Lost jobs cost budget $600m

Large job losses since the Abbott government came to power could cost taxpayers more than $600 million in extra dole payments and income tax not paid.

And there could be further costs, too, such as lower GST revenue and a greater call on healthcare and other essential services at concessional rates.

Research by the Parliamentary Library, at the request of Opposition Leader Bill Shorten, has shone a light on the hidden cost of factory closures, putting the cumulative bill for post-election announcements as high as $616 million.

The figure quantifies for the first time the other side of the Abbott government's ''end of the age of entitlement'' policy, which labels company assistance as ''corporate welfare'' and dictates that taxpayer funds should not be used to protect jobs.

The modelling assumes the newly unemployed had been earning average weekly income in the private sector of $57,200 a year, and that they will take 12 months on average to find other work. The figures assume each worker has two children. The losses amount to $35 million per 1000 employees displaced. It also aggregates jobs already axed with the thousands more slated to end in the future.

These include major employers in the manufacturing and resources sectors from Electrolux, Forge, Alcoa, Rio Tinto, and Qantas, to Holden and Toyota.

The government argues that propping up dying industries and poorly managed firms only rewards bad practices and delays the inevitable.

Many economists agree, with Deloitte Access director Chris Richardson, backing the short-term cost of redundancies over what are usually long-term costs from industry support. But the costs of allowing large numbers of workers to fall into unemployment has not been prominent in the political argument until now.

Mr Shorten said the government had not been upfront about the impact of the decisions to leave car workers and others to their own devices in a worsening labour market.

''This government promised a million new jobs over five years but all we've seen since it was elected is jobs going overseas,'' he said.

''It's bad enough these jobs are going, but it's even worse that the government hasn't even put up a fight for them.

''This government was elected to fight for Australian jobs - but the only fight they've been willing to have is to send Qantas and other jobs overseas.''

Some economists work on the so-called ''thirds'' theory after big factory closures, arguing a third of the displaced workforce - usually the younger employees - turn out to have readily transferable skills and pick up work quickly. Another third take a lot longer to find work and even then may not earn as much, and the final third - often the older employees - never secure paid work again.

Australian National University economics professor Bob Gregory said quantifying the costs either to the budget or to individuals displaced was extremely ''tricky'' because of a plethora of situational factors.

These included where and when someone was made unemployed, and what their personal circumstances were, including age, mobility, savings, assets and the income of their partners.

This made predicting the aggregate cost of unemployment benefits problematic because a surprisingly large number of the jobless do not qualify for the dole.

He said the impact on income tax revenue foregone by the Commonwealth was easier to predict.

Charles Darwin University economics professor Bill Mitchell said economists agreed that spending public dollars to keep companies afloat was usually a waste of money but said the problem was allowing people to become unemployed at a time of worsening unemployment.

He said the $600 million figure was not significant in the context of the fiscal envelope and called for more money to be spent on work programs.

Other economists say the short-term cost to the budget does not make the policy of ending corporate welfare wrong.

Dr Richardson said: ''There are costs to the budget, but they don't last long.

''What tends to last are the costs of subsidising businesses. Chances are that in the long term, the budget is healthier if people work for companies that don't need government subsidies to stay in business.''

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