JobKeeper: The Australian Short-Time Work Program

JobKeeper is a short-time work subsidy implemented between March 2020 and March 2021 in Australia during the COVID-19 pandemic to reinforce the resilience of the labour market. As a job retention (JR) program, JobKeeper supports businesses, protects jobs and employment relationships and secures income of Australian workers. Drawing on microeconomic and macroeconomic evaluations of the JR programs published in other countries in a pre-pandemic period, this paper studies how the generosity, responsiveness, governance and eligibility criteria of JobKeeper may shape its efficiency and equity. We show that expected benefits of JobKeeper may be limited by some negative economic effects of short-time work subsidies. Locking employees in their current position potentially crowds out more efficient matches on the labour market. These displacement effects may slow down economic recovery. As a wage subsidy, JobKeeper distorts the relative wage and employment prospects between eligible and non-eligible workers. These substitution effects can increase the dualization of the Australian labour market and institutionalise lay-offs inequities for workers holding a temporary visa. Finally, we argue that subsidies for part-time work also generate incentives for working time reorganisations that should be evaluated.

Automated summary

JobKeeper is a short-term work subsidy implemented in Australia during the COVID-19 pandemic to support businesses, protect jobs and secure income of Australian workers. However, the policy may be limited by negative economic effects of short-time work subsidies, including potentially slowing down economic recovery, distorting relative wage and employment prospects, and increasing dualization of the Australian labour market.