Increasing JobSeeker not an open and shut case

Robert Carling

31 July 2020 | Ideas@theCentre

Should there be a permanent increase in unemployment benefit (now called JobSeeker)? There is widespread support for it, but is this because the case is strong — or is it just another example of group-think?

The arguments most often heard in favour of a permanent increase are that the rate has not been increased above inflation for many years; nobody can live on $40 a day; and Australia is stingier than most other developed countries.

International comparisons of anything are always interesting, but never conclusive. We should never accept that because the OECD average of something is X and in Australia it is Y, Australia should move to X. OECD experiences are full of Xs that tell us what NOT to do, not what we should do.

Australia has been served well by having lower overall levels of government expenditure, taxation and debt than many other developed countries, and if we are to maintain that advantage we cannot match them on every social benefit.

Australia does not have an unemployment insurance scheme like many other countries, where the benefit for an individual depends on their contributions, their earnings, and other factors, and the benefit is often time-limited. The Australian unemployment benefit is the same for all those eligible and has always been maintained in real terms. Nothing has fallen apart because there have not been real increases. The incentive for the unemployed to look for jobs is stronger as a result.

Forty dollars a day makes a good slogan, but what matters ultimately is the household income of the households in which the unemployed live. According to ABS statistics from 2017-18 (latest available) the median household income of households with no employed persons but at least one unemployed person was $400 per week. Many of the unemployed receive a government benefit in addition to the unemployment benefit.

The JobSeeker benefit is currently double the pre-crisis rate and will still be 45% above it even after being pegged back from end-September. If any increase becomes permanent, it will go against the government’s mantra that all extra spending in this crisis is ‘temporary and targeted’.

The cost would be a substantial and permanent increase in the level of government expenditure, and as such it must compete with other priorities.

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