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The JobKeeper payment: How good are wage subsidies?

Author

Listed:
  • Timothy Watson
  • Juha Tervala
  • Tristram Sainsbury

Abstract

We estimate the effect of the Australian JobKeeper Payment COVID-19 wage subsidy on payroll jobs and wages at the employer-level using novel administrative datasets. We find a cost per job-year saved of around $112,819 ($US80,959) over the program period, implying around 812,000 jobs were saved over this time. Weekly payroll wages were almost $1.1 billion ($US761 million) higher on average during the program period, implying wage benefits equivalent to around 60 per cent of program spending. Program effects are persistent, suggesting cumulative benefits will be larger over time. A medium-scale business cycle model featuring heterogeneous households and learning-by-doing in the production technology is derived to map estimates of costs per job-year saved to approximate output multipliers. The model generates plausible output multipliers centred around 1.3, and identifies the extent to which wage subsidies support liquidity constrained workers as a key determinant of program effectiveness.

Suggested Citation

  • Timothy Watson & Juha Tervala & Tristram Sainsbury, 2022. "The JobKeeper payment: How good are wage subsidies?," CAMA Working Papers 2022-36, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2022-36
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2022-05/36_watson_tervala_sainsbury0.pdf
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    Cited by:

    1. Robert Breunig & Tristram Sainsbury, 2023. "Too Much of a Good Thing? Australian Cash Transfer Replacement Rates During the Pandemic," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(1), pages 70-90, March.
    2. Timothy Watson & Paul Buckingham, 2023. "Australian Government COVIDÔÇÉ19 Business Supports," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(1), pages 124-140, March.
    3. Jeff Borland, 2023. "Introduction," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(1), pages 61-69, March.
    4. Jeff Borland & Jennifer Hunt, 2023. "JobKeeper: An Initial Assessment," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(1), pages 109-123, March.

    More about this item

    Keywords

    Employment; fiscal policy; study of particular macroeconomic policy episodes.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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