Federal support needed for Victorian workers in lockdown

People say a week is a long time in politics, but the week-long shutdown in Victoria is going to feel like an eternity for the hundreds of thousands of Victorians who will lose shifts and pay this week. Because unlike previous lockdowns, there is no JobKeeper support and no moratorium on rent evictions to stop them experiencing significant hardship from being unable to work due to the COVID-19 restrictions.

As a mother with two primary school-aged children back at home for remote learning, it is easy to forget that with the ability to work from home, we are far from the most impacted by this latest lockdown. That many Victorians live precariously close to the line of being able to afford three full meals a day, keep their homes warm and put a roof over their head. One lost shift is felt acutely, and a week without work will be a body blow from which many will not easily recover.

When Australia was plunged into the first lockdown over a year ago, the federal government stepped in and rolled out an unprecedented level of support for households and businesses. The rate of JobSeeker for the unemployed was doubled and the JobKeeper scheme was introduced, heavily subsidising the wages of more than 3.5 million workers that would have otherwise suffered a large fall in income or unemployment. In addition, state governments offered their own stimulus support but their capacity to spend is well below that of the federal government, due to constitutional limits on revenue raising and spending.

In total, the federal government spent more than $300 billion to stop the health crisis turning into a humanitarian and economic crisis with far-reaching consequences. But when the tap was turned off to much of this support in March, Australians unable to work from home and without access to holiday leave or sick leave were left carrying the risk and cost of future lockdowns. Lockdowns, that with the snail-paced speed of the vaccine rollout and quarantine arrangements that have never been fit for purpose, will continue to be inevitable.

The federal government’s response last March was needed because Australia’s social safety net is so weak. It was not capable, like many European systems that rely on social insurance, of simply kicking into gear when people suffer a drop in income due to lost hours of work. Even in non-pandemic times this lack of an adequate safety net leaves millions of casual employees and independent contractors at risk of financial hardship due to the cancellation of shifts, a bout of illness or the need to care for a loved one.

A deserted Melbourne CBD during lockdown. Credit: Jason South

Meanwhile the rest of us enjoy some of the most generous leave entitlements and security of employment in the world. We have created a dual system that is great for those of us inside the tent, but keeps those outside the tent, even those of us effectively working full-time across multiple jobs, on the precipice of financial ruin. This embedded level of financial insecurity is itself an economic issue for the whole economy. Research tells us that it not only negatively affects individual decision-making and risk-taking, it also increases rates of poor mental health and impacts the long-term outcomes of children.

Before the pandemic almost 2.6 million, or more than a quarter, of employees had no paid leave entitlements. And another million were independent contractors, also without legal access to paid leave. These independent contractors are not just highly paid consultants or skilled tradies, they are increasingly Uber drivers and otherwise engaged in low-paid gig economy work.

A social insurance system that covered all of us for the risk of getting sick, losing our job suddenly or having our hours of work cut without warning would ensure we all benefit from the same level of financial security. Businesses would benefit from not having to individually carry the risk of these entitlements – that for many small businesses can stop them hiring more staff.

Even those of us in secure work would be much freer to move jobs without risking losing sick leave or finding ourselves out of work during a probation period. The economy would gain from people moving jobs more often, with the lack of this movement often blamed for the fall in productivity and low wages growth observed over the past 10 years. The federal government would save money from not having to implement emergency policy on the run such as JobKeeper, that due to poor targeting ended up wasting billions of dollars on payments to businesses that needed no assistance.

In the absence of a social insurance scheme, it is left to the federal government to once again provide those suffering a fall in income due to this and future lockdowns with emergency assistance. There is a role for state governments, with the Victorian government already providing $250 million in emergency support to businesses but it does not have the systems or the money to provide the level of support people and our economy require.

The strength of the Australian economic recovery has been underpinned by timely support limiting the impact on households and businesses and allowing them to quickly bounce back. Let us hope that this week in politics is indeed a long one, and the federal government moves to shorten the week for the hundreds of thousands of Victorians by giving them the support they need.

Dr Angela Jackson is lead economist at Equity Economics.