South Australia

Top economists want JobSeeker boosted by $100+ per week and tied to wages





Wes Mountain/The Conversation, CC BY-ND

Peter Martin, Crawford School of Public Policy, Australian National University

Once about as high as the pension, the JobSeeker (Newstart) unemployment payment has fallen shockingly low compared to living standards.

It’s now only two thirds of the pension, just 40% of the full-time minimum wage and half way below the poverty line.

JobSeeker has fallen relative to other payments because while the pension and wages have climbed faster than prices, JobSeeker (previously called Newstart) has increased only in line with prices since 1991.

In an apparent acknowledgement that JobSeeker had fallen too low, the government roughly doubled it during the coronavirus crisis, introducing a supplement to enable people to “meet the costs of their groceries and other bills”.

But that supplement is being wound down, from A$225 per week to $125 on September 25, and again to $75 on January 1, before expiring on March 31.

After March, the single rate of JobSeeker (including the $4.40 per week energy allowance) will drop back to about $287.25 per week.


JobSeeker vs age pension





Source: Ben Phillips ANU, Services Australia

Ahead of a decision about any permanent increase expected early next year, The Conversation and the Economic Society of Australia asked 45 of Australia’s leading economists where they thought JobSeeker should settle.

Only four think it should revert to $287.25 per week.

All but eight want a substantial increase. More than half (24 out of 45) want an increase of at least $100 per week.






Economic Society of Australia/The Conversation, CC BY-ND

The results suggest the economists would be dissatisfied with a decision to merely increase JobSeeker by $75 per week in line with the supplement that is due to expire at the end of March.

The 45 members of the society’s 57-member panel who responded include Australia’s preeminent experts in the fields of microeconomics, macroeconomics economic modelling, labour markets and public policy.

Among them are former and current government advisers, a former member of the Reserve Bank board and a former member of the Fair Work Commission’s minimum wage panel.





Read more:
Top economists back boosts to JobSeeker and social housing over tax cuts in pre-budget poll


 

Many want an increase of about $150 a week to bring JobSeeker close to the age pension and 50% of median income.

Curtin University’s Harry Bloch asked (rhetorically) whether unemployed people had “lower needs than those on the aged pension”.

Labour market specialist Sue Richardson said keeping payments so low that people lost dignity and hope and suffered material deprivation hurt not only the people who were unemployed, but also the thousands of children who grew up in their households.

A scant incentive to shirk

She knew of no evidence that suggested a low rate of JobSeeker increased the likelihood of an unemployed person getting a job.

Jeff Borland said even if JobSeeker was increased by $125 per week, those on it would still earn less than all but 1% of full-time adult workers and would face plenty of remaining financial incentives to get paid work.

In research to be published in The Conversation on Monday he examines a real-life experiment: the temporary near-doubling on JobSeeker between March and September, and finds it played no role in creating unfilled vacancies.





Read more:
New finding: boosting JobSeeker wouldn't keep Australians away from paid work


 

Emeritus Professor Margaret Nowak said JobSeeker had been driven to the point where it denied unemployed Australians the shelter, food and transport they needed to find work.

Former Liberal party leader John Hewson described the failure to adjust JobSeeker for three decades as “immoral”, and a national disgrace driven by “little more than prejudice”.

Going forward, there was overwhelming agreement among those surveyed that once JobSeeker was restored to an acceptable level, it should be linked to wages (in line with the pension) rather than increase with prices as before.






Economic Society of Australia/The Conversation, CC BY-ND

Two thirds of those surveyed want JobSeeker increase in line with wages, and of those who do not, several want the pension to increase more slowly in order to ensure the two move in sync.

Gigi Foster and Geoffrey Kingston propose a half-way house – increases in both the pension and JobSeeker halfway between increases in the consumer price index and wages.

Wages determine living standards

Others suggest practical measures to make JobSeeker better at getting Australians into jobs. Beth Webster suggests reducing the rate at which JobSeeker cuts out with hours worked to encourage part-time workers to take on more hours.

Tony Makin suggests a relocation allowance to help people take on jobs distant from their current place of residence.





Read more:
'If JobSeeker was cut, the unemployed would be picking fruit'? Why that's not true


 

None of the economists surveyed expressed concern about the budgetary cost of restoring the relative position of JobSeeker, estimated by the Parliamentary Budget Office to be $4.8 billion per year for an increase of $95 per week.

Several expressed a desire to put the issue behind them, increasing JobSeeker to a reasonable proportion of the pension or median wage and leaving it there so that, in the words of Saul Eslake, “this issue never arises again”.


Individual responses

The Conversation

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


Responses (45)


 

A Abigail Payne

Be indexed in line with wages


 

Alison Booth

Remain indexed in line with the CPI

The reduced Jobseeker allowance is insufficient to cover recipients' subsistence and maintenance costs. (See ANU's Ben Phillips recent report for estimates of the numbers who will fall into poverty as a result of this policy change of cutting the allowance.) In view of the level of uncertainty about the economy and COVID-19, and the difficulty of finding working in this uncertain climate, the Jobseeker allowance should stay at its current level at least until the vaccination program has been implemented and the level of uncertainty reduced. It also should not be forgotten that recipients' expenditure from the allowance not only helps them maintain their health but also feeds back into the economy. Whether Jobseeker is indexed in line with the consumer price index or in line with wages is of second order importance at this time, though I have a slight preference for keeping it indexed to the CPI.


 

Allan Fels

Be indexed in line with wages


 

Beth Webster

Other

This is an opportunity to reduce the taper rate (the rate at which benefits cut out as people take up part-time work). A high taper rate is a disincentive to work. This not only makes poverty worse but also excludes people from participating in the economy. Potentially, part-time work is a stepping stone to full-time work. Clearly, it is nonviable for people to live a proper life on the current level of benefits, especially if they are living alone.


 

Brian Dollery

Remain indexed in line with the CPI

Evidence has already emerged from the Australian agricultural labour market of the disincentive impact of the dole, with unemployed Australians disinclined to work at harvesting.


 

Bruce Chapman

Be indexed in line with wages


 

Chris Edmond

Be indexed in line with wages

The JobSeeker allowance should be grow at the same rate as average real wages (roughly inflation plus productivity growth) and there should be a significant one-time level adjustment to make up for the many years of growing only with the consumer price index.


 

Craig Emerson

Be indexed in line with wages

The JobSeeker rate includes an allowance for job search costs such as clothing, grooming and travel to employer locations for interviews. When the true unemployment rate is the highest in living memory the job search component should be commensurately higher. On equity grounds, unemployed Australians meeting the activity test are no less in need and no less worthy than age pensioners. The Jobseeker rate should be the same as the age pension rate and should be indexed at the same rate.


 

Danielle Wood

Be indexed in line with wages

The base JobSeeker payment rate is so low that the payment is not adequately fulfilling its core function of providing a minimum, adequate income. People on unemployment benefits have an income below the poverty line ? using any reasonable definition of that line ? as well as heightened levels of financial deprivation and stress. Grattan has compared the payment to various poverty lines and bottom up budget standards here. An increase of about $180 per week would be needed to lift the JobSeeker payment above the poverty line. This would also lift unemployment benefits to about the same level as the single Age Pension. The argument to lift the payment by this amount is compelling. But an increase of more than $126 per week would mean that a full-time worker at the minimum wage would be entitled to receive unemployment benefits. This would represent a significant change to the nature of the payment. It would also cost a substantial amount of money and would raise questions about whether the incentive to obtain employment would remain strong enough. On balance I think something upwards of $100 a week is a good first step. An increase of $100 a week would result in an unemployment benefit at a similar level relative to full time wages as in 1994. The base payment rise should be done alongside an increase in Commonwealth Rent Assistance, which has not kept pace with private rental costs. We have recommended and increase of the maximum weekly Rent Assistance payment of 40% ($28). Benefits should be indexed in line with community living standards via wage indexation. Otherwise a person on unemployment benefits falls further and further behind other members of the community, including pensioners. Indeed, CPI indexation has meant that unemployment payments haven?t even kept pace with living costs for allowance recipients (the cost of necessities has risen faster than the cost of discretionary items in the CPI basket).


 

Deborah Cobb-Clark

Be indexed in line with wages

Indexing the JobSeeker benefit to wages rather than the CPI would be useful in ensuring that it kept pace with the changes in wages and living standards among workers. It would not necessarily need to be indexed at the same rate as the age pension which has a different objective.


 

Emily Lancsar

Be indexed in line with wages

The current rate is inadequate (based on the minimum income for healthy living and other measures), has not kept pace with living standards and leaves a number of recipients living in poverty. Payments to people out of work could provide a disincentive to work for some, but the OECD has questioned Australia?s unemployment benefits sufficiency to enable searching for work. Of course we also have to consider the increased cost to the federal budget of raising the rate of JobSeeker, but in doing so important to consider downstream costs avoided or the spillover benefits of reducing poverty in terms of positive outcomes in other areas including health, education, etc. Increasing (or maintaining part of the recent increase) in the rate for JobSeeker will also enhance automatic stabilisers in stimulating the economy in the current economic downturn. Indexing to inflation has meant Newstart/Jobseeker has not kept pace with living standards. Moving forward, Jobseeker must be indexed to living standards and indexing in line with wages is one way to do that. Indexing to wages would also help reduce the large and increasing disparity between various forms of government transfers, including JobSeeker and the pension. Such a change could be considered within a broader review of Australia?s tax and transfer system which could also consider such questions as whether a one size fits all Jobseeker rate is appropriate and the incentives built into that, rates once recipients move to part time work etc.


 

Fabrizio Carmignani

Be indexed in line with wages

The fact that some businesses are unable to fill specific vacancies in certain parts of the country is not necessarily evidence that Jobseeker is too high. In fact, the economics behind the supposed "disincentive-effect" of unemployment benefits (such as Jobseeker) is much more articulated than the simplistic arguments often used in the public debate. People seek employment for many reasons, including personal satisfaction, collegiate relationships, dignity. This means that most (albeit not all) individuals will continue to actively look for a job even when unemployment benefits are in place. Of course, unemployment benefits need to be combined with other labour market policies that facilitate job search, matching, and requalification when needed. Overall, a well designed package of labour market policies should include an unemployment benefit that is significant in terms of supporting the living standard of people without work. In this respect, I would be favorable to increasing job seeker (net of the COVID supplement) to be at least 50% of the minimum wage. I am also strongly concerned by a too early reduction of the supplement, as we know that even if GDP were to rebound as early as late 2020, unemployment is sticky and will remain above pre-crisis level for longer. Finally, in the current context, weekly earnings are probably a more relevant proxy of changes in living costs and I therefore support the indexation of Jobseeker in line with wages.


 

Flavio Menezes

Be indexed in line with wages

There are both ethical and economic reasons for supporting a higher JobSeeker payment. Here I focus on the economic rationale: current empirical literature suggests that unemployment insurance may have a very high value for society (by protecting workers against adverse shocks that they have no control over). This high insurance value justifies setting unemployment benefits at a generous level, even when the moral hazard cost (in the form of reduced incentives for job searching) is high. The reason for the high value of unemployment benefits as insurance is that the marginal propensity to consume of the unemployed may be much higher than that of the employed ? the higher the difference the higher the value of the consumption smoothing afforded by the unemployment benefits.


 

Garry Barrett

Be indexed in line with wages


 

Geoffrey Kingston

Be indexed half way between CPI and wage growth

I think the government's proposed glide path for JobSeeker is about right. So far as indexation is concerned, we should adopt the Swiss indexation formula of half the rise in wages plus half the rise in prices. This should apply to both unemployment benefits and government pensions. In the short run this method would not make much difference. In the long run it would ensure that unemployment benefits do not drift down relative to pension benefits. All recipients of government benefits would participate substantially but not fully in real wage rises.


 

Gigi Foster

Other

Setting the right amount of unemployment benefit such that the unemployed are both able and motivated to seek work is a challenge for any government. After long languishing without real increases and now at punishingly low levels, the base rate of NewStart/JobSeeker should increase. As regards indexing of payments, I like the idea of a combination of CPI indexing and indexing in accordance with prevailing economic conditions. In recessions and times of higher unemployment, JobSeeker could have a supplement (as indeed it has had recently); in booming economic conditions, when it is easier to find work, this supplement could be scaled back and extra support provided instead not in monetary form but towards in-kind assistance for those still remaining in unemployment even in times of low unemployment - who are more likely to be our long-term unemployed. This would help to address the needs of the long-term unemployed that run deeper than simply a lack of money. Assistance could take many forms, such as re-training subsidies, personal coaching in how to re-enter the labour market, and/or a government jobs guarantee. Also by the way: what an antiquated idea to index the pension to the male wage. If it's going to be indexed to wages, why not to the wage of everyone?


 

Guay Lim

Be indexed in line with wages


 

Harry Bloch

Be indexed in line with wages

Do people who are unemployed have lower needs than those who are receiving the aged pension? Justifying a low rate of Job Seeker by claiming that higher benefits are a disincentive to work ignores the absence of sufficient demand for labour to achieve full employment. Current policy is akin to maintaining a reserve army of unemployed in order to prevent wages from rising, a very odd policy for a government that claims to be trying to lift the rate of increase in wages.


 

Helen Silver

Be indexed in line with wages

The supplement is important both to support low income households in a time of high unemployment and to provide additional economic stimulus to the economy


 

Be indexed in line with wages

There are many factors to be considered when determining an appropriate level of welfare payments, and it is impossible to canvas all of them in these comments. However over the next few years it is important that costs of the economic and social dislocation from the policy response to the Covid-19 do not fall too heavily on particular individuals. For this reason a substantial increase over the former rate of $287.25 is warranted Maintaining the relatively high rate that was in place between March and September this year would likely distort the labour market and, of course, have budgetary consequences for the government. It is important that labour markets are flexible over the next few years to help business, and the broader economy, recover from the disruption resulting from the Covid-19 response. To this end, a useful (and easily implemented) reform would be the reduction or elimination of poverty traps in welfare payments. Such reforms would give welfare recipients greater financial rewards to seek the available work, and thereby increase the workforce in areas where there may be shortages. And it would help raise recipients? standard of living.


 

James Morley

Be indexed in line with wages


 

Janine Dixon

Be indexed in line with wages

Two arguments often raised in favour of NOT increasing Newstart/JobSeeker are (1) that it creates a disincentive to employment, and (2) that the budgetary cost is too great. But Jobseeker (without the coronavirus supplement) is so low that recipients live in poverty, a greater impediment to training and finding work than the perceived disincentive created by the payment. And (2) the cost of an extra $150 per week for 800,000 JobSeeker recipients would be $6 billion a year, a mere fraction of the PBO's costing for the income tax cuts which will be worth over $40 billion a year by 2026-27.


 

Jeff Borland

Be indexed in line with wages

The current level of JobSeeker (without the COVID supplement) means that individuals and families who rely on that payment do not have a standard of living that a rich country like Australia should regard as the minimum acceptable standard. The main argument that is being raised at present against an increase in JobSeeker is that it would have an adverse impact on incentives for recipients to search for and accept paid work. This argument is either totally unsupported by evidence; or supported by anecdote (a businessperson in my electorate said they were having trouble filling a vacancy...'). There is no evidence I know of that a rise in JobSeeker of the amount being advocated (say $125 per week) would have a large-scale appreciable impact on incentives for work. There is not enough space here to cite all the evidence available, but a few pieces: First, were JobSeeker to be increased to $407.85 a week, that would still just be at the first percentile of the distribution of weekly earnings of full-time adult employees. In other words, there is a huge financial incentive to obtain employment. Second, it is well-known that a substantial incentive for work (in some studies of equal importance to the financial incentive) comes from the social and psychological benefits - which will be unaffected by an increase in JobSeeker. Third, there is no evidence that the higher rate of JobSeeker (with the COVID supplement) has caused an increased vacancy rate or reduced flows from unemployment to employment (either in aggregate or for the young). Labour market dynamics are, however, likely being affected by other structural issues, such as the large reduction in temporary visa holders to Australia. To anyone who argues that a substantial increase in JobSeeker would cause an appreciable increase in the disincentive to work, the question has to be asked: What is your evidence? For that evidence to be policy-relevant it must demonstrate that appreciable Australia-wide effects would follow from the increase in JobSeeker fro its current level.


 

Jeffrey Sheen

Be indexed in line with wages

Income inequality has become a major social problem that is invisible to too many. It has been exacerbated by the current pandemic, though ameliorated by the huge and smart fiscal responses. Even when this health-sourced shock has completed most of its negative macroeconomic repercussions, income inequality will remain one of the greatest threats to our social compact. Keeping up the ramped JobSeeker is one essential policy commitment that can make a difference. It should be accompanied over time by higher minimum wages, extended provision of social housing, and improved age pensions. This can all begin to happen as tax revenue growth recovers with economic activity and then higher tax rates.


 

joaquin vespignani

Remain indexed in line with the CPI

Jobseeker rates should be sufficient for an unemployed recipient to pay their basic needs, but not high enough to discourage active job hunting. To maintain a low level of structural unemployment increasing rates beyond the pandemic crisis is not recommended. However, it is not clear to me that the effect of the pandemic will subside by march (when the additional support is withdrawn). Regarding indexation, I believe that the cost of living of each state should be considered, therefore the jobseeker payment should be index by the major cities CPI indexes to properly account for the state-specific inflation.


 

John Freebairn

Be indexed in line with wages

Suggest JobSeeker or Newstart be raised to about 50% of average weekly earnings as a minimum income support for equity, and that this be sustained over time by indexing to a wage index. Clearly the current level is very challenging, and it has fallen relative to other social security measures over the last thirty years, including Disability. Concerns about disincentives to seek employment are important, but are more directly supported via the work test. Index to wages would maintain comparability to other social security payments and relative to incomes of many others in society.


 

John Hewson

Other

The failure to permanently increase Newstart (now JobSeeker) for roughly 30 years is a national disgrace and fails to understand and accept the realities and challenges of unemployment. It is irresponsible, if not immoral, to keep it so far below all estimates of the "poverty line". This has been driven by little more than prejudice, certainly not by evidence. It is time for a definitive "reset".


 

John Quiggin

Be indexed in line with wages

We should restore and maintain parity with the age pension. That entails an increase of just under $150 per week and indexation by wages.


 

Kevin Davis

Be indexed in line with wages


 

Lata Gangadharan

Uncertain

I think the supplement should be increased. This doesn't seem to be the time to take the stimulus away. There are not many jobs available now, so those who are looking for jobs are not likely to find them.


 

Lisa Cameron

Be indexed in line with wages

Increasing JobSeeker by about $150 per week (from $287.25 to about $437) would bring it close to parity with the aged pension of $472.15 per week and to the poverty line of $457 per week (50% of median income). An increase of $150 per week is a significant increase, while not being large enough to create a disincentive to work. While increasing it beyond this to parity with either the poverty line or the aged pension could be argued for, a greater increase is unlikely to be politically palatable. Indexing the payments in line with wages would ensure that living standards on this payment are maintained so we don't end up back in a position with the transfer amount falling way short of what is sufficient to live on, resulting in people living in poverty, focusing on day-to-day survival and making it difficult to focus on the longer term goal of preparing for and obtaining work.


 

Margaret Nowak

Be indexed in line with wages

There are two reinforcing factors at play in my response. Firstly, our mixed public/private economic system is subject to fluctuations in output and employment; there has been, in post-war Australia, an implicit social bargain that those citizens impacted through loss of employment or livelihood will be supported by society through a social safety net. This "social contract" is one of the conditions which supports the operation of our mixed economic system to avoid the development of social unrest resulting from privation/starvation. However, there is now considerable evidence that over the past 20 or more years the level of the safety net provided has eroded and it is not now adequate to enable recipients to avoid severe hardship, instances of hunger and is some cases homelessness. Jobseeker at $287 per week falls well short of that needed to meet the social contact to provide an adequate safety net. Secondly there is research evidence to show that the base level of Jobseeker , $287 per week , impedes those reliant on it and seeking employment. The ongoing struggle to maintain shelter and adequate food coupled with transport, clothing and other costs entailed in jobseeking, are proving barriers to preparing for and finding long term secure jobs, especially for those on jobseeker for any length of time. Current anecdotal press coverage of difficulties in finding workers, (implicitly because current jobseeker payment is deemed too high) is misleading. Many of the toted vacancies are seasonal in nature. These anecdotes ignore the very significant resources required to be in a position to take up such positions (access to transport needed in regional or new locations, housing including moving away from secure housing resources provided by family/networks, establishment costs etc.) and to follow the seasonal flows.


 

Matthew Butlin

Be indexed in line with wages

I would support an increase of around $100. The pre-COVID rate was far too low. Indexation with wages sets the relativity by reference to the labour market and also benefits from overall productivity gains.


 

Nigel Stapledon

Be indexed in line with wages

There is a balancing act here between an adequate safety net and, what many commentators ignore, long-term incentives to encourage maximum workforce participation. The latter was why over a long period successive Labor and LNP governments allowed the jobseeker payment to decline. But if we can get it at the right level then there should be no reason not to increase it in line with increases in the pension (and AWE).


 

Peter Abelson

Be indexed in line with wages


 

Other

Jobseeker should be indexed using the Pensioner and Beneficiary Living Cost Index which better reflects the effect of price changes on the living expenses of income support payment recipients than consumer price index does. In addition, the government should raise the maximum rate of Commonwealth Rent Assistance (CRA) to reduce the number of renters in housing affordability stress. CRA indexation has not kept pace with real rent increases over time.


 

Rana Roy

Remain indexed in line with the CPI

My answer to the first question ? more precisely, my support for a $143 per week increase in the rate of the JobSeeker payment up to the level of the age-pension ? is wholly conditional on the current context. In the ?abnormal? context of the current recession, and so long as the recession continues, an elevated JobSeeker payment, without time-limitations, is defensible in its own right, independently of its positive macro-economic impact on aggregate demand. It is reasonable to suppose that the typical new entrant to the Jobseeker scheme will be involuntarily unemployed, having been made unemployed largely as a result of the deliberate actions of governments in imposing restrictions on economic activity as a key part of the management of COVID-19. And it is wholly unreasonable for governments effectively to make people unemployed and then penalise them with a JobSeeker payment set below the poverty line. In a ?normal? context, I would also support an elevated level of JobSeeker ? but only on condition that it is strictly time-limited. In such a context, the JobSeeker payment would serve to cover the temporary incidence of ?frictional unemployment? in an economy of full employment. By this, I mean an unemployment rate of less than 2%, as obtained in Australia and across much of the OECD world in the period of ?Les Trente Glorieuses?, the thirty years from 1945 to 1975. In short, the answer to the poverty of unemployment is full employment. There is nothing ?progressive? in accepting a world of permanently high ?structural unemployment?, combined with continuing, time-unlimited payments to the resulting poor, and only so long as they do remain poor. Sadly, however, today?s ?progressives? place themselves, all too often, far to the right of yesteryear?s Tories. Regarding indexation, if the new starting level of JobSeeker is appropriately determined, and if consumer price index is correctly calculated, I see no difficulty in indexing the rate of increase in JobSeeker to the rate of increase in the index. As I argued above in my answer to the first question, JobSeeker should serve to cover the temporary incidence of ?frictional unemployment?. It is not obvious why it should attempt to enable the unemployed to attempt to ?keep up with the (employed) Joneses?. The more important point to make is that now is not the time to be planning for the post-recession details of the JobSeeker payment. Now is the time to do our utmost to plan for a post-recession economy of full employment, rather than an economy of permanently high structural unemployment.


 

Renee Fry-McKibbin

Remain indexed in line with the CPI


 

Richard Holden

Remain indexed in line with the CPI


 

Saul Eslake

Be indexed in line with wages

Actually, I think the age pension should be indexed in line with the CPI (or, even better, with the pensioner cost of living index which the ABS now publishes), rather than with male average earnings. And I think JobSeeker should be fixed as a percentage of the age pension (so that this issue never arises again), but those weren't listed among the options.


 

Stefanie Schurer

Remain indexed in line with the CPI

Unemployment benefits should be a short-term measure to support individuals who experienced voluntary or involuntary unemployment. The payment should be considered as a temporary measure. Thus, no incentives should be created to get habituated to the payment. Pensions are different, because retirement is a permanent state. The needs of the elderly are potentially higher (e.g. due to higher health care expenditures and care support), which justifies as more generous indexing. Yet, the original Newstart rate of $287.50 appears too low for e.g. single mothers. I have argued elsewhere that Newstart should be increased by about a sixth to factor in higher consumption needs of vulnerable families.


 

Sue Richardson

Be indexed in line with wages

Keeping jobseeker payments so low that people lose dignity, hope and suffer real material deprivation is unnecessarily punitive in our wealthy country. It is very harmful for the many thousands of children in unemployed households. I know of no evidence that it is an effective way of increasing the likelihood of an unemployed person getting and keeping a job.


 

Tony Makin

Be indexed in line with wages

By international standards an increase in unemployment benefits seems warranted and could be fixed as a proportion of the minimum wage, with increases indexed to rises in that wage. The proportion chosen (say 50%) would actually understate the true income benefit relative to the minimum wage as the unemployed incur lower expenses than the employed, such as travel to and from the workplace, carparking and income tax. A key question is the extent to which a higher benefit payment for unchanged mutual obligations requirements would, at the margin, discourage some unemployed from actively seeking employment where vacancies exist (thereby worsening ?the fruit picker problem?). This is an empirical question worth examining in depth, perhaps motivated by principles from behavioural economics. In addition to increasing the benefit amount, labour mobility could be improved and unemployment lowered if those currently unemployed were paid a rent assistance-type relocation allowance should they take jobs distant from their current place of residence.


 

Uwe Dulleck

Remain indexed in line with the CPI

Australia's choice for these payments is that it is needs based. That should determine the level. The consumer price index maybe closest to capture that but a more specific basket of goods as a basis may be a better choice. Thus discussing a level on increase is a guestimate. One also wonders whether payments require some regional element, as the rate maybe sufficient to support a life in some areas it's likely to insufficient elsewhere.


 

Warwick McKibbin

Be indexed in line with wages

My answers are contingent on the current state of the economic slowdown. Raising JobSeeker helps under current circumstances. The dilemma is to balance the tradeoff between maintaining incentives for the unemployed to find work with the need to have minimum livable income during a severe economic slowdown. Indexing to consumer price index maintains the living standard, while indexing to wages maintains a living standard relative to society as a whole. During a pandemic it is important to raise support for the unemployed. My answers would be different if the Australian economy was close to full employment.

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