JobMaker could pay bosses to cut wages and jobs, warns Treasury

Employers could sack experienced employees, replace them with workers earning just a third of the salary and get a taxpayer-funded grant to do it, previously secret Treasury documents have revealed.

Treasury’s own examples, obtained by the ABC using the Freedom of Information (FOI) process, show bosses could sack a full-time employee on $75,000 and replace him or her with three part-time staff on wages between $22,500 and $30,000, while remaining in front financially – thanks to the generous JobMaker hiring credit.

The $4 billion two-year scheme, revealed in the 2020 Budget, pays employers up to $200 a week for creating new jobs for people aged 16-to-29 years who are on JobSeeker, Youth Allowance or the Parenting Payment. (It is $100 a week for 30-to-35-year-olds).

Joan Hughes, in her early 60s, spent two years looking for work. After a lifetime of career advancement, she felt the burn of age discrimination.

“It just erodes your confidence,” she said.

“You start to question your own skills and attributes, and you just give up.”

JobMaker is intended to create new jobs – the ‘headcount’ of the business must increase – but the scheme immediately created concerns it would discriminate against older people in the jobs market.

“Sometimes I wonder about the inclusion of older people in our community,” Ms Hughes said. “When we’ve done the hard yards.”

Internal Treasury emails, talking points and an ‘issues register’ listing problems with the scheme go further, outlining how employers will benefit from axing high-wage jobs and suggesting the department will “need to confirm” if the scheme is even legal under laws that aim to prevent age discrimination.

Big promises

In his budget speech, the Treasurer claimed the $4 billion policy would “support” 450,000 jobs. Treasury has been forced to admitted that does not mean JobMaker will actually create that many new jobs.

The number of jobs likely to be created is a tenth of that, around 45,000, acting division head, JobKeeper Division at The Treasury, Philippa Brown, told the Economics Legislation Committee on Monday, November 2, 2020.

This means the best-case scenario for taxpayers is spending $89,000 for every unemployed person who finds a genuinely new job through the scheme.

“I think there will be some jobs created,” said Dr Elise Klein, senior lecturer at the Crawford School of Public Policy at the ANU.

“But I think there’ll be mass job displacement and churning and shifting the terms of jobs available, and that’s not a good thing in a labour market, where people already very precarious.”

Treasury documents note that “arrangements for claiming the Hiring Credit will require an employer to demonstrate both an increase in payroll and an increase in headcount” and that there are costs involved in getting rid of and hiring employees.

The document states the JobMaker credit “does not create an incentive for an employer to replace an older worker with several part-time workers.”

But the words are directly below a table that shows the opposite.

Treasury documents outline a hypothetical example where JobMaker helps an employer replace one full-time worker with three half-time ones at no extra cost.(Supplied: Treasury)

Treasury’s figures show a full-time worker on $75,000 a year could be replaced by three part-time employees. If the boss pays them $22,500 each, there is no JobMaker subsidy, but the employer is $7,500 a year ahead.

If the new part-time employees are paid more, such as $27,500 or $30,000 a year, the payroll increases by $7,500 and $15,000 respectively. But the JobMaker hiring credit pays bosses those amounts, meaning the employer is paying no more, but now has two extra workers and has increased the hours covered from 40 per week to 60 per week.

In response to questions about the table, a statement from Treasury contended that “any JobMaker Hiring Credit payments received by employers will, at most, only offset the increased payroll from the eligible additional new employees”, and that there was “no financial windfall” to employers if they replaced one full-time employee with three part-time employees.

Dr Klein said the point of the subsidy was to boost the number of young people hired, but the trade-off is that people over the age of 35 will miss out, even if they have the same skills and experience.

“From an employee perspective it sucks. It’s not a good situation for people to be in,” she said.

“It seems as though there is an incentive to move from full-time to part-time and to increase the precariousness of the workforce.

“This has been a longstanding concern about the Australian labour market and it seems that JobMaker is another contribution in that in that respect.”

‘Illustrative’ examples

The office of Treasurer Josh Frydenberg was invited to comment for this article.

In a statement, the Treasury Department said: “The examples in the document are for illustrative purposes to demonstrate different circumstances in which an employer would be entitled to receive a Hiring Credit.”

The Australian Unemployed Workers’ Union is concerned the scheme will exacerbate a key issue in the recovering economy: that jobs being created are largely part-time, casual or insecure.

“We’re very concerned that the way the schemes have been designed means that companies will be thinking about how they can transition existing or former employees out of their business, as JobKeeper winds down, and then have a very short gap until they enter the JobMaker scheme and begin hiring to replace those employees,” said Kristin O’Connell, spokesperson for the union.

“The design of the criteria that are supposed to prevent that from happening really don’t, once you start to look at the detail.”

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JobKeeper once supported 3.5 million workers, and ends in March. The government has insisted it won’t be extended.

“It’s almost like this system has been designed precisely to enable huge employers with large workforces to fracture their workforce: to get rid of older employees who might be costing them more money and replace them with younger workers, and putting these workers in a position where they have no security and can’t plan for the future.”

For older workers like Joan Hughes, it is another roadblock to finding employment. Now a chief executive in the not-for-profit sector, Ms Hughes said the ageing population meant older people would need employment for longer.

Woman sits at a desk, typing on a laptop
Joan Hughes says her friends who have been out of work have often seen their health deteriorate.(ABC News: John Gunn)

“I’ve seen so many of my older friends – once they give up work and they haven’t replaced it with something, whether that’s voluntary work or activity – their health really starts to decline,” she said.

“Work gives us that identity. It’s an economic issue of course, but it really does equate to health and wellbeing for older people.

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