ELECTION 2023
Was the Covid-19 wage subsidy successful? Two reports have been released detailing to what extent New Zealand’s Covid-19 Wage Subsidy Scheme preserved employment and supported businesses during the pandemic
F
unded by the Ministry of Social Development, Motu Economic and Public Policy Research Trust found that the program was good value for money, helping workers and small business owners more than if there had been no support at all. Their second report also highlights that the subsidy prevented mass layoffs and found no solid evidence that firms did not pass on the subsidy money to their employees. The Covid-19 pandemic has caused substantial disruption in social and economic activity since 42 propertyandbuild.com
March 2020. The New Zealand Government reacted early, introducing stringent lockdowns to restrict the spread of the virus. At the same time, it introduced a series of economic policies designed to support the health response. The largest was the Covid-19 Wage Subsidy Scheme (WSS). The WSS was a hightrust policy, giving subsidy payments to firms that expected to have a substantial drop in revenues because of the pandemic. The objectives of the WSS were to: avoid widespread layoffs
help firms maintain employment relationships with their workers maintain workers’ incomes to help meet their essential needs during lockdown periods. The reports analyse the impacts of the WSS on both firm and worker level economic outcomes, adopting a ‘doubly-robust’ estimation approach that uses propensity score methods both to match subsidy receiving firms to similar non-subsidised firms, and to weight the outcomes analysis. The analysis focuses on the first four WSS-waves: the March
2020 (Original), Extension, Resurgence and March 2021 waves. First, the reports analyses if the WSS reached the intended people and businesses. For the March 2020 wave, subsidised firms experienced substantially greater revenue declines than unsubsidised firms: the modal reduction in revenue for subsidised firms was about 50%. It also observes larger revenue losses relative to a year earlier for subsidised firms in the Extension and Resurgence waves, but revenue changes for the March 2021 wave are confounded by
