What Is The Wage Subsidy?
The Wage Subsidy was a scheme that was rolled out at high pace in 2020, which aimed to prevent loss of employment due to Covid lockdowns. Businesses could apply for the money which had to be used to cover the wages of your employees over a 12 week period.
Businesses could claim either $585.80 for people working an average of 20 hours or more per week (full-time rate) or $350.00 for people working an average of less than 20 hours per week (part-time rate). The subsidy was paid as a lump sum1.
Under the scheme, businesses were obligated to try their hardest to pay employees at least 80 percent of their regular income for the period of the subsidy2.
To qualify for the Wage Subsidy:3
your business must be registered and operating in New Zealand
your employees must be legally working in New Zealand, including employees who:
have a NZ work visa
have a condition on their NZ temporary visa that allows them to work in NZ
are international students whose visa allows them to work in NZ
your business must have experienced a minimum 30% decline in actual or predicted revenue over the period of a month, when compared with the same month last year, and that decline is related to COVID-19
your business must have taken active steps to mitigate the impact of COVID-19
you must retain the employees named in your application for the period of the subsidy.
What Happened With The Wage Subsidy?
There were many iterations of the text on the Wage Subsidy page, which included both content and layout, as lawyers and policy writers pored over and amended the details as information came up to consider.
There was a Wage Subsidy Extension in July 2020 to support businesses to pay 8 weeks of wages for their employees4.
There was a massive uptake (anecdotally, every business owner I spoke to claimed the subsidy) and 62% of jobs (excluding sole traders) were supported by at least one wage subsidy5.
There was a lot of controversy that businesses were claiming the subsidy even though they weren’t eligible to do so, but as the requirement of the business predicting a 30% drop in revenue was entirely subjective and was based on the opinion of the business. Consequently, many took the subsidy believing that they were allowed and entitled to do so.
Additionally, many businesses were eligible for subsidies by the virtue of having naturally lumpy revenue that happened to present as a >30% drop during the period - for example, wholesalers might receive large payments every 5 months as they sign on new distributors as part of their normal business operation, then not sell much between pipe-fill orders.
Some businesses started offering to pay back the subsidy even though they were eligible to keep it, and publicizing this. There became a change in perception in the general public and mainstream media that company’s should pay back the subsidy if they can afford to do so.
At some point between 08/02/021 and 21/04/21, the requirements to get the Wage Subsidy changed6. Businesses now had to have a 40% drop in revenue and the concept of predicting a drop had been redacted with no evidence of it ever having been there (thank God for web.archieve.org!). Businesses who had taken a subsidy under one set of rules were required to pay it back on another7.
Analysis
Despite the chaos of a rapidly executed scheme which took many iterations and changes during operation, based on the employment data available, I would say that the Covid Wage Subsidy was a success because people kept their jobs.
[OPINION] Although it’s worth noting that this was a massively expensive scheme with ethical considerations around whether the helicopter money went to right people.
[OPINION] There are also ethical considerations in offering money to companies to keep their employees, then changing the rules and requiring the companies to pay the money back. What the government essentially did was shift the cost (risk) of the subsidy onto the businesses. This is because they offered to fund them to stay open even if it wouldn’t have otherwise be profitable to do so, then made them pay the cost of staying open after the event. Businesses got a bad wrap for keeping the subsidy and the government got kudos for paying to keep everyone’s jobs. It’s a little more complicated than this, which is why I’ve marked this statement as “opinion”. I’m happy to discuss it further in the comments if people wish to opine on this.
[OPINION] While some might argue that this massive expense wouldn’t have been required if we didn’t do lockdowns, I console myself in the fact that the vast majority of NZ wanted to do lockdowns, so democratically it was arguably the right thing to do. Given that the subsidy was essentially tax money being returned to tax payers (albeit heavily weighted to business owners), this was the cost NZ paid for maintaining status quo throughout the lockdowns that people wanted.
(This is a snapshot in time of the Work and Income website taken on 22/04/2020. The site is now defunct and no longer available at this URL).
(This is a snapshot in time of the Work and Income website taken on 22/04/2020. The site is now defunct and no longer available at this URL).
(This is a snapshot in time of the Work and Income website taken on 22/04/2020. The site is now defunct and no longer available at this URL).
(This is a snapshot in time of the Work and Income website taken on 21/04/2021. The site is now defunct and no longer available at this URL).
To support this assertion, here’s an article referencing the change in eligibility but omitting any mention of the requirement involving predicted revenue: https://www.stuff.co.nz/business/129384549/bumper-revenues-but-only-4-of-wage-subsidy-returned