What’s in an Age?

Covid Jobs Update from John Black, CEO of Education Geographics, October 12, 2020

Some economists, trade unions and the Labor Opposition say the Federal Government’s JobMaker Budget proposal which subsidises wages only for eligible workers less than 35 years old should be open to eligible workers of any age. They argue that the current policy discriminates against older workers and may be open to job substitution rorts from some employers.

And most Australian voters tend to agree with them.

This week’s Newspoll finds the age-limited JobMaker measure to be unpopular with 57 percent of all voters, 63 percent of older voters and, worryingly for the Government, a clear majority of (mostly older) Coalition voters. Given their concerns and this lack of public support, Labor and the Greens in the Senate can smell a political opportunity and are lining up to give the enabling legislation the death of a thousand committee cuts.

In defending its proposal, the Government draws heavily in Budget Papers on seasonally adjusted data in the monthly ABS Labour Force Survey and points to higher unemployment rates among younger workers. It also uses Government figures of 700,000 persons under 35 years on Jobseeker or Youth Allowance at the end of August.

The problem for the Government in relying on the traditional ABS monthly Labour Force sample of about 50,000 persons is that the series has been sorely tested by the immediate and massive labour market disruption caused by emergency social distancing orders and border closures since mid-March, and then by unprecedented stimulus measures from the Federal Government with JobKeeper and JobSeeker to minimise the impacts of this disruption.

The reliability of data produced by official sources during this somewhat hectic period is illustrated by the fact that the Taxation Office, Treasury and the Government initially estimated 6.5 million Australians would receive JobKeeper at a cost of $130 billion, only to revise the recipients down to 3.5 million and the cost down to $70 billion.

So, some degree of caution is recommended when evaluating Government initiatives involving both taxpayers’ money and big numbers of jobs in the labour market.

Bear in mind here the Labour Force series leverages up a random monthly sample of about 50,000 persons to estimate results for about 13 million Australian workers, which the Government has then used to justify biasing its JobMaker policy in favour of certain age groups less than 35 years old.

The problem for the Government with JobMaker is that these leveraged results are contradicted by the new experimental ABS series based on weekly ATO payroll figures for about ten million real jobs.

If you’re trying to understand the behaviour of 13 million workers and break it into smaller sub-groups or areas, you’d expect to be a lot better off using a weekly sample of 10 million jobs, rather than a monthly sample of 50,000 persons.

Before you do, it’s useful to compare the two series first. See an ABS comparison here: https://www.abs.gov.au/methodologies/weekly-payroll-jobs-and-wages-australia-methodology/week-ending-5-september-2020#differences-to-labour-force-employment-statistics

Figure 1 below, shows the national summary for age-based August payroll data by index numbers in blue, and a comparable index we constructed for the labour force sample by age groups in green.

Figure 1 shows, that despite definitional differences, the Payroll jobs and Labour Force Survey index values are similar for (combined) all ages, and for those age groups 20-29, 30-39, 40-49 and 50-59 years, with each group containing between 2.3 and three million workers.

And both series confirm the twenty-somethings potentially benefiting from the Government JobMaker wage subsidy scheme are up to three percent worse off than the average worker and worthy of some targeted support, with appropriate safeguards.

A large part of this poor result for twenty somethings is due to the ongoing job lockdowns in Victoria and the Victorian figures pulling down the national results. Clearly, the Commonwealth Government here has thrown a JobMaker lifeline to Victoria, without breaching its obligations to the states which have made a better fist of managing Covid.

But what about the strong public sentiment in favour of extending JobMaker to other age groups, particularly older Australians? The payroll jobs index shows there has been a 5.2% decline in jobs for 60-69-year-olds. Contrastingly, according to the Labour Force series, there has been only a 0.4% decline in employed persons aged 60 years or more, an age group containing about 1.4 million workers.

So, the payroll data paints a grim picture for older workers, but the Labour Force data does not.

We see the reverse picture for the relatively small (about 600,000) group of very young workers aged 15-19 years, with payroll data spot on the national average for all workers, but the Labour Force screaming panic stations, with nearly 13 percent of very young workers losing jobs since the job lockdowns started with the 100^th confirmed Coronavirus case in mid-March.

Thanks to the great work done by the ABS since March with the huge volume of data provided by the Australian Taxation Office in the payroll series we can drill down further than the national figures by age, down into age groups by State, shown below in Table 1.

This adds the ingredient missing from the national age-based data and that’s Victoria, where the state figures for all ages trail more than three points behind the national figure and the bulk of these job losses have been experienced by workers under 29 years and above 60 years.

Table 1

In every state, bar Victoria, the under 20s are back up close to or above the pre-Covid index numbers, while those 70 and over are still well below these figures. When we isolate the bigger groups of those in their 20s and their 60s, the position is shown in Figure 2, below.

Figure 2

The evidence here shows that, during a lockdown period, the jobs situation is worst for young people (with lots of jobs lost in food and retail). However, after lockdown, there is faster recovery in the job situation for young people.

For Australia as a whole:

• the jobs index value for 60-69-year-olds fell to 93.1 on 18 April and recovered by about two points to 94.8 on 15 Aug.
• the jobs index value for 20-29-year olds fell drastically to 85.9 on 18 April but also recovered rapidly to 93.8 on 15 Aug.

in Victoria, which remained in lockdown in August, the jobs index values for both groups have remained low, and are much lower in the younger age group.

Figure 3 shows the big and prolonged slump for twenty-somethings in Victoria, and an identical slump but subsequent recovery for twenty-somethings in Australia as a whole, which of course includes Victoria. Take out Victoria and the twenty-somethings could be about level or narrowly ahead of their grandparents.

Figure 3

Put simply, the evidence supported by the millions of taxpayers in the payroll data series infers that the Government doesn’t need a recovery in jobs for young people; rather it needs a recovery in jobs in Victoria, as the latter would render the former done and dusted.

Your humble correspondent, who has long felt that politicians overreact to the Labour Force stats which show that when a young person loses a job, they join the official unemployment rate and hence dominate news reports, whereas, when an older person loses their job, they tend to leave the official jobs market until they’re sucked back in by local rising demand – particularly for part time tourism and hospitality jobs in regional centres.

This resonates with the views of University of Melbourne economist Professor Mark Wooden who questioned the Federal Government’s focus on subsidising younger jobs, given the substitution effects which would see young persons prioritised over older workers.

“I worry if they (the Government) are somewhat sucked in by the argument that young people have been much worse affected economically,” he told the Financial Review after the Budget move was announced.

“That’s true, but I think that’s true in all recessions. Young people do worse, they lose jobs faster. But they also do better in the recovery.”

In that case, wage subsidies would have a windfall effect by paying for the employment of workers who would have been hired anyway.

For what my views are worth here, I’m backing the weekly payroll data interpretation of the current labour market when it comes to its age profile. And, given most Australians and a majority of Coalition voters agree with me, the Government would be wise to accept Senate amendments broadening JobMaker to all Australians.

“Life is so normal”, the Treasurer reportedly remarked last weekend, after months locked down in Melbourne and quarantined in Canberra, when he visited Sydney and was able to get out of the office and share a coffee with others in Bondi.

Perhaps he needed to look more closely at the ages of those serving him, as the payroll data shows more jobs for the under 20s in NSW now than there was before the Covid lockdowns.