Low income earners are still feeling the financial ramifications of the coronavirus pandemic, according to new research conducted by one of Australia’s largest banks.
ANZ has found Australians on lower wages were disproportionately affected by the hit to employment levels last year compared to higher income earners, as the mass shutdown sparked by COVID-19 hurt industries such as hospitality, retail and tourism.
ANZ senior economist Catherine Birch said job vacancies had improved and employment levels could track upwards in the first quarter of 2021, but stagnant growth in new vacancies in low-to-middle income brackets may hinder the recovery of the jobs market.
“Encouragingly, as restrictions have lifted, employment has rebounded quickly in the lowest paid occupations,” Ms Birch said in an economic note distributed by ANZ.
“But for workers in the middle and second-lowest paid occupation groups, the recovery so far has been sluggish.”
Australia’s latest unemployment figure was 6.8 per cent, with the Reserve Bank previously confirming ongoing stimulus would be needed while the rate was above 5 per cent.
According to ANZ, the pick-up of lower wage jobs is imperative to the overall economy, as a glut would impact wage growth and the needed boost in inflation.
The central bank has an optimal inflation target range of 2 to 3 per cent, however RBA governor Philip Lowe expects inflation to remain below the needed level for the next couple of years.
“A persistently uneven labour market recovery could have macro-level consequences and may make it more difficult to get under-utilisation low enough to drive wage growth and inflation sustainably higher,” Ms Birch said.
Roughly 39 per cent of all job losses were from six low income occupations: waiters, sales assistants, bar attendants/baristas, kitchenhands, drivers and beauty therapists.
Low-skilled employment is also in a longer-term decline due to the automation of routine work, which usually falls in the lower income categories.
Ms Birch said the damage to the labour force from the pandemic largely impacted younger demographics, which make up the bulk of lower wage sectors.
“Young workers’ over-representation in occupations affected by COVID restrictions, as well as their lower likelihood of JobKeeper eligibility, meant that they accounted for 37 per cent of employment losses between February and May, despite making up less than 15 per cent of the pre-COVID workforce,” she said.
Ms Birch said the job losses skewing towards younger workers helped explain why the housing market was resilient during the economic downturn, as they were less likely to own a home.
ANZ said government policies such as the JobMaker hiring credit and JobTrainer fund would help younger workers skill up for industries where there was future demand, however older workers would see the scarring effects of unemployment.
“Workers in the middle and second-lowest quintiles (income bracket) may suffer more hardship in the short-term from loss of employment and income,” Ms Birch said.
“They tend to be older … and more likely to have dependent children than workers in the lowest quintile. The introduction of the coronavirus supplement to JobSeeker would have helped cushion the blow earlier in the pandemic, but the supplement was cut to $150 per fortnight from January 1 and there has been no confirmation of whether and by how much the base JobSeeker rate will be increased after March 31.”
ANZ’s research said older workers would also lose out to younger workers who were more likely to have a higher level of education.