Good piece Matt. On the necessity of JobKeeper and similar schemes - there was some recent research claiming that the reason the US has been leaving everyone else in the dust on productivity growth in recent years is the lack of any job retention scheme during Covid. The idea is that mass layoffs pushed people out of old stale roles and forced them to look for jobs that were a better match for their skills. I’m not totally convinced, but it is a genuine attempt to explain something that remains baffling to me otherwise.
I'll post on this next week, but I'm not convinced about job retention schemes being a medium term productivity drain in the same way I'm not convinced they protected capacity of the economy - the productivity changes in both cases should be temporary.
We've seen over half of the "at risk" job matches that were maintained by JobKeeper already severed as people have moved on. Unless we believe people are making worse matches when switching jobs in a hot labour market, or experienced sharp loses in human capital they would not have otherwise, I don't see how this is really an explanation of much.
And a key thing for this is that the US did still have business loan and protection schemes - so the cleansing effect of "bad firms" dying didn't necessarily happen to a greater degree in either country. It was just the maintenance of employment relationships.
Good piece Matt. On the necessity of JobKeeper and similar schemes - there was some recent research claiming that the reason the US has been leaving everyone else in the dust on productivity growth in recent years is the lack of any job retention scheme during Covid. The idea is that mass layoffs pushed people out of old stale roles and forced them to look for jobs that were a better match for their skills. I’m not totally convinced, but it is a genuine attempt to explain something that remains baffling to me otherwise.
Good point. The Australian Productivity Commission has been making a similar point, and it was a lesson some people took from earlier work we did on JobKeeper (https://e61.in/what-can-jobkeeper-teach-us-about-job-retention-schemes/ - all of the relevant work is actually buried in an appendix here https://e61.in/wp-content/uploads/2023/11/Appendix-Lessons-from-JobKeeper.pdf).
I'll post on this next week, but I'm not convinced about job retention schemes being a medium term productivity drain in the same way I'm not convinced they protected capacity of the economy - the productivity changes in both cases should be temporary.
We've seen over half of the "at risk" job matches that were maintained by JobKeeper already severed as people have moved on. Unless we believe people are making worse matches when switching jobs in a hot labour market, or experienced sharp loses in human capital they would not have otherwise, I don't see how this is really an explanation of much.
And a key thing for this is that the US did still have business loan and protection schemes - so the cleansing effect of "bad firms" dying didn't necessarily happen to a greater degree in either country. It was just the maintenance of employment relationships.