HONG KONG (Reuters Breakingviews) - In these sickly times, there is some healthy competition taking place. Even as countries implement social distancing and quarantines in the race to avoid overloading hospitals – “flatten the curve,” in the vernacular – they are also now rolling out massive stimulus measures in part to prevent the unemployment curve from getting too steep. Australia’s A$130 billion ($80 billion) of wage subsidies are among the latest, and they might encourage other governments to dole out more.
Despite having a comparatively low number of coronavirus infections, Australia is acting aggressively on the fiscal front. The plan unveiled by Prime Minister Scott Morrison would cover about 70% of median pay for most workers, and 100% for those in badly affected industries such as tourism. The final tab would amount to about 6.5% of the country’s A$2 trillion GDP. And that doesn’t include previously announced cash handouts, payments to small businesses, loan guarantees and other provisions.
Britain may have provided some inspiration Down Under. Earlier in March, the UK finance minister outlined support to cover 80% of a worker’s wages. It applies for three months and is worth a little over $3,000 a month. Australia’s so-called “JobKeeper” scheme is slated to last up to a half year, at about $1,800 a month. Employees in Australia who earn more than the subsidy would continue to receive their regular salary. To be eligible, companies with less than A$1 billion in revenue would have to experience top-line contraction of at least 30%; bigger companies a 50% decline.
Denmark, too, has introduced significant wage support, but not every government will be able to match this sort of stimulus. Many poorer nations will be too fiscally strapped. Even richer ones trying to live up to the “whatever it takes” mantra might be confronted with sticker shock. In the United States, for example, the Brookings Institution found last year that 53 million Americans aged 18 to 64, or about 44% of all workers, qualify as “low-wage,” with median annual earnings of around $18,000 a year. Six months of pay for them would cost nearly $500 billion. In the quest to keep jobless rates down, however, politicians may find a way. Generosity elsewhere could help supply the will.
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