Job retention schemes hold back workers' earnings: New e61 research - e61 Institute

30 Jun 2025 7:00 AM

Job retention schemes rolled out during the COVID-19 pandemic may have actually held back wages by keeping workers in poorly matched roles, according to new research by the e61 Institute.

 

The study finds that workers covered by both JobKeeper and NSW’s JobSaver earned $3,000 less on average in the year following the pandemic than similar workers who weren’t subsidised.

 

The research suggests that during the next downturn governments should use household income support and business loans instead of job retention subsidies to support the economy.

 

During COVID-19, governments were concerned that firms and workers would separate even if they were in well matched jobs. By subsidising the job, job retention schemes could keep firms and workers matched together and protect productive capacity. 

 

e61 analysed the NSW JobSaver program, which supported businesses and workers during the 2021 COVID-19 lockdowns by subsidising firms’ payroll expenses. But, like the federal JobKeeper program, JobSaver may have preserved jobs at the cost of lower future wages and productivity by keeping workers in poorly matched roles.

 

Drawing on detailed administrative data, the e61 research found:

 

• Workers tied to job retention schemes for the longest had lower earnings growth and job mobility than other workers.

• Workers covered by both JobKeeper and JobSaver earned $3,000 less in the year following the pandemic than similar workers who weren’t subsidised.

• Workers covered by only JobKeeper earned $1,500 less in the year after the pandemic.

• Job retention schemes aimed to protect workers who were well matched to their jobs - but the workers actually covered by JobSaver tended to be younger, lower paid and had spent less time with their employers.

 

“Tying workers to struggling firms is potentially worse for those workers in the future,” said Aaron Wong, senior research economist at e61 Institute.

 

“Although JobSaver didn’t tie people to their jobs like JobKeeper, our research suggests it disadvantaged workers by artificially propping up poorly performing firms and reducing productivity-enhancing job mobility.”

 

As well as potentially holding back wages, the research also found that JobSaver trapped workers in low match value jobs.

 

At a total cost of $7.2 billion, JobSaver disproportionately supported short-tenure, low-skill roles – in sectors like hospitality – where jobs typically don’t last long.

 

"Many of the jobs subsidised by job retention schemes were jobs that workers could ordinarily move around easily – in other words the value of maintaining these job matches was not high,” said Mr Wong.

The report notes the design of job retention schemes matters for reducing their negative effects. JobSaver’s more flexible design allowed for greater labour mobility than JobKeeper, which required employers to retain specific individuals. This meant that JobKeeper likely had larger negative effects on workers’ earnings than JobSaver and lower labour mobility may be contributing to Australia’s ongoing productivity struggles.

“JobKeeper and JobSaver were introduced in an emergency where policymakers faced unprecedented uncertainty and time constraints,” said Mr Wong.

 

“But in planning for the next economic downturn, we now know it’s better to support people and businesses directly through household cash transfers and credit support. This is better than trying to freeze the labour market, which risks tying workers to a sinking ship and worsening their long-term outcomes.”

Contact details:

Charlie Moore: 0452 606 171

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