The federal government will extend the JobSeeker Coronavirus supplement for an extra three months, to the end of March, at a cost of $3.2 billion.
The supplement, which is currently $250 a fortnight, will be at a reduced rate of $150 a fortnight during that period.
Prime Minister Scott Morrison said the financial “lifeline” that had been extended during the COVID crisis could not be allowed now to hold Australia back, as the country moved into the next phases of recovery.
The extension is a recognition that longer-term assistance is needed for the high number of people who will be unemployed early next year and that extra stimulus is needed to help lift the economy out of recession as soon as possible.
But the government is still avoiding the question of what change it will make to the base JobSeeker rate, which was widely recognised as inadequate long before the pandemic.
At the same time, the government is pushing a tougher approach to trying to ensure people take what jobs are available.
Morrison told a news conference mutual obligation requirements were being enforced. There were nearly 260,000 suspensions between September 28 and October 31, and from August 4 to October 31, 242 payments were cancelled.
“So the mutual obligation requirements are there and we are serious about them. But we are also serious about the support we need to provide to Australians,” Morrison said.
“We are seeing confidence return, whether it’s on the NAB measures just released today, the ANZ measures showing confidence getting above where it was pre-pandemic or the Westpac figures that were released for last month,” Morrison said.
“Australia is safely reopening and it needs to remain safely open. Jobs are returning. Job advertisements have doubled since May on the most recent figures in October, and we know that employers are looking for people to come back to work and we need to ensure that we have the right settings in place to support that.”
The shadow minister for families, Linda Burney, said the government would “cut unemployment support by $100 per fortnight after Christmas.
“With the Morrison Government expecting 1.8 million Australians to be on unemployment support by the end of the year, now is not the time to cut unemployment support. There are simply not enough jobs for every Australian who needs one.”
This welcome but temporary support is being withdrawn. The JobSeeker supplement was reduced to A$250 a fortnight from September 26. It will end in January 2021.
Our modelling for Victoria shows the tapering down and withdrawal of the JobSeeker supplement will cause crippling rental stress for unemployed and underemployed private renters. In Melbourne, we have found the unemployed will face the same problem of rental stress as those on the former Newstart allowance experienced before the pandemic. (Rental stress is defined as a low-income household spending more than 30% of its income on housing costs.)
To illustrate the extent of the rental stress crisis we modelled rental affordability for the typical low-income household types in Victoria. The first chart shows the effects of the withdrawal of the supplement on rent affordability for two and three sharers and lone-parent families. The second chart later in this article shows the effects across a range of household types.
The modelling shows the interim rate (A$250) of the Coronavirus Supplement will help for a limited number of household types, particularly in the outer part of Melbourne and regional towns like Ballarat. However, it will not help many households in the inner region of Melbourne where rentals will remain unaffordable. This pattern is worrying because that’s where many of the jobs will become available once economic recovery is under way.
Households with more than one adult receiving the supplement will be better off than lone-parent households. That is because all the adults in those households receive the supplement, and lone-parent households generally need to rent properties with more than one bedroom.
The scenario here plays out across Australia, but is particularly bad for Victorians because the extended lockdown has deferred recovery.
COVID impacts have hit low-income households hardest
Is is important to note that the COVID economic shock has hit low-income households particularly hard. Those in precarious work, young adults and women have had the biggest hits to their incomes and jobs.
In Melbourne increases in unemployment are concentrated in inner-city suburbs like Brunswick and St Kilda. This reflects the loss of jobs for young people in hospitality and retail.
Job losses have also occurred in working-class areas such as Brimbank, Melton and Hume. These losses reflect the impact of shutdowns in the processing, manufacturing and transport sectors.
It is predicted it will take some time for earnings to return to pre-COVID levels. This means renters who have not been able to get jobs will once again be in dire rental stress in most capital cities when the Coronavirus Supplement cuts out in January 2021.
What about household savings?
The Finder Consumer Sentiment Tracker shows household savings have temporarily increased. But it is difficult to assess how much reserve people on JobSeeker payment have been able to lay down, relative to the loss of normal earnings. Any optimism on this count needs to be tempered by the observation that the Coronavirus Supplement did not start until late April and early May — five to six weeks after the job losses started.
Our modelling shows that even during the temporary tapering down of the supplement until January 2021, there will be a rental crisis in cities like Melbourne. These findings can be extrapolated to other capital cities and the scenario will be worse in Sydney.
Cutting the JobSeeker supplement is risky policy because the labour market has not “snapped back”. People who depend on unemployment payments will now face the same problem of rental stress as those on NewStart experienced before the pandemic. But this stress will be more widespread than before. This underscores the need to develop policy that counters the risk of rental stress.
The economic crises that have punctuated the 21st century, most notably the global financial crisis and the COVID-19 crisis, have led to a growing realisation that alternatives to our present system are possible and perhaps inevitable.
In particular, there has been an erosion of the belief that the economy is able to provide a decent income to everyone who wants to work.
A number of proposals have been put forward in the wake of this realisation, among them
universal basic income, which would unconditionally provide every resident (children and adults) with a regular subsistence wage
a job guarantee in which the government would provide real jobs, at the minimum wage, to all unemployed Australians
Many seem utopian, which isn’t necessarily a bad thing – it’s good to look beyond the day-to-day to consider how things could be done differently.
In a new Australian National University Policy Brief we propose something practical, which we are calling a Liveable Income Guarantee (LIG).
Take the age pension..
It starts with one of the most successful institutions we’ve got: the age pension.
Before the age pension was introduced in 1908, retired Australians were highly likely to be poor. But now, on some measures, retired Australians are less likely to be in poverty than Australians of less than pension age.
Our proposal is to replicate this success for the entire population.
We are proposing a payment equal to the pension, and subject to the same asset and income tests, that would be provided to everyone who is willing to make a contribution to society consistent with their ability to do so.
…extend it to others
“Contribution” would be defined broadly to maximise contributions. Examples would include full-time study, volunteering, caring for children, ecological care, and starting a small business.
The biggest shift relates to the treatment of unemployed workers and single parents.
We are suggesting that instead it be lifted to the rate of the age pension, which is about where it used to be before unemployment benefits were frozen in real terms in the 1990s.
Newstart versus the age pension
Parenting Payments have also been notoriously low, especially for single parents, whose support has been cut consecutively by five prime ministers from Howard to Turnbull.
Unlike some proposals for a universal payment to all citizens, the increased expenditure required for the liveable income guarantee would be relatively modest, as little as A$20 billion a year.
Do it for the price of tax cuts…
This is roughly comparable to the budget cost of the income tax cuts, primarily directed to high earners, legislated to take effect in 2022 and 2024.
The real barriers to the adoption of the proposal are ideological. The central assumption underlying economic policy in Australia has been that in a market economy everyone who wants a decent job is capable getting one.
It has followed that the unemployed are seen as either unwilling to work or suffering from particular deficits that need to be remedied by training and job readiness programs case by case.
Over the first two decades of this century, it has become evident this assumption is incorrect. The global financial crisis and the subsequent swing to austerity produced sustained high unemployment in much of the developed world.
While Australia avoided the worst consequences thanks to well-timed stimulus (here and in China) the unemployment rate has failed to fall below 5% as underemployment has climbed for more than a decade.
Any prospect of a rapid return to full employment have been dashed by the pandemic.
Longer term it is clear that many existing jobs will disappear as a result of technological change, and it isn’t clear that our current institutions will be able to manage the process.
While governments should commit to a return to full employment, they are unlikely to be completely successful.
Ready us for the future
The implementation of a liveable income guarantee would allow us to be better prepared in case they are not and to be better prepared for future disruptions, be they pandemics or anything else.
On the brighter side, technological progress has increased our productive capacity to the point where we can afford to support a much wider range of non-market contributions to a market economy. The crisis has shown us how important many of those contributions are.
Looking beyond the crisis, it is possible (relatively simple) to create a society in which everyone has a decent standard of living, and no one is excluded.
Providing dignity to everyone who makes a contribution would benefit us all.
I’m not sure which does the most harm: the cut of A$150 per week in JobSeeker payments due this Friday or the sudden and coincidental volley of mediareports about unemployed people refusing jobs, including fruit picking.
This narrative is jarring when there are 19 people unemployed or underemployed for every vacancy and only 3% of employers report that they are recruiting but can’t find enough applicants.
Are unemployment payments really that cosy since they almost doubled in April from $282.85 to $557.85 a week?
$557.85 a week for a single adult is around 80% of the full-time minimum after-tax wage of $669 per week, and a good less again as a proportion of what most entry level jobs pay, because most pay more than the minimum wage.
Five studies conducted in the United States where unemployment payments were lifted US$600 per week during the coronavirus crisis found no evidence they were discouraging people from finding jobs.
Some were making 70% more than they did while in jobs.
Unemployed workers would generally prefer to be in paid work, and in any event are usually required to search for it.
There are other reasons not to pick fruit…
Growers representatives have told a parliamentary inquiry that when JobSeeker payments were doubled, many workers collected their final cheques and went home.
But temporary migrants and young locals are often underpaid in such jobs.
Squeezed by powerful customers, employers with thin margins and a ready supply of labour have grown used to offering very low wages cash-in-hand.
In piece-work like picking where pay is tied to output, there’s no legal requirement to pay minimum wages.
A labour hire firm recently complained people weren’t taking up their offer of “at least $500 per week” to pick strawberries.
$500 is two-thirds of the minimum wage.
It’s not just the pay that discourages people from taking up crop picking: they need to be fit and able to travel for what’s often a short period of paid work.
This won’t work for many people on Jobseeker, including the quarter with disabilities, the third aged 45 or over, and the 10% caring for children.
There are ways to reduce under-payment and high turnover in such jobs.
Reducing our reliance on temporary migrants would be a first step.
Otherwise, employers won’t compete fairly to attract workers, and local workers will remain wary.
More direct contact between the employers and unemployed people and less reliance on labour hire firms would help build trust.
…and other reasons not to work more days
Jobseeker tops up the wages of many part-time workers.
It is cut by 50c for every dollar earned above $53 per week, then 60c for every extra dollar earned up to $128 per week, before cutting out completely for a single adult on $544 per week.
Former social security official David Plunkett calculates that before COVID and the effective doubling of JobSeeker, a worker on it gained a net $100 to $200 for working one to three days a week at the minimum wage, climbing to $269 for the fourth day, after which Jobseeker expired.
Since the new arrangements and top up that effectively doubled JobSeeker, the net gains have fallen slightly $100 to $175 for the first three days, before dropping to just $5 on the fourth.
The problem isn’t the effective doubling of JobSeeker, it’s the sudden-death cut off of the top-up as soon as the last dollar of Jobseeker expires.
That flaw could be fixed by tapering the supplement out gradually (rather than increasing the “income free area” to $150 per week as the government is proposing).
There’s no need to force people to choose between poverty and entry-level jobs.
Even if, for example, Jobseeker was increased permanently to the pension rate, it would still be under 70% of the minimum wage after tax.
Incentives for part-time work can be fixed by reforming income tests and tax. Beyond that, the answer to periodic labour shortages, exploitation and high turnover in entry-level jobs is better entry-level jobs.
In fact, for the longer term health of the economy, it is important people find jobs that suit their skills. International evidence shows the provision of unemployment benefits slightly increase both the wages received when work is found and the stability (or duration) of the new job.
But would higher benefits be a problem as the economy recovers?
If benefits start to approach the level of minimum wages, some workers with low earning potential might decide the extra effort is not worth it — and so reduce their job search effort.
As the economy recovers, this will mean some potential jobs will go unfilled and government expenditure on JobSeeker will remain unnecessarily high.
Comparing JobSeeker to the minimum wage
However, our analysis shows Australia is in no danger of creating a disincentive for people to seek work because of higher JobSeeker payments.
We have compared Newstart and JobSeeker payments for single people with the minimum adult full-time wage (after tax) over the past three decades. This is a standard benchmark for assessing incentives to move from welfare benefits into work — assuming work is available.
Our analysis also looks at the payments provided to single pensioners. Pensioners received around 55% of the minimum wage up until 2009, when the pension was increased under the Rudd government. After that, net pension income was around 65% of the minimum wage. This is close to the commonly used poverty line, set at half the median household disposable income.
But for unemployed people on JobSeeker (or its predecessor, Newstart), the past two decades have seen a steady decline in their position relative to the minimum wage. It has fallen from around 50% in the 1990s to under 40% at the start of 2020 — well below the poverty line.
These calculations changed with the introduction of the Coronavirus Supplement in April, which almost doubled the payment for single unemployed people. Nonetheless, JobSeeker plus the supplement was still well below the adult minimum wage (76%, or 82% if we add shared accommodation rent assistance).
On September 25, the Coronavirus Supplement will drop by $300 a fortnight. And the combined JobSeeker/supplement payment will fall back to 55% of the minimum wage until December 31.
Unless the federal government makes further changes, the supplement will be removed entirely at the end of the year. So those on JobSeeker will be back receiving less than 40% of the minimum wage.
The crisis isn’t over, why is support being wound back?
Neither the pandemic nor the economic crisis will be over by the end of 2020.
As the wage subsidy program JobKeeper is also wound back, next week and then again, next year, increasing numbers will become reliant upon JobSeeker.
If the payment reductions continue as forecast, this will force many people well below the poverty line. A recent Australian National University analysis estimated an extra 740,000 people will be pushed into poverty.
This would not only be a disaster for the people directly affected, but also likely have large adverse economic effects. Deloitte Access Economics estimates withdrawing the Coronavirus Supplement support would be equal to a reduction in the size of the economy of $31.3 billion and an average loss of 145,000 full-time equivalent jobs.
The case to maintain much of the crisis-induced increase in payments is clear. In the short term, there will be no shortage of people looking for work. Maintaining payments at around the pension level — close to the poverty line — should be our policy objective.
Even in the longer term, as labour demand increases, the large gap between welfare payments and minimum wages leaves plenty of room for permanent increases in income support, without creating a disincentive for people to look for work.
At a minimum, permanently increasing JobSeeker to 50% of the minimum wage — as was the case in the 1990s — should be an easily achievable target for Australia as it makes it way through the economic wreckage of COVID-19.
Australian National University calculations suggest JobKeeper and the boosted JobSeeker payment have saved about 2.2 million people from poverty.
It’s a remarkable outcome without precedent in Australia.
JobKeeper was set at A$1,500 per fortnight and the Coronavirus Supplement was set high enough to double JobSeeker and associated payments, increasing them to about $1,115 per fortnight.
Both are well above the poverty line, which according to our modelling is around $816 per fortnight.
From the end of September both will be cut. JobKeeper will fall to $1,200 per fortnight for those who previously worked 20 or more hours per week and to just $700 for those who previously worked less than 20 hours per week.
The payment to people on JobSeeker and related benefits will fall to $815.
Beyond December, JobKeeper will fall to $1,000 and $650 per fortnight and the Coronavirus Supplement will end, returning JobSeeker to $565.70 per fortnight.
Three quarters of a million more
Our estimates suggest that by themselves these changes will push an extra 740,000 Australians into poverty, lifting the total number in poverty from from 1.1 million to 1.84 million.
Partly offsetting this, the improvement in the economy forecast in the July Economic and Fiscal Update should it be realised would cut the number of Australians in poverty by about 140,000.
These numbers tell us two important things.
One is that the Newstart unemployment benefit (now called JobSeeker) was too low.
It’s in all of our interests to minimise it for any given level of government support.
The ANU Centre for Social Research and Methods has developed an algorithm for calculating the optimal mix of government supports to achieve a range of policy goals including minimising poverty.
The mix it suggests would cut the poverty gap from $6.5 billion to $5.6 billion under the 7.5% unemployment scenario and from $6.9 billion to 5.8 billion under the 10% unemployment scenario.
How to minimise the damage
If the total level of welfare expenditure were to remain unchanged on pre-JobKeeper and Coronavirus supplement settings, the single JobSeeker would be increased substantially from $551 to $821 per fortnight and the age pension single rate from $902 to $915 per fortnight.
The increases would be offset by reductions in the Parenting Payment from $770 to $737 per fortnight (single), Family Tax Benefit Part A for children under 13 years of age from $218 to $154 per fortnight and Rent Assistance from $137 to $131 per fortnight.
Non-essential retailers across Melbourne will be shut except for “click and collect” and delivery sales, and industries including meatworks and construction will be drastically scaled back, under Victoria’s unprecedented lockdown.
The business shutdown details came as Scott Morrison announced a “pandemic disaster payment” worth $1,500 for Victorian workers who have to isolate for two weeks and do not have sick leave.
The leave can be taken multiple times if needed but it will only be available to those hit by the Victorian disaster.
Premier Daniel Andrews estimated 250,000 more workers would be stood down as a result of his government’s measures, which run for six weeks. “We know there is about 250,000 people stood down in one form or another and this will add a further 250,000 in rough numbers.”
Melbourne supermarkets, grocery stores, bottle shops, pharmacies, petrol stations, banks, newsagents and post offices will remain open, giving people access to necessities.
Businesses have been put into three categories:
those able to stay open
full “onsite” closures – including retail stores and services, some manufacturing and administration – which must shut by 11.59pm Wednesday
those that will have to drastically reduce their operations.
While most of the restrictions relate to Melbourne, the provision for meatworks – on which many COVID cases have been centred – apply across the state.
Andrews said workers in these enterprises would be dressed like health nurses – with shields, masks, gowns, gloves – and have to undergo temperature tests. The on-site workforces at meat works will have to be reduced by one third.
Bunnings, which has been particularly popular during the pandemic, will be only allowed to offer “drive through” sales to the public, although tradespeople will be able into the store for purchases.
Services from tradespeople to the public will be confined to emergencies. Cleaners will not be able to go to houses.
Different rules will apply to various parts of the construction industry, which will move to what Andrews called “pilot light” levels.
Workforces constructing large commercial buildings above three stories will need to be reduced at any one time to no more than 25% of normal numbers.
No more than five people will be able to be working on a house-building site at one time.
The state government has already reduced its large-scale projects and will look at further reduction.
Warehousing and distribution centres in Melbourne will be limited to no more than two thirds of their normal workforce on site at one time.
Workplaces that are continuing to operate will have extra requirements including more personal protective equipment, staggered shifts and breaks, health declarations and more support for sick workers to ensure they stay home.
Daniels announced the latest Victorian number of new cases was 429; there had been 13 deaths, of whom eight were linked to aged care.
Morrison said many Victorians “would have reached breaking point trying to come to terms with what has happened in their state”.
Andrews warned if the changes didn’t work “we’ll need a much longer list of complete shutdowns”.
Treasurer Josh Frydenberg flagged changes to eligibility for JobKeeper to take account of the impact of the Victorian hard lockdown.
Last month the government announced eligibility would be tightened under the revised scheme to operate after September – businesses would have to demonstrate they had met the relevant 30% decline in turnover test in both the June and September quarters.
But on Monday Frydenberg foreshadowed tweaking to ensure businesses badly hit in the September quarter were not disadvantaged because they had not had low turnover in the June quarter.
The change would apply nationally, not just in Victoria.
The Business Council of Australia and the ACTU on Monday wrote jointly to the federal government strongly urging it “to move quickly to introduce a paid pandemic leave scheme”.
After the announcement, the ACTU said the pandemic leave disaster payment was a step forward but didn’t go far enough.
“The $1500 a fortnight is the minimum wage when the average wage is double this amount. This means that nearly every fulltime worker will still suffer a financial penalty for isolating. Only full wage replacement, like sick leave, can fix this,” the ACTU said.
The Australian Industry Group said the economic impact of the draconian Victoria lockdown would “devastate the livelihoods of millions in the state”.
CEO Innes Willox said: “Closing or restricting large swathes of manufacturing and construction as well as their supply chains brings the hammer down on sectors that have been responsible for relatively little transmission, which have followed strict COVID-safe plans and are vital to the community and the country’s economic well-being.”
The recent COVID-19 cases in social housing, which saw nine public housing towers in Melbourne’s north put into hard lockdown, brought this into sharp focus. These tower blocks accommodate some of the most vulnerable people in our community.
People living in these buildings experience high levels of unemployment and job insecurity, generally exist on low wages, have limited access to education, are often from migrant backgrounds, and in some instances are victims of trauma.
The fact we saw the virus spread through these towers should be no surprise given what we know about how it spreads in crowded conditions and shared spaces. Physical distancing is almost impossible when you have big families living in two-bedroom units.
Importantly, for cultural and language reasons, generic health messaging may miss the mark for these groups.
These factors combine to put social housing residents at increased risk of contracting the virus.
Another group this pandemic disproportionately affects is aged-care residents. In aged-care facilities we have a perfect storm: an environment conducive to virus transmission and residents who are among the most susceptible to serious outcomes from infection.
Add into the equation the well-documented system deficiencies and workforce issues that have plagued Australia’s aged-care sector, and we have another situation in which some of the most vulnerable in our society are disproportionately affected by COVID-19.
We’ve seen this in Australia and around the world. Once you have community transmission of COVID-19 it’s hard to keep it out of aged-care facilities, and once in, outbreaks in this setting can be difficult to stop.
The disproportionate effect of the pandemic on the most disadvantaged, vulnerable and marginalised in society is not just evident in Australia, but throughout the world.
There is perhaps no better example than the plight of African Americans in the United States. Figures released in May reported Black Americans were dying at almost three times the rate of white Americans from COVID-19.
And it’s not only the health effects of the virus which hit the disadvantaged harder. These people are also much more vulnerable to the indirect economic impacts of the pandemic, by virtue of their lower financial resources to begin with.
Looking across the globe
COVID-19’s discrimination against the vulnerable also extends to entire countries. Poorer and less developed nations, such as in Africa and Latin America, will potentially suffer the most in the immediate and longer term.
With weaker health systems, scarcity of medical resources (less equipment such as ventilators, for example) and large, vulnerable populations, these countries are less able to cope with a crisis of this magnitude.
And beyond the demands placed on their health systems, these countries have less capacity to withstand the economic shocks of the pandemic. Its effects could well catapult them into further crises, such as food insecurity.
We know infectious diseases, like other health conditions, are highly influenced by the social determinants of health. That is, the conditions in which people live, learn and work play a significant role in influencing their health outcomes.
Broadly speaking, the greater a person’s socioeconomic disadvantage, the poorer their health.
In shining a light on these inequities the pandemic also provides an opportunity for us to begin to address them, which will have both short and longer term health benefits.