The JobKeeper Scheme: Criticism and Defence

The federal government ran the ambitious and comprehensive JobKeeper program to keep Australians in jobs and shield businesses from the disruptive effects of the Covid-19 pandemic. The JobKeeper scheme is said to be one of the largest economic programs ever implemented in the modern history of Australia. However, over the past two months, it has been at the centre of intense public debate and scrutiny. Let us take a closer look at the details, framework, criticisms, and latest developments on the issue. 

What is the JobKeeper scheme?

According to information provided by the government on the Australian Taxation Office (ATO) website, the JobKeeper Payment scheme is a “subsidy for business significantly affected” by the Covid-19 pandemic. The scheme (estimated to cost A$130bn at the time) was announced on 30 March 2020 for a duration of six months, but it was later extended. 

Businesses were to be provided up to $1,500 per fortnight for each full-time, part-time or casual employee who has worked with them for over a year. The goal was to ensure that businesses do not lay off employees in the face of falling revenue and crippling lockdowns. The eligibility conditions were based on the size of the business, the amount of turnover lost, and the ABN status on specified date cut-offs.

In February, the base pay rates for the scheme were increased and came into effect from April onward. The scheme officially ended on 28 March, completing nearly one full year. However, some eligible businesses can continue to apply for payments.

What is the controversy?

The data released by Australia’s Parliamentary Budget Office (PBO) in July 2021 showed that during the first three months of the scheme, nearly $12.5bn was given to businesses that were not impacted significantly by the Covid-19 pandemic. According to one estimate, nearly one in six businesses that applied for the scheme did not suffer a loss of revenue during this period. Further scrutiny of the data showed thousands of profitable businesses that saw their turnover rise also got payments under the scheme, a trend that was visible throughout its duration.

Even before the current controversy, the JobKeeper scheme had been in the spotlight for the wrong reasons. Nearly a month after its rollout, the ATO announced that there had been a miscalculation of $60bn in the program's cost. Due to an accounting error, the number of  people under the scheme were reduced by three million and the new budget was nearly half the previous amount at $70bn. Prime Minister Scott Morrison took responsibility for the mistake and welcomed the savings of a more focused scheme.

The scheme also received criticism for not being inclusive of the arts industry, as nearly none of the 193,000 people employed in the sector were eligible for JobKeeper payments. What’s more, it also specifically excluded “freelancers and casuals on short-term contracts, or who have worked for a series of employers in the last year.” All these exclusions meant that nearly 1.1 million Australians were not eligible for the JobKeeper scheme when it launched.

Which businesses have been under scrutiny?

A variety of businesses and well-known brands have been under fire for allegedly misusing the subsidies offered under the scheme. Luxury brands like Gucci, Bulgari, Richemont (owner of Cartier and Montblanc) have been accused of profiting off the scheme despite witnessing a rise in revenues. The same accusations have been levelled against retailer Harvey Norman and handbag maker Coach. Disney has also been under scrutiny, although the company has not clarified how much payment it has received as part of the program. Other entities, like the Australian Christian Lobby, also reportedly got the subsidy despite having higher revenues.

What are the latest developments?

The opposition Australian Labor Party has been demanding that more information about the companies that benefited from the JobKeeper program be made public by the government. They have also started publicly naming and shaming big businesses that have been confirmed to have accepted payments from the scheme despite no significant loss of turnover or a proven decrease in business. The public clamour to reveal details of the program is growing and calls for repayment in cases of wrongful usage of subsidies are also gradually building.

Some companies have refused to return the payments they have received, and others, like Harvey Norman, have obliged after public pressure. The retailer has returned $6m of the $22m it had received.

Despite growing criticism and demand for scrutiny, the government has defended the scheme and said that it helped save over 700,000 jobs and kept the unemployment rate low. Deloitte Access Economics’ Chris Richardson also praised the scheme saying that, despite its flaws, it was “bloody beautiful” and the country needed it in the face of a massive economic crisis.

What can Australians expect in the future?

The ATO has stated that after reviewing roughly $12.5bn of the payments made through the program; it has identified $470m in overpayments and recovered $194m of it while pursuing another $89m. It further said that most small businesses made “honest mistakes” and “acted in good faith,” and it wouldn’t be fair to recoup payments that have already been passed on to their workers. Seventy-five businesses have also voluntarily approached the ATO and repaid $203m in overpaid subsidy.

Treasurer Josh Frydenberg has said that there is no clawback provision in the scheme. This was done to ensure that all eligible businesses benefited. He further said that a significant portion of the entire scheme payments (nearly $70bn of the estimated $88-90bn) was paid during the first six months of the program. Asking businesses to prove loss of turnover would have delayed the process. Thus, a scenario in which repayments are demanded from businesses seems highly unlikely.

The refusal to recover funds is also inviting accusations of double standards from the federal government. In August, nearly 11,000 individuals were asked to return overpaid dues in the JobKeeper program. Furthermore, questions regarding the classification of ‘small’ and ‘midsize’ businesses are also being raised. 

The JobKeeper scheme: Looking ahead

While the government must be open to feedback and criticism from the opposition and the public at large, it should make every effort to ensure that funds meant to save jobs are not misappropriated by businesses. There is little doubt that the scheme helped prevent a larger economic and labour crisis in Australia and helped millions get by during the lockdown, but a careful analysis of the scheme and its implementation is necessary to create better policies in the future.