Economic and Political Outlook 2021

Check out CEDA's new report featuring insights from economists and political commentators on the year ahead.

Workforce | Skills

Labour market policy after COVID-19

Several recognised experts explore current labour market policy issues and present practical ideas on ways forward.

Policy making in the COVID-19 recession has thus far been all about health and macroeconomic support and stimulus. But once the recovery is sufficiently underway, policy making will need to turn from the general to the particular. 

In this series of papers from labour market experts, we look at what those policies should be, with topics chosen with the ‘once recovery is underway’ time horizon in mind.

Authors:

Associate Professor Elizabeth Hill, The University of Sydney

Dr Peter Davidson, Adj Senior Lecturer, Social Policy Research Centre UNSW Sydney

Sonia Arakkal, Co-founder, Think Forward

Professor Jeff Borland, Truby Williams Professor of Economics, University of Melbourne; Board Member, CEDA

Gabriela D’Souza, Senior Economist, CEDA

Michael Keating AC

Andrew Stewart, John Bray Professor of Law, University of Adelaide


INTRODUCTION
Jeff Borland, Truby Williams Professor of Economics, University of Melbourne; CEDA Board Member


Policy making in the COVID-19 recession thus far has been all about health and macroeconomic support and stimulus. This has been necessary and entirely sensible – without the COVID-19 virus being brought and kept under control, economic activity will remain depressed.[1] At the same time, to alleviate the substantial negative impacts of the recession on households and business, and to promote macroeconomic recovery, large-scale and broad-based fiscal support has been essential.

Once recovery is sufficiently underway, however, policy making will need to turn from the general to the particular. When it comes to policies directed at the labour market, there are four main reasons for that change of focus:

  • First, while recovery may lift all boats, it will lift them by different amounts, and extra assistance will be needed for groups who have been most disadvantaged by the recession and are finding it most difficult to get back into work. 
  • Second, the existing JobKeeper and business support programs have been about saving jobs and preserving connections between employers and their workforces – an appropriate objective for policy at a time when new job creation has virtually disappeared. However, once recovery is underway, it will be desirable for the orientation of policy to shift towards job creation.
  • Third, at least in the medium-term, it seems that COVID-19 will not completely disappear and that will create issues of labour market adjustment that must be managed. 
  • Fourth, the imperative for implementing structural reforms that can increase labour productivity (for example, by increasing the efficiency of operation of the labour market or raising workers’ human capital) will be heightened as one means to achieve recovery at the fastest possible rate.

The topics relating to labour market policy in this volume have been chosen with the ‘once recovery is underway’ time horizon in mind – and to address each of the four types of policy issues likely to arise.

In their articles, Elizabeth Hill, Peter Davidson and Sonia Arrakal describe the outlook and propose policy options for the groups who it seems will be most adversely affected by the COVID-19 recession: for women, for the long-term unemployed and for young people. 

My article addresses the scope for job creation via wage subsidy/hiring credit programs, while Gabriela D’Souza reviews COVID-19's likely effect on immigration and the opportunities that may create for Australia. 

Finally, articles by Michael Keating and Andrew Stewart examine two main areas of potential structural policy reform already under consideration by the Federal Government: reform to the training system and industrial relations reform.

The magnitude and complexity of the task faced by governments in the years ahead cannot be overstated. Having successfully scaled the policy-equivalent of Mt Everest – dealing with COVID-19 and its immediate economic impact – they must now, without any rest time at base camp, make another Everest-like ascent to address the vast array of second-order issues that will inevitably arise in the phase of economic recovery. 

The contributions in this volume are written in the spirit of seeking to assist with that climb. Each provides motivation for the labour market policy issue that needs to be (or might be perceived to need to be) addressed and presents practical ideas on ways forward. CEDA is delighted to be able to offer these insights from set of recognised experts in their fields, each with extensive experience in the policy sphere.

Explore analysis

Reducing gender inequality and boosting the economy: fiscal policy after COVID-19
Associate Professor Elizabeth Hill, The University of Sydney

The scramble for jobs: who will be employed when the music stops?
Dr Peter Davidson, Adj Senior Lecturer, Social Policy Research Centre UNSW Sydney

Why Australia needs a youth jobs guarantee
Sonia Arakkal, Co-founder, Think Forward

The use of hiring credit wage subsidy programs after COVID-19
Professor Jeff Borland | Truby Williams Professor of Economics, University of Melbourne; Board Member, CEDA

Immigration and COVID-19
Gabriela D’Souza, Senior Economist, CEDA

Skills and workforce development
Michael Keating AC

COVID-19 and the future of Australian industrial relations
Andrew Stewart, John Bray Professor of Law, University of Adelaide

 
[1] Increasing evidence that the ‘fear’ effects of contracting COVID-19 have been major driver of reduced household spending with onset of the virus – see for example: Goolsbee, Austan and Chad Syverson (2020), ‘Fear, lockdown and diversion: Comparing drivers of pandemic economic decline 2020’, National Bureau of Economic Research, Working Paper no.27432; Chetty, Raj, John N. Friedman, Nathaniel Hendren, Michael Stepner and The Opportunity Insights Team (2020), ‘How did COVID-19 and stabilization policies affect spending and employment? A new real-time economic tracker based on private sector data’, National Bureau of Economic Research, Working Paper no. 27431; And for Australian evidence: Ball, Jarrod (2020), ‘Real time economic data is in big demand but short supply’, CEDA Blog; accessed at: https://www.ceda.com.au/Digital-hub/Blogs/CEDA-Blog/April-2020/COVID-19-Real-time-economic-data-is-in-high-demand-but-short-supply
 

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