Lockdown support payments are good, but the path there was shambolic | Chris Edmond and Steven Hamilton

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The government’s decision to provide “disaster” payments of up to $500 per week to workers locked down in Covid-19 hotspots is, in principle at least, a welcome addition to the safety net that will help struggling workers and keep the economy on track. But the shambolic process that led to it, and some of the details, are far from ideal. And one wonders why we waited this long to introduce targeted, temporary insurance for workers stood down due to lockdowns.

This delayed response is further evidence that our early wins over the virus – among the best on Earth – led us to declare victory prematurely. While we got the initial health and economic responses to the pandemic right, there was never enough thought given to the end game. This is most obvious in the botched approach to the procurement and rollout of vaccines, and the lack of dedicated quarantine facilities built by either the states or feds.

It’s now also clear that not enough thought was given to what would happen in the event of lockdowns once jobkeeper ended. The government was right to roll back permanent support in the form of both jobkeeper and the generous, original jobseeker coronavirus supplement. But it was wrong not to then replace them with temporary, targeted measures that would be triggered by renewed outbreaks.

We’ve seen the consequences of this around the country following a number of flare-ups, but none more so than the current outbreak in Victoria. Hundreds of thousands of workers were stood down for more than a week before the government thought to act – and it may be another week before money actually flows into people’s bank accounts. But the government’s 11th-hour move is better late than never.

Weaving this new payment into the fabric of the permanent, national safety net was absolutely the right way to go. Workers everywhere need to know that if a prolonged lockdown occurs, support will be there for them. The circumstances that justify this today are exactly the same as those that justified it a year ago – and this will remain the case until we have broad vaccine protection.

This has a strong economic justification. In the midst of our still-fledgling recovery, the last thing our economy needs is a large number of people cutting back on spending for a lack of income. Moreover, workers across the country, facing the lingering threat of an outbreak, will no doubt be more cautious if they expect not to be supported in the event of a future outbreak – another brake on our recovery.

As announced, the new program is a bit clumsy, with tricky eligibility criteria for individual workers within designated hotspots and contentious criteria for the hotspots themselves. Perhaps this is by design, but this isn’t the time to be making workers jump through unnecessary hoops to save a few dollars. A cleaner way to go would simply have been to make workers subject to lockdowns eligible for jobseeker, which is already available to those workers who are sick or injured, but not to those locked down.

As it is, the disaster payment has a sharp eligibility threshold such that a worker who ordinarily works 19 hours a week gets $325 per week ($325 per hour for those working just one hour!), while another who ordinarily works just one hour more gets $500. And workers will be ineligible if they have more than $10,000 in “liquid” assets. This will be very difficult to enforce. And our existing social insurance system is built around the principle that workers in temporary spells of unemployment shouldn’t have to run down their life savings.

The government was right, of course, to resist reinstating jobkeeper, a move mooted by some including the union movement. While that policy did its job through the worst of the pandemic, it is geared towards a large economic shock for a prolonged period that is likely to send a lot of firms out of business or lead remaining firms to shed a lot of workers. For a local lockdown lasting a matter of weeks, this would have been overkill.

Perhaps most concerning, though, is that the government’s approach appears to be mostly about strong-arming the Victorian government into towing the federal government’s line on lockdowns. Under the policy, the federal chief medical officer is to personally determine whether and where hundreds of millions of dollars in pandemic support payments will flow. This puts undue pressure on someone we want to be making impartial decisions based on expert analysis, not government finances or political squabbles.

The whole idea that the feds supporting workers will give states an incentive to lock them up is really too cute by half. No government in Australia wants to be locking down. The states know just as much as anyone how good it is to get life back to normal.

We all want big crowds back at the MCG. Those crowds will be bigger, and the economic recovery stronger, if we don’t leave locked down workers out in the cold.

Chris Edmond is professor of economics at the University of Melbourne, and Steven Hamilton is assistant professor of economics at George Washington University and chief economist at the Blueprint Institute

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Source: The Guardian
Keyword: Lockdown support payments are good, but the path there was shambolic | Chris Edmond and Steven Hamilton

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