Template-Type: ReDIF-Paper 1.0
Author-Name: Caroline Fyfe
Author-X-Name-First: Caroline 
Author-X-Name-Last: Fyfe
Author-Email: caroline.fyfe@motu.org.nz
Author-Workplace-Name: Motu Economic and Public Policy Research
Author-Name: Dave Maré
Author-X-Name-First: Dave 
Author-X-Name-Last: Maré
Author-Email: dave.mare@ot.govt.nz 
Author-Workplace-Name: Motu Economic and Public Policy Research
Author-Name: Phoebe Taptiklis
Author-X-Name-First: Phoebe 
Author-X-Name-Last: Taptiklis
Author-Email: phoebe.taptiklis@ot.govt.nz 
Author-Workplace-Name: Motu Economic and Public Policy Research 
Title: COVID-19 Wage Subsidy: Outcome evaluation - Value for Money
Abstract: The value for money of the COVID-19 Wage Subsidy Support programme (WSS) was evaluated using cost-benefit analysis from a societal perspective, that encompassed the New Zealand economy as a whole. The subsidy was treated as a transfer (from the government into the wider NZ economy) and negative transfers - government money repaid or not spent, i.e.– subsidy repayments and unemployment support avoided - were subtracted from this. As the analysis was undertaken from a societal perspective, transfers were included as both a cost and a benefit, but with a 20% deadweight burden of raising tax revenue added to the cost side. The cost of administering the wage subsidy was also included. 
The quantified benefits of the wage subsidy were increased output associated with people remaining in employment, and the value of the wellbeing they experienced from avoiding unemployment. Outcomes were calculated by employment months gained over the short (6 month) and medium (12 month) term. The March 2020 wave had a favourable benefit-to-cost ratio of 1.20 after 6 months and 1.45 after 12 months. The 12-month ratio was 1.14 for the Extension wave, 0.83 for the Resurgence wave, and 1.63 for the March 2021 wave.
Overall the COVID-19 wage subsidy represented value for money. It allowed more workers to remain in employment and more sole traders to remain in business, than was predicted would occur without a wage subsidy. To understand whether the effectiveness of  the wage subsidy as an intervention remained stable over time, it is recommended that an evaluation be undertaken on the August 2021 wage subsidy.
The value for money analysis could only identify direct benefits of the wage subsidy and so was limited to examining microeconomic outcomes. An investigation of fiscal interventions to mitigate the impact of the COVID-19 pandemic on the New Zealand economy is recommended to determine their effectiveness at a macroeconomic level.
Length: 24 pages
Creation-Date:  2023-08
File-URL: https://motu-www.motu.org.nz/wpapers/23_04.pdf
Number: 23_04
Classification-JEL:  J08, J20 
Keywords: COVID-19, Wage subsidy, value for money, employment retention, sole trader survival, cost benefit analysis 
Handle: RePEc:mtu:wpaper:23_04