Andrew Leigh

THE UGLY TRUTH IS THAT THE NUMBERS MATTER — AND WE ARE NOT GETTING THEM RIGHT

Crikey, 22 July 2020

Numbers, said mathematician Paul Erdős, are beautiful. But when it comes to coronavirus, they’ve also been downright ugly. That’s true whether we’re talking about the rate of infection of the virus, or the size of the economic slump, which has literally required economists to redraw their graphs to accommodate the drop. Getting the right numbers to the right people at the right time is critical. Yet amidst the first recession in a generation, Australia is fighting blindfolded, because we’re not measuring and publishing the things that matter most.

Let’s start with JobKeeper. When it was first announced in March, the federal government anticipated that the wage subsidy program would cost $130 billion and support 6 million jobs. In May, they continued to say that the program was on track in terms of both cost and jobs. Then the $60 billion penny dropped. Suddenly the Treasurer admitted that the program would in fact cost just $70 billion and support only 3.5 million jobs.

Rather than owning the mistake, Josh Frydenberg blamed employers for putting the wrong figures into the tax office form. After years of lecturing poor people about the importance of personal responsibility, the government wasn’t willing to take any. The biggest fiscal error in Australian history was apparently the fault of small business owners, not the government.

Data, too, is at the heart of the problem with how JobKeeper was designed. When COVID-19 hit, many countries realised that it was critical to prevent affected firms from firing their staff. It typically takes twice as long to get out of an economic slump as it does to get into it in the first place (like romantic relationships, employment relationships are easier to end than start). So governments around the world subsidised wages, in order to keep firms and workers together through hard times.

To run this kind of wage subsidy scheme, governments need to know two things: how much the organisation’s turnover has been hit, and how much its employees earn. Yet despite touting its ‘Single Touch Payroll’ system which records both, the federal government weren’t confident they could use its data as a way of administering JobKeeper. This meant that while other nations subsidised workers’ actual wages, Australia opted to provide a flat $750 per week for every employee. This meant that someone working one day a week received a windfall. Meanwhile, the Coalition claimed that they couldn’t afford to extend the scheme to one million casuals, even those that worked full-time.

This week’s announcement still hasn’t fixed the problem. Rather than match the payment to the wage, the government has gone with a clumsy solution. From September, JobKeeper will pay $600 per week for those that work more than 20 hours a week, and $375 per week for those working less than 20 hours a week. Because the payment remains poorly targeted, it’s more expensive and less effective than it could have been. The government’s deficient data systems are costing the budget millions of dollars.

Meanwhile, the Australian government is stubbornly refusing to say which firms are getting JobKeeper. In New Zealand, the government publishes full details of all firms receiving their COVID-19 wage subsidy program, including the number of employees covered and the amount that has been paid. For the Ardern Government, transparency provides a form of public accountability. By contrast, even in the case of Australian firms with an annual turnover above $100 million, taxpayers are kept in the dark about whether or not the firm is getting JobKeeper.

Transparency is especially important for large public firms. As Ownership Matters’ Dean Paatsch points out, some Australian firms are on track to receive JobKeeper and report an increase in profits. If their executive pay rules aren’t carefully calibrated, executives in those companies could be in line for big bonuses.  As Paatsch mildly puts it, ‘I don't think it was ever the intention of the government to subsidise executive salaries.’ Personally, I’d go a step further: if your company is being kept afloat by the taxpayer, the CEO shouldn’t be getting a bonus.

Finally, we’re being let down by the lack of up-to-date information on unemployment. Each month, the Australian Bureau of Statistics publishes unemployment figures. But those numbers don’t tell us the unemployment rate today. Instead, because it takes time to compile the figures, they tell us the unemployment rate about six weeks ago. Making decisions based on these figures is like driving down a steep hill by watching the rear-view mirror. You might get there safely, but you’d better hope there aren’t any sudden turns.

There is a straightforward solution. When people go into a Centrelink office and claim unemployment benefits, the government knows immediately. In the United States, these figures are published at 8.30am every Thursday morning. The numbers have been reported once a week since 1968. As economist Saul Eslake notes, it’s hard to see why the same statistics that have been published weekly in the United States for more than half a century should be regarded as a ‘state secret’ in Australia. Right now, real time unemployment estimates would be invaluable in states where coronavirus numbers are rising.

It's not an accident that the Morrison Government has repeatedly mucked up the numbers. Since coming to office, they have literally decimated the public service. That’s undermined institutional knowledge, and impaired the capacity of government agencies to invest in data systems. As the Robodebt scandal proved, the Liberals didn’t really want to understand how the government’s computer systems affected citizens. Robodebt is what happens when conservative rhetoric about ‘cracking down on welfare cheats’ meets the reality of technology that’s only as good as the numbers fed into it. If the federal government took data seriously, invested in the public service, and published key figures, the country would be better able to battle the economic slump.

Business thinker Peter Drucker once observed that ‘what gets measured gets managed’. You might not share Paul Erdős’s love of numbers, but if your organisation or government starts measuring the wrong things – or doesn’t have the figures at all – you’ll soon suffer the cost. It’s time the federal government started taking figures seriously. Beautiful or ugly, they matter, and they’re vital to the recovery.

Authorised by Paul Erickson, ALP, Canberra.