Unemployment would have been double without the government subsidy. Yes, some ASX companies used the money to pay bonuses to executives. But still.
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A Reserve Bank study has found the Federal Government’s JobKeeper subsidy has prevented 700,000 Australians from losing their jobs during COVID-19.
“Our baseline estimate is that 1-in-5 JobKeeper recipients would not have stayed employed during this period had it not been for JobKeeper,” read the RBA report.
With 3.5 million receiving JobKeeper, that equates to 700,000 jobs directly saved. It’s likely saved many more indirectly.
“Overall employment losses would have been twice as large over the first half of 2020 without JobKeeper.”
The program saw the government hand out $1,500 per fortnight to companies, to be eventually passed onto employees. The amount has since reduced to $1,200 and will be phased out in the first half of 2021.
All up the government will end up spending about $100 billion on JobKeeper.
The RBA report warned that the benefits were short term and that policymakers shouldn’t assume it would last.
“Indeed, the international literature suggests that wage subsidies, if maintained too long, can have adverse effects on incentives and impede the reallocation of labour.”
ASX companies accused of misusing JobKeeper
While the effectiveness of the support to the Australian economy has now been quantified and confirmed, some ASX-listed companies have been criticised about how they’ve used the assistance.
Last month an Australian Taxation Office commissioner warned employers to stop pocketing JobKeeper then fattening up bonuses to its top executives.
“The quid pro quo in the community’s mind is that large corporates, in particular but not limited to those who accessed these schemes, will pay their share and improve their approach to tax,” said ATO second commissioner Jeremy Hirschhorn.
“Yes, follow the tax law, but also follow the spirit of the law.”
Several publicly listed businesses have provoked outrage among taxpayers for receiving JobKeeper then paying out millions in bonuses to its leadership.
For example, Premier Investments Limited (ASX: PMV) disclosed that $49 million of JobKeeper payments propped up its balance sheet as of July. Then it granted a $2.5 million bonus to its chief executive officer.
In September, unions won a Federal Court case against Qantas Airways Limited (ASX: QAN) for keeping JobKeeper money that should have been passed onto workers.
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Motley Fool contributor Tony Yoo owns shares of Qantas Airways Limited. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.