One of Australia's largest unions is urging Treasurer Josh Frydenberg to scrap the two-tiered rate for JobMaker, saying the scheme has a "distortionary" effect that incentivises insecure work.
A Senate inquiry into the Morrison government's hiring credit is set to report on Friday.
Under the proposed scheme, businesses will be able to receive a hiring credit of up to $200 per week for each job seeker aged 18 to 29 they take on, or $100 for every person aged 30 to 35 they hire out of the dole queue.
But Shop, Distributive and Allied Employees' Association national secretary Gerard Dwyer said the scheme was designed in such a way that it was more lucrative to take on younger workers for fewer hours.
Analysis from the union showed on the retail wage, a business would receive a subsidy of around 12 per cent of the wage of a 30-year-old working 40 hours a week.
Alternatively, they could take on two 30-year-olds for 20 hours a week and get a subsidiary equivalent to 23 per cent of their wages.
The younger the employee, the greater the effect. A retailer could hire one 22-year-old for 40 hours a week and get 23 per cent of their wage subsidised or employ two 22-year-olds for 20 hours a week and get a credit worth 47 per cent of their wages.
If the retailer hired two 16-year-olds instead, 93 per cent of their wages would be covered by the subsidy.
"It actually does incentivise short-term, insecure work," Mr Dwyer said.
"We support the proposal to actually engage more employees, it's just about what sort of jobs do we want? Short-term insecure is not the outcome we're after."
The union says there should be a flat rate for all workers aged 16 to 35 hired under the program.
Doing so would reduce the impact on women trying to return to the workforce after pregnancy, Mr Dwyer argued.
"We're an industry where a lot of, almost 60 per cent of the people working in our industry are female, the average age for women to have their first child in this country is 29, so it's almost set up to tie in with having to go back at the lower rate," Mr Dwyer said.
A Treasury Department spokesperson said the higher rate for hiring younger workers reflected the degree to which they'd been impacted by coronavirus job losses.
"The JobMaker Hiring Credit has been designed to be as simple as possible for businesses to administer. Therefore, there are two flat rates that apply under the program," the spokesperson said.
"A higher rate of $200 per week applies to 16-to-29 year-olds reflecting that this age group has been impacted to a greater degree in the labour market than 30-to-35-year-olds."
The latest Australian Bureau of Statistics figures show there was a 6.5 per cent fall in payroll jobs for those aged between 20 and 29 between March and October.
Comparatively, payroll jobs for people aged between 30 and 39 fell by 4 per cent in the same period.
However the number of payroll jobs for people aged under 20 actually rose by 10.1 per cent in that time.
Mr Dwyer was also concerned the headcount test could "mask" the impact of the subsidy on older workers, especially in the retail sector where many workers are part-time or casual.
"I take 10 hours off this person, 10 hours off this person, I can then point to additional heads, but no additional cost to the business, no additional hours being worked so the program hasn't done what it set out to do, which was to create new jobs. It didn't all it did was replace," Mr Dwyer said.
The exposure draft of the JobMaker scheme suggests this kind of behaviour would be weeded out by the program's commissioner.
However Mr Dwyer said that would not be manageable, if the scheme created 450,000 jobs as promised.
"If there is an uptake of this on scale there simply won't be the resources to do that. And where do you go?" he said.
"That's why we argue that they should be access to the Fair Work Commission with a dispute resolution, including arbitration.
"You don't need an army of inspectors. We just have arbitration powers that we can take them up."
He said the headcount test needs to be replaced by counting full-time equivalent jobs, where businesses can get a credit for every 0.5 positions they put on.
"Headcount is meaningless in an industry where it's predominantly part time and casual," Mr Dwyer said.