21
Jul
2020

Woman waiting in queue with facemask to protect from COVID-19

Why JobSeeker should be raised permanently

by Brendan Coates


Published in, The Guardian, 21 July 2020

The old Newstart allowance rate – around $287 a week, including the energy supplement – was unconscionably low. It’s well below any measure of adequacy you care to choose: the OECD’s relative poverty line, the Henderson Poverty Line, and estimates of the budget needed to meet basic needs. It’s the least generous unemployment benefit in the developed world for newly unemployed people. Jobseeker must not return to that old, inadequate level.

There’s no magic formula to tell us how high the unemployment benefit should be. We need to protect people from poverty – the reason the payment exists – but also take into account the cost of the program and the prospect that if the payment were increased beyond a certain level, people might be discouraged from looking for work.

The Grattan Institute has recommended that the government increase the jobseeker payment by at least $100 a week when the coronavirus supplement is withdrawn. We’ve also recommended that commonwealth rent assistance be increased by 40%, which would lift the maximum payment by $28 a week.

A $100-a-week rise is not extravagant. It would leave Australia’s unemployment benefit as one of the lowest in the OECD. A $100-a-week rise would take the benefit back to roughly where it was in the early 1990s, as a percentage of the median full-time wage. And the payment should be benchmarked to wages to prevent it ever falling so low again.

There’s little chance that such a modest increase would lead to people choosing the dole over work. Recent research suggests any disincentives to look for work from more generous unemployment benefits are largely offset by the boost such payments provide to employment by lifting economy-wide demand.

If the payment went back to Newstart levels, people wouldn’t have enough to meet their basic needs, including the cost of searching for a job. That’s why the OECD said Newstart might be so low that it undermines job search – and that was a decade ago, when the payment hadn’t fallen quite so far behind wages and pensions.