JobMaker not suited to most SMEs, as Treasury estimates hiring credits will create 45,000 jobs, not 450,000

The federal government’s JobMaker hiring credit is not suited to many SMEs that are still in a recovery phase, according to professional accountancy body CPA Australia, as new estimates suggest the program will not create as many new jobs as initially promised. 

On Monday, Treasury officials revealed the hiring credit is expected to create only 10% of the new jobs promised by Treasurer Josh Frydenberg when he unveiled the $4 billion policy on budget night. 

At the time, Frydenberg said the wage incentive, which is targeted at younger workers, would support “around 450,000 jobs for young people”.

However, The Guardian reports that Jenny Wilkinson, deputy secretary of Treasury’s fiscal group, told Senate estimates on Monday that Treasury believes the number of “genuinely additional” jobs created by the program will be closer to 45,000. 

Wilkinson said it was “very hard to judge” whether the hiring credit would be the sole reason a business hires a new employee, although the Treasury estimate of 45,000 has “very wide” margins of error.

“In costing this we’ve made a conservative assumption that about 10% of employment is genuinely additional — it would not have happened but for the hiring credit,” she said. 

The comments come ahead of a Senate inquiry into the program, which is yet to pass parliament. 

Both Labor and the Greens have been critical of the program, which offers a credit of $200 per week to employers that hire new workers aged between 16 and 29, and $100 per week for workers between the ages of 30 and 35. 

Gavan Ord, manager of business and investment policy at CPA Australia, says this kind of policy is designed to support growing business, not those that are simply trying to survive.

“Uptake of the JobMaker scheme is inextricably linked to the business cycle,” Ord tells SmartCompany. 

The hiring credit will be most beneficial for businesses already in the growth phase of their business cycle and ready to add to their headcounts, says Ord, whereas many SMEs are still in the recovery phase of their cycle, as they continue to grapple with the challenges of the coronavirus recession. 

“In Victoria, many business owners are still engaged in a daily battle for survival. Hiring staff is the last thing on their minds,” Ord says. 

“We know from past experience that businesses are more likely to reduce headcount during a recession. The [$200 or $100] amount of the JobMaker hiring credit is not sufficient to overcome the uncertainty that a recession creates.”

As it stands, the JobMaker program also has a number of eligibility requirements that may exclude some SMEs, including the fact the hiring credit is not available to businesses claiming JobKeeper payments. 

Ord says the JobMaker hiring credit is likely to be more useful to SMEs in 12 months time, “as they enter the growth phase of the business cycle”. 

“Ultimately, seeking trusted professional advice will provide greater benefits than pursuing a strategy which is not aligned to the business’ current needs,” he adds. 

NOW READ: Tassie economy outperforms the pack, as borders reopen and events plan is rolled out

NOW READ: Qualifying and legacy employers can still utilise some JobKeeper flexibilities: Here’s a break down