“So more than one third of younger Australians are either without paid work, or working fewer hours than they would like.”
The unemployment rate jumped sharply for the half of the population under the age of 44, but barely shifted for the half aged over 44. Women are also harder hit on average, with official figures showing 8.1 per cent of women lost their jobs between mid-March and mid-April compared with 6.2 per cent of men.
This is in contrast to previous downturns. Coates says older workers bore the brunt of the early 1990s recession when the manufacturing industry was hit hard.
Similarly, Commonwealth Bank senior economist Belinda Allen says low-paid workers are worst affected by this downturn, whereas the 2008 slump mainly hurt high-paid workers especially in the mining industry.
Out of work
Keona Weller, 30, from Bayside in Melbourne lost her sports therapy business in seven minutes one Sunday afternoon, as she received successive texts from the AFL and other elite sporting clients informing her that the pandemic shutdown meant her services were no longer required.
Nine days later she had to close her clinic – where she had four staff sub-contracted to her company – when the state government closed down massage therapy.
She could not get the JobKeeper payment of $1500 a fortnight because she had not completed last year’s tax return so she applied for unemployment benefits and started driving for Uber.
As a single mother with a 9-year-old daughter, this was not enough to pay the rent so homelessness service Launch Housing stepped in to help her stay afloat.
Weller now has rent relief from her landlord – they recently connected on Facebook and she found out he had offered to reduce her rent but the real estate agent had not passed it on.
Last week she found a full-time job working in a call centre and she now has the all-clear from both the government and her landlord to treat massage clients at home.
“There are a lot of people who are definitely struggling and I am grateful that I was given the chance to get some work,” she says.
The federal government is pumping billions of dollars into the economy, with the two most important stimulus measures being JobSeeker and JobKeeper. JobSeeker is the new name for unemployment benefits and is temporarily double the old Newstart at a base rate of about $1100 a fortnight.
JobKeeper is the $130 billion program to subsidise employers to retain jobs for six months, which Grattan describes as the “most generous social welfare program in Australia’s history”.
A Commonwealth Bank analysis of its own accounts suggest while wages and salaries have fallen, this has been more than offset by an increase in government benefits. JobKeeper payments, which are now coming through after a delay of more than a month, are paid via the employer and will count in wages and salaries.
People who have taken a hit to income include anyone who has lost their job and is either on JobSeeker or who doesn’t qualify for welfare, those who have taken a pay cut to be on JobKeeper, and landlords who have accepted a rent reduction.
Yet, there are also those who are doing better.
Anyone who was previously on Newstart has had their income doubled but only during the pandemic. There was already a campaign – backed by business groups as well as social policy advocates – to raise Newstart, so the Coalition would face a political fight if it wants it to reset to the previous level.
Coates argues it’s unsustainable to keep JobSeeker at $1500 a fortnight indefinitely, given it is higher than the age pension and many entry-level jobs, but believes it should be $75-100 higher a week than the old Newstart.
Meanwhile, anyone who earned less than $750 a week and is now receiving JobKeeper has had a pay rise. Grattan analysis, reported in The Sun-Herald, shows JobKeeper equates to about $39,000 a year, or 70 per cent of the median wage, and that will be a pay rise for 80 per cent of part-time workers.
But for professionals, like Ilina Lovely from Marrickville in Sydney, JobKeeper is a pay cut.
Lovely, a single mother of two children aged 7 and 9, has been stood down from her hospitality management job because of the lockdown. The size of the venue means it could be months before it’s viable to reopen.
While Lovely is grateful for JobKeeper, it is about half her normal income and only covers her rent and some of her bills.
“It’s been a bit scary,” Lovely says. “We were already struggling financially so this has just totally tipped us over the edge.”
She expects to burn through her small stash of savings and start accumulating credit card debt before she returns to work.
The spending slump
One of the biggest risks to the economy is the slump in consumer spending and confidence.
National economic figures show many people have maintained their full income and are saving their money, whether for lack of anything to spend it on during lockdown or as a precautionary measure.
Free childcare has also been a boon for millions of families using long daycare, vacation care and after-school care.
What happens next depends on how quickly things open up, whether efforts to open up the economy spark a second wave of the pandemic, how consumers behave, and how long the government maintains its stimulus spending.
The Reserve Bank has forecast gross domestic product to fall 8 per cent in the six months to June with further falls in the second half of the year, before a recovery in 2021.
Meanwhile, wages growth is expected to slow to 1.5 per cent in December 2020, down from 2.1 per cent in the March quarter of 2020.
There are hopeful signs consumers are starting to loosen the purse strings. Commonwealth Bank figures, based on its own credit and debit card transactions, point to a cautious recovery in consumer spending. Overall spending was down 2 per cent nationally and 4 per cent in NSW for the week ending May 8, compared with the same week last year. But only three weeks ago, spending was down a whopping 20 per cent year on year.
However, Allen cautions against too much optimism. It was a weak point for the Australian economy 12 months ago, with unemployment rising leading into the May 18 federal election and just before the Reserve Bank’s first interest rate cut.
“The comparison to 12 months ago may not be fair,” Allen says. “What we are comparing it to is the momentum in the Australian economy pre-coronavirus. Compared to earlier this year, spending is still down around 10 per cent.”
Andrew and Vanessa from Ashfield in Sydney, who requested to go by first name only, have become accidental savers.
Their income is the same but their expenditure is much less, because they are no longer going out for dinner and drinks and they cancelled an overseas trip.
Andrew, 39, is a public servant working from home and Vanessa, 40, runs a small arts organisation with secure funding. Her salary is subsidised by JobKeeper but topped up to the full amount.
Usually the couple, who have no children, are out seeing friends and going to art openings several nights a week, but that’s all stopped. “We Zoom with friends and that’s it,” says Andrew.
Vanessa says the couple was trying to spend the extra cash to support local businesses and the arts.
“Maybe it’s buying a fancy steak from our local butcher, buying beer from our favourite brewery in Marrickville, buying a voucher for a favourite bar in Newtown,” she says.
“We’ve also bought earrings from a friend who is a designer and an artwork from a commercial gallery of an artist that we really like.”
The couple is still saving more than usual, and interest rates have fallen, so they are getting ahead on their “enormous mortgage” and spending on home improvement.
Andrew says their situation was unusual in their social circles because the arts industry was one of the hardest hit.
Those left out
Not everyone is eligible for JobKeeper. The scheme does not cover freelancers and people with episodic employment, for example an arts worker who works on multiple productions. It also does not not cover people who work for universities or any businesses owned by another government.
Media Entertainment and Arts Alliance chief executive Paul Murphy says there needs to be a specific support package for the arts, because the impact has been “devastating”.
“A number of people have said we risk losing a generation of performers and other professionals in the industry, because it’s just too precarious,” Murphy says.
“The reality is, if screen and live performance and music are going to get back up and running again, it’s going to require a specific assistance package from the government and that’s what they’ve been refusing to do up to this point in time.”
The federal government’s plan for step three to reopening the economy will still limit audience sizes to 100 people. Even then, physical distancing requirements are likely to mean even small venues can’t be filled.
Meanwhile, migrants on temporary visas are not only ineligible for JobKeeper, but also barred from receiving any welfare benefits. Other countries such as Britain have included migrant workers – including Australian expats – in similar schemes.
Andres Puerto, 27, is an international student from Colombia, halfway through his Master in Business Information Systems in Sydney.
Last year he started a business renting e-bikes to other international students working for delivery companies and he feels lucky that he’s been able to keep this going during the pandemic.
Puerto says most of his fellow international students were working in jobs as cleaners, in the hospitality industry or construction and lost their jobs overnight. He has been volunteering at the Addison Road Community Centre food pantry in Marrickville, which has mobilised a huge community effort to feed people left destitute by the downturn.
“I know how it feels to be vulnerable, I know how it feels when I was here for six months with no English and not much money,” Puerto says. “It is very difficult for them.”
Puerto says students have been told to access their superannuation but that does not help the new arrivals. In his own case, he tried to access his super only to discover his previous employer had never paid it.
He believes there needs to be more support for international students and universities should offer fee relief if they are not offering face-to-face teaching.
Caitlin Fitzsimmons is a senior writer for The Sun-Herald, focusing on social affairs.