How Red Tape Stops Business And Job Creation

How Red Tape Stops Business And Job Creation

In response to the COVID-19 pandemic, federal and state governments in Australia implemented social distancing rules and lockdown measures which forced many businesses to close with the effect of putting Australians out of work. The best available evidence shows that 8% of small businesses (those with 20 employees or fewer) stopped trading within one week of the imposition of the social distancing regulations. Additionally, some 1.6 million businesses experienced a decline to revenue in June of this year compared with the same time last year, with approximately 220,000 of those businesses experiencing a decline of at least 75%.

The result has been widespread unemployment. According to the Australian Bureau of Statistics, by mid-June, three months after the lockdowns started, 815,000 jobs were lost entirely or reduced to zero hours of work. The official unemployment rate is currently 7.4%, but this counts as unemployed only those who are out of work but are actively seeking and available to work. This measure ignores those who have lost their job and have left the labour force entirely, meaning they have given up even looking for a job. When these Australians, plus those who are still technically employed but are working zero hours, are added to the official estimate, the unemployment rate rises to 11.7%.

Unemployment is more than an economic or financial problem; it is a profound social and humanitarian issue. Work is the epicenter of a good and flourishing life. Those who work are more likely to be able to afford to purchase their own home, participate in their local community, have better physiological and mental health outcomes, are less likely to become addicted to drugs and alcohol, and are less likely to commit crime and become incarcerated. Work, in a word, brings dignity.

In response to the economic downturn caused by the lockdowns, both the federal and state governments have introduced unprecedented levels of spending. Throughout April, May and June, just over half of the Australian labour force was either directly employed by Commonwealth and state governments or local councils, or in receipt of the JobSeeker unemployment payment or the JobKeeper wage subsidy.

As a result of these extraordinary levels of spending, gross federal debt is expected to increase to $1 trillion within three years.

Public policy must focus on getting Australians back into work and businesses operating again as soon as possible. Part of this will be achieved as the lockdown measures are ended. But there are also deeper, structural problems which predate the crisis and have undermined job and business creation in recent years.

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