporary migrants doing critical work like food production and cleaning. They need full work entitlements and access to healthcare immediately.
The Jobseeker payment has been raised to at least $1,100 a fortnight. Unions across all essential sectors have a new bargaining floor to improve pay and security. For instance, median earnings in retail are $1,400 per fortnight. What incentive does a retail clerk have to face workplace abuse and high viral loads on these earnings?
Critical workers deserve pay increases and hazard pay allowances like in Canada where workers in big retail chains are now receiving danger pay allowances of 15% or more. Existing staff should be offered all additional hours, and casual workers converted to permanent employees with full leave entitlements, including sick leave and holiday leave.
The government’s decision to lift the Jobseeker payment reveals much. Not only that the unemployed have languished on half this rate for years, but it exposes the low-wage regime baked into our whole economy.
This regime impacts not just retail, cleaning and hospitality workers. Take the largely feminised community and social services sector. Median earnings in this sector are only $1,488 per fortnight. Australia has allowed private contracting models to entrench wage discrimination by forcing providers to compete with each other based on how low they pay their (female) workers.
Contracting models will come under pressure as the recession unfurls and we have an opportunity to right wrongs. State and federal governments should immediately in-house all social services contracts. Full permanent employment rights, wage increases, and additional virus sick leave should be extended to retain this valuable and critically important workforce.
We Want Incomes And Jobs
A cross-unions and civil society campaign will be needed to lock in the much-needed Jobseeker payment increase. But we could go further. If the government plans to funnel millions of people onto unemployment benefits as the “wage of last resort”, then that benefit should be lifted to the more dignified level of the minimum wage: $770.43 per week (including the 4% increase the ACTU is demanding in this year’s Minimum Wage Review). We could also abolish means-tested payments altogether and introduce a universal income guarantee at the minimum wage level – as proposed by the United Workers’ Union.
These changes would improve the lives of millions of people. But minimum income guarantees, like unemployment benefits, bring new risks to consider. For starters, they are both fixed income streams determined by government and not workers themselves. Without a corresponding push to create higher-wage, good union jobs to counter the power of business lobbyists inside government, fixed income programs can become weapons against our freedoms to determine what jobs we do, and on what (and whose) terms we do them. Mass coronavirus work-for-the-dole schemes anyone?
Business is in no position to lead the reconstruction but they will be looking to the people to pay for their losses, and to swoop in later and purchase those assets back (ideally at a low price). Growing the number of people dependent on fixed incomes can make it easier for hostile governments to cut minimum labour laws (including the Awards and minimum wage), delivering a lower-wage, more insecure workforce when business resumes.
Structural power risks aside, securing basic incomes are really only half the equation for progressive forces at this juncture. We need income and we need jobs.
Businesses that survive post-lockdowns must guarantee jobs will be given back to workers at the same pay and conditions – a moderate requirement given they are receiving billions in subsidies. Keeping workers in jobs may cushion some of the recessionary blow, but millions more will still need jobs.
The answer? Expand public sector employment. Creating our future sustainable economy will depend on expanding public employment in well-paid, permanent jobs with benefits. These are the jobs that will lead national reconstruction.
Australia certainly has no shortage of jobs to do. We need to build new renewables infrastructure, public housing, public transit systems, manufacturing capacity, and drastically increase the size and reach of public services including healthcare and education.
Government has the power to employ people directly to get through the pandemic recession and beyond. 5,000 additional public sector jobs for unemployment benefits processing is a start. But our public sector employment share is only 15%. Nordic countries like Denmark have upwards of 38% (and that was pre-crisis).
We should aim to lift the public share of employment much higher: 50%? 75%? The answer to this question is a collective one. How much economic activity do we want the private sector to control?
The welfare system and a comprehensive income guarantee can secure incomes for all. A government wage subsidy of 80% will save many private sector jobs, and an expansion of good public sector jobs can offset those jobs we can’t save.
Without action, we march toward a society stratified by three groups of workers: a pool of higher-income professionals (many with work-from-home flexibility); essential workers who keep services going during lockdown with lower pay and conditions; and an army of unemployed whose ranks increasingly swell as the recession unfolds.
We can create the jobs we need to provide secure futures to millions. And we can simultaneously create the jobs Australia needs to build a sustainable economy free from resources dependency. We can do both right now.
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