Forget JobSeeker. In our post-COVID economy, Australia needs a ‘liveable income guarantee’ instead



Kelly Barnes/ AAP

John Quiggin, The University of Queensland; Elise Klein, Crawford School of Public Policy, Australian National University, and Troy Henderson, University of Sydney

There are now less than three months to go before the expanded JobSeeker payment is due to end.

As a result, there is a growing political debate about what should happen to the unemployment payment that was roughly doubled in April.




Read more:
How to improve JobKeeper (hint: it would help not to pay businesses late)


While the government is reportedly considering a revamp of both the JobSeeker and JobKeeper payments, we believe a much broader rethink is needed of the way we provide income support to people without a market income.

Instead of an unemployment payment – or the dole – we need a liveable income guarantee.

‘Snapback’ is not going to happen

It’s increasingly clear a “snapback” to the pre-pandemic way of doing things is not realistic.

Unemployment has jumped under coronavirus.
Stefan Postles/AAP

The recent upsurge in coronavirus cases reminds us the new normal will see all sorts of economic and social activity constrained and subject to sudden lockdowns.

As a June Grattan Institute report has also shown, we need more fiscal stimulus, not a return to pre-pandemic fixations on debt and deficits.

On top of this, we have also seen grim announcements of job cuts at Qantas, the sale of Virgin and other well-known brands collapsing. Many smaller businesses will follow their lead.

Thousands of hardworking Australians, many of whom have never been unemployed before, will be thrown out of work – some of them for a long time.

We need a new unemployment system for a new reality

The system of unemployment benefits that was in place before COVID-19 worked on the assumption there were plenty of jobs for anyone capable of filling them.

Unemployment was therefore seen as reflecting personal defects – either unwillingness to work or, more charitably, a lack of particular skills needed for “job readiness”.




Read more:
No big bounce: 2020-21 economic survey points to a weak recovery getting weaker, amid declining living standards


This assumption was clearly untrue, even before the pandemic. As the long history of booms, busts and economic crises have shown us, all workers are vulnerable to losing their job through no fault of their own.

There aren’t jobs for everyone

The failure of labour markets to provide full employment is also seen in the increasing levels of underemployment, particularly among young people.

Underemployed workers are, by definition, willing and able to work, and ineligible for unemployment benefits. But they are nonetheless unable to secure a full-time job.

Young people are increasingly underemployed.
http://www.shutterstock.com

For an unacceptably high proportion of young people, the experience of the labour market has been one of stringing together part-time gigs, while trying unsuccessfully to start a career. Official measures of youth unemployment hit 16% in May. A further 25.8% of young Australians between 15 and 24 years old were underemployed.

We need to do something different

Even before coronavirus, there was a pressing need to reform the way we support unemployed people.

JobSeeker (or its predecessor, Newstart), had not been increased in real terms since 1994. Business, community groups and researchers were among the loud chorus pushing for an increase to the payment which, on average, is about A$45.50 a day.




Read more:
When the Coronavirus Supplement stops, JobSeeker needs to increase by $185 a week


But to respond to the post-pandemic era, we need to make more comprehensive changes to the way we support unemployed and underemployed Australians, that acknowledge the scarcity of jobs.

A liveable income guarantee

Moving forward, we should adopt the concept of a liveable income guarantee or living wage. The living wage is closely linked to the idea of participation – starting from the principle everyone has a right to a liveable income and a responsibility to contribute to society.

Ideas of this kind, under names including “universal basic income”, “guaranteed minimum income” and “participation income” have been discussed since the 1960s.

They have attracted more attention in recent years as the failure of the current economic system to deliver full employment and broad improvements in living standards has become more apparent.

How would a liveable income guarantee work?

Many people already productively contribute to society in different ways, such as caring, but their work is largely obscured by the narrow measure of formal employment.

The social security system only partially supports those unable to work due to age, disability, unemployment, or caring needs. And support for all of these categories has been cut back and subjected to conditionality under successive governments, operating on the ideology of market liberalism.




Read more:
Vital Signs: COVID-19 recession is different – and we need more stimulus to deal with it.


There are many possibilities of what contributions could be included and “paid for” under a liveable income guarantee. Most of them have some precedent, but have not been considered as part of a comprehensive program of social participation. The options include:

  • volunteering in support of organisations and causes
  • work on grant-funded community projects
  • support for beginning small businesses
  • ecological care projects
  • artistic and creative activity
  • full-time study.

All of these productive activities should be given the same terms, income and assets test as the pension.

Including supplements, a single pensioner currently receives up to $944.30 per fortnight. This is paid to the aged, people with disability and carers.

Without the Coronavirus Supplement, a single person on the JobSeeker Payment receives $574.50 a fortnight (including the Energy Supplement).

How to pay for a living wage

We estimate the annual cost of a policy along the lines suggested above would be less than $30 billion. About $10 billion a year would be needed to set all benefits equal to the age pension. The cost of expanded eligibility for the liveable income guarantee is harder to estimate, but unlikely to be more than $20 billion a year.

Most of this could be financed simply by forgoing the tax cuts for high income earners legislated by the Morrison government after it won the 2019 election.

The welfare system should be more like the tax system

When it comes to government checks on people’s participation in their chosen community activities, we need to look to the tax system.

Currently the welfare system imposes strict compliance rules to prevent cheating at the outset. By contrast, the tax system is operated on the basis of self-assessment.

Taxpayer declarations are assumed to be true in the first instance, but subject to auditing. The liveable income guarantee should operate like this, where people submit their own participation declaration, as we do with our tax returns.

The welfare system could operate more like the tax system when it comes to self-reporting.
James Gourley/AAP

Looking ahead, we need to focus on cooperation rather than competition.

This means giving everyone the opportunity to contribute to society, whether or not they generate a market income. A liveable income guarantee will be a crucial step towards this goal.


This article was the product of discussion among a group that also included author Tim Dunlop, Western Sydney University emeritus professor Jane Goodall and QUT senior lecturer Dr Jenni Mays.The Conversation

John Quiggin, Professor, School of Economics, The University of Queensland; Elise Klein, Senior Lecturer, Crawford School of Public Policy, Australian National University, and Troy Henderson, Lecturer in Political Economy, University of Sydney, University of Sydney

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

Government to repay 470,000 unlawful robodebts in what might be Australia’s biggest-ever financial backdown


Terry Carney, University of Sydney

In a near-complete capitulation, the government will refund every alleged overpayment it has collected from welfare recipients under the discredited “robodebt” system of income averaging.

Unveiling the automated system in mid-2016 then treasurer Scott Morrison and social services minister Christian Porter promised more “accurate and appropriate income testing”.

They were going to work with the prime minister’s Digital Transformation Office to “cut red tape and ensure that mistakes are minimised”.

The man who headed Digital Transformation Office at the time later described what happened as “cataclysmic”.

Three quarters of a billion to be paid back

Almost half a million Australians received letters from Centrelink telling them they had been overpaid because the income their employer had reported to the Tax Office was more than the income they had reported to Centrelink.

Unless they explained why within 21 days, they would have an assessment made against them and be hit by a 10% recovery fee.

Many paid up, in part because the alleged overpayments went back six years or more, and the Centrelink website had only asked them to keep payslips for six months.

Hundreds of thousands of these assessments appear to have been wrong.

Rather than using the recipients’ actual income in the fortnights for which benefits had been paid, Centrelink calculated an average fortnightly income over a longer period which often included fortnights they were in paid employment and not receiving Centrelink benefits.

November backdown

In November 2019 a week before it was due to defend a test case brought by a 33-year-old local government worker, and after press reports that its own lawyers had told it such collections were unlawful, the government conceded all points and abandoned income averaging.

A court order declared that the debt notice was not validly issued because the decision-maker could not have been satisfied that the debt was owed.




Read more:
Robodebt failed its day in court, what now?


At the time the minister for government services Stuart Robert described the decision not to proceed with income averaging as “a refinement” that would affect a “small cohort”.

On Friday, ahead of the hearing of a larger class action, Mr Robert announced that the government would refund everything collected under the scheme, whether it was calculated using partial or whole income averaging.

The refunds will be paid to all 470,000 Australians who have had debts calculated using income averaging, whether they had paid up voluntarily or not.

Now the half a million repayments

Included in the refunds will be interest charged and collection fees charged, at an estimated total cost of A$721 million.

What the Government has not agreed to is damages for harm and suffering of supposed debtors, which were sought by the class action. Although liability for damages is more difficult to establish, the class action is unlikely to abandon the attempt to obtain compensation.

The harm suffered by many of those caught up by the Government’s illegal and immoral robodebt scheme is an injustice still to be rectified.




Read more:
Danger! Election 2016 delivered us Robodebt. Promises can have consequences


The Conversation


Terry Carney, Emeritus Professor of Law, University of Sydney

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

When the Coronavirus Supplement stops, JobSeeker needs to increase by $185 a week



James Gourley/AAP

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

The Morrison government’s changes to welfare payments were among its most significant responses to the coronavirus crisis.

In April, the new Coronavirus Supplement roughly doubled the level of benefits for unemployed people on the JobSeeker Payment (called Newstart until March) and a range of other working-age payments.

But this huge increase will not last, with the $550 fortnightly supplement due to expire in late September.

If we want to keep unemployed Australians out of poverty in future, significant changes will be required to the base rate of JobSeeker.

According to my analysis, an increase of $185 a week is needed.

Debate brewing over the future of JobSeeker

A political debate is now brewing about what happens next to the JobSeeker Payment.

Before coronavirus, there had been consistent calls across parliament, business and community groups to raise the rate of Newstart/JobSeeker, which has scarcely increased in real terms since 1994.




Read more:
Coronavirus supplement: your guide to the Australian payments that will go to the extra million on welfare


Prime Minister Scott Morrison appears to be holding firm to the idea that the increased payments will stop later this year.

As he recently said,

we’ve put a COVID supplement in place for the period of the pandemic and that’s what we’ve budgeted for and that’s what our policy is.

But Labor and the Greens say there should be a permanent increase to the JobSeeker Payment (although they do not agree on an amount). Some Coalition MPs are also pushing for a boost.

Millions of Australians will need JobSeeker support

There are currently about 1.6 million Australians receiving the JobSeeker Payment, while the Coronavirus Supplement also goes to recipients of other payments, including Youth Allowance, Parenting Payment, Farm Household Allowance and Special Benefit.

In December 2019, there were more than 400,000 people receiving these payments – and possibly more now.

It is also possible that many of the estimated 6.1 million people currently on JobKeeper will need to claim JobSeeker as the former is phased out. So, would the government really halve income support for more than two million people at the end of September?

As the Grattan Institute has pointed out, cutting income support in this way this would be “a recipe for a second downturn”.

The Coronavirus Supplement and the “benefit cliff”

While the Coronavirus Supplement is a crucial element of support for newly unemployed Australians, it is not well designed. This reflects the speed with which it was developed and the fact it was intended to be temporary.

The chart below shows how the supplement combines with the basic JobSeeker Payment for a single person, and how the package of assistance changes by hours of work per week, paid at the minimum wage of $19.49 per hour.



The Conversation, CC BY-ND

What is most striking here is the “benefit cliff”: a person working 27 hours per week takes home around $720, but a person working 28 hours takes home $508. This is the result of the loss of the entire Coronavirus Supplement when the last dollar of JobSeeker is lost under the current income test.

This also creates significant anomalies: a person working up to three hours per week would have a higher disposable income than someone working 28 to 31 hours per week. And someone working 38 hours would have a lower disposable income than someone working between 19 and 27 hours.




Read more:
What’ll happen when the money’s snatched back? Our looming coronavirus support cliff


The same benefit cliff applies to couples, but because of the relaxation of the couple income test, the effect is not felt until higher levels of income.

At the moment, these anomalies and the benefit cliff are not very pressing because many people on payments will have reduced hours of work, if any.

But as workplaces open up and people return to employment, these design issues will become more problematic. Put simply, the Coronavirus Supplement in its current form should not be continued.

We need to increase the basic JobSeeker rate

This means that to continue to adequately support unemployed Australians and avoid a double dip economic downturn, the basic rates of payments need to be increased.

Last month, a Senate inquiry released its report into the adequacy of Newstart/JobSeeker.

The report by non-government members made 27 recommendations, including:

once the Coronavirus Supplement is phased out, the Australian Government increase[s] the JobSeeker Payment, Youth Allowance and Parenting Payment rates to ensure that all eligible recipients do not live in poverty.

They also recommended that

the Australian Government set a national definition of poverty. The Government should immediately commence work in collaboration with academic experts and the community sector to determine this definition.

Keeping people out of poverty

Clearly, we need to look at how to make the payment more adequate immediately, without waiting for an inquiry to determine how much is enough – a process that could take months.

There is a simple benchmark already available that can be used. This is the rate of pension paid to the aged, people with disability and carers. Including supplements, a single pensioner currently receives up to $944.30 per fortnight.

When the Coronavirus Supplement ends, a single person on the JobSeeker Payment will receive $574.50 (including the Energy Supplement) – a gap of $370 per fortnight or $185 per week.

Setting working-age payments at the same rate as pensions will significantly simplify our overly complex system and provide a consistent treatment of all adults.

It will reduce incentives for people to seek to qualify for higher payments.

It would also mean that if the federal government sets up an inquiry into poverty standards – as the Senate recommended – we would not have to worry about anomalies in current payment rates. We could focus on clear principles of adequacy for all Australians instead.

JobSeeker must increase by about $185 a week

In January, the Australian Council of Social Service called for a minimum $95 a week increase to Newstart.




Read more:
How to tweak JobKeeper, if we must


This would have applied at the time to around 850,000 people, at a cost of about $3.8 billion a year.

I estimate that an increase of $185 per week could cost around $7.4 billion, but this does not factor in the projected increase in the number of people needing support.

If we have more than two million people on working age payments in September this year, this would imply a rough budget cost of around $17 billion in a full year.

Raising JobSeeker payments is a substantial budgetary cost. But the current cost of the Coronavirus Supplement over a full year is likely to exceed $30 billion.

The alternative of cutting rates is also extremely costly: a deep increase in poverty among millions of Australian households and the likelihood of a double dip recession.The Conversation

Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University

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

What’ll happen when the money’s snatched back? Our looming coronavirus support cliff



Shutterstock

Danielle Wood, Grattan Institute and Nathan Blane, Grattan Institute

At almost 10% of gross domestic product, and a much larger per cent of government spending, Australia’s fiscal response to the COVID-19 crisis has been one of the biggest in the world.

The government is spending an average of A$26 billion a month on programs that didn’t exist in February.

To put that in perspective, before COVID-19 the government’s total average monthly expenditure this financial year was going to be $42 billion.

While far from perfect, these emergency measures have been successful at supporting the incomes of many households and businesses.

But, as this chart shows, each and every one will be gone by the end of October, making October a very dangerous time for businesses and for the economy.

In his address to parliament on Tuesday, Treasurer Josh Frydenberg spoke of a return to work as restrictions were eased.

But he noted that any new outbreaks of COVID-19 could see restrictions re-imposed at a loss of more than $4 billion per week to the economy.

Treasurer Frydenberg’s address to parliament.
MICK TSIKAS/AAP

Even if things go to plan, the harsh reality is that big parts of the economy are still likely to be doing less than they should for some time yet.

Most of the world has not fared as well as Australia in limiting deaths and the spread of the virus, which means global economic activity and demand will be weak for some time.

Businesses and consumers are likely to be cautious. Many will find themselves financially challenged because their loan and rent obligations were deferred rather than removed during the crisis.

Australia’s population growth will be much slower because of the reduction in temporary migration, hitting consumer-facing businesses and the broader economy.

Against this backdrop, the sudden withdrawal of massive government spending will leave an enormous hole in economy activity and the incomes of business and households.

The chart below shows that huge amounts of government support (more than 25% of gross domestic product) scheduled to vanish by the end of October.

It’s a recipe for a second downturn.

A much better approach would be to remove the measures slowly.

JobKeeper could be wound back in line with the recovery of individual businesses.

Reassessing eligibility after most physical distancing restrictions have been removed, particularly if the health situation is well controlled, seems sensible.

Support should end early for some, late for others

If the revenues of some businesses rebound to close to pre-coronavirus levels, they could come off JobKeeper early, before the September deadline.

But if the revenues of others remain weak because their operations are still constrained by health restrictions, the government could consider extending their JobKeeper payments beyond September.




Read more:
That estimate of 6.6 million Australians on JobKeeper, it tells us how it can be improved


Targeting support to the firms that need it most in this way would be a better use of taxpayers’ money – and it would help stop the economy falling off a “cliff” in late October.

The JobSekeer supplement could also be phased out more slowly than the government currently plans.

JobSeeker should stay higher than it was

The treasurer should settle on a new level of income support – lower than JobSeeker with the supplement but probably $75 to $100 a week better than JobSeeker without the supplement – so that people on it are spared significant financial distress while searching for work.

It could also announce a range of measures to boost demand in the danger zones that will be created by supports coming off.

There are plenty of good options.

  • one-off cash payments to households, which we know have boosted spending

  • more spending on mental health services or programs to help disadvantaged students catch up on learning lost

  • infrastructure spending on shovel-ready projects with good returns to the community including social housing, roads and school maintenance

Debt will need to be managed over the medium term, but it shouldn’t constrain the government from implementing the policies needed to drive recovery.

On Wednesday the Office of Financial Management unloaded $19 billion of new 10-year bonds in the biggest bond sale in Australian history after receiving bids for more than twice that many.




Read more:
Were it not for JobKeeper, unemployment would be 11.7%, up from 5.2% in one month. Here’s how the numbers pan out


It will pay an interest rate of 1.025%, which is less than the rate of inflation.

Transitioning the economy from emergency settings to business as usual will not be easy, but there’s no imperative to do it suddenly.The Conversation

Danielle Wood, Program Director, Budget Policy and Institutional Reform, Grattan Institute and Nathan Blane, Analyst, Grattan Institute

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

Coronavirus Update: International


General

Italy

Russia

United Kingdom

USA

China

India

Papua New Guinea

Singapore

Africa

Brazil

Coronavirus Update: International


General

USA

Italy

United Kingdom

Sweden

Bangladesh

India

Indonesia

The key to the success of the $130 billion wage subsidy is retrospective paid work


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

The secret sauce in the government’s A$130 billion JobKeeper payment is that it will be retrospective, in the best possible way.

It’ll not only go to employers who have suffered losses and had employees on their books tonight, March 30, but to employers who have suffered losses and had workers on their books as far back as March 1.

This means that employers who have sacked (“let go”) of workers at any time in the past month can travel back in time, pay them as if they hadn’t been sacked, and nab the A$1,500 per employee per fortnight payment.

As the official fact sheet puts it, “the JobKeeper Payment will support employers to maintain their connection to their employees”.

This retrospective connection will add new meaning to the term “revision” when the March unemployment numbers are released.

Not only will the March numbers be liable to being revised a month later as is normal in the light of extra information, but many Australians who were unemployed in March will retrospectively turn out not to have been unemployed.

They will have been retrospectively in paid work.




Read more:
Modelling suggests going early and going hard will save lives and help the economy


(And if they have applied for the Centrelink payment of Newstart plus $550 per fortnight, they’ll have to un-apply to avoid what the prime minister referred to as “double counting” rather than the more loaded “double dipping”.)

It gets better. If you have been part-time, or for some other reason on less than $1,500 per fortnight, “your employer must pay you, at a minimum, $1,500 per fortnight, before tax”.

This means you’ll get a pay rise, for the six months the scheme lasts.


The Conversation, CC BY-ND

If you’ve been let go and then retrospectively un-sacked, you are also guaranteed to get at least $1,500 per fortnight, which in that case might be less than you were being paid, but will be more than the $1,115 you would have got on Newstart (which has been renamed JobSeeker Payment).

If you remain employed, and are on more than $1,500 per fortnight, the employer will have to pay you your full regular wage. Employers won’t be able to cut it to $1,500 per fortnight.




Read more:
Which jobs are most at risk from the coronavirus shutdown? 


To get it, most employers will have to have suffered a 30% decline in their turnover relative to a comparable period a year ago. Big employers (turnover of $1 billion or more) will have to have suffered a 50% decline. Big banks won’t be eligible.

Self-employed Australians will also be eligible where they have suffered or
expect to suffer a 30% decline in turnover. Among these will be musicians and performers out of work because large gatherings have been cancelled.

Half the Australian workforce

The payment isn’t perfect. It will only be paid in respect of wages from March 30, and the money won’t be handed over until the start of May – the Tax Office systems can’t work any faster – but it will provide more support than almost anyone expected.

It’s scope is apparent when you consider the size of Australia’s workforce.

Before the coronavirus hit in February, 13 million of Australia’s 25 million residents were in jobs. This payment will go to six million of them.




Read more:
Coronavirus supplement: your guide to the Australian payments that will go to the extra million on welfare


Without putting too fine a point on it, for the next six months, the government will be the paymaster to almost half the Australian workforce.

Announcing the payment, Prime Minister Scott Morrison said unprecedented times called for unprecedented action. He said the payment was more generous than New Zealand’s, broader than Britain’s, and more comprehensive than Canada’s, claims about which there is dispute.

But for Australia, it is completely without precedent.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.

‘Whatever it takes’ should now include a universal basic income


Jeremy Baskin, University of Melbourne

G20 leaders have pledged to do “whatever it takes” to minimise the impacts of COVID-19.

Most of these nations are lumbered with welfare safety nets unfit for purpose. They are designed for last century, with a binary way of thinking about employment that’s no longer the experience of casual, contract and gig workers.

The limitations are being thoroughly exposed by a crisis further blurring the line between having or not having work.

A simple solution is a universal basic income – a regular payment to every adult, no questions asked.




Read more:
Coronavirus: Why the UK needs a basic income for all workers


Binary thinking

The deficiencies of current welfare nets have been demonstrated in Australia over the past week. The nation’s social security system has been in meltdown as hundreds of thousands make new claims for government assistance.

There have been massive queues at Centrelink offices. The government’s MyGov website has crashed and phone calls have gone unanswered.

These problems are more than logistical. They are also ideological, reflecting how the system has been conceived. It requires people to jump through bureaucratic hoops, filling in forms and providing documents and financial statements. It judges need according to a binary (employed-unemployed) way of thinking, with processes that are punitive and complex.

No conditions attached

The universal basic income (UBI) is a well-developed idea to address these problems with existing social security regimes.

The basic idea is to make a regular cash payment to all adult individuals, no conditions attached. The intention is to ensure the welfare safety net reflects the fact many more people in informal, casual, part-time, portfolio, irregular and self-employed work face financial stress despite technically being employed. Everyone gets the means for a basic existence regardless of their employment situation.




Read more:
Job guarantees, basic income can save us from COVID-19 depression


Limited trials have occurred in Finland, Kenya and Canada. These have generally found recipients are happier and not disincentivised to look for work, a common criticism of the concept.

Unemployment spiking

The most common criticism of the universal basic income is its cost. But now, with the need for income support spiking and governments adopting a “whatever it takes” approach to spending to keep economies afloat, this argument is not compelling.

The scale of the economic challenge is demonstrated by Australia’s unemployment predictions for the next six months jumping from 7% a week ago to 11%. Government Services Minister Stuart Robert this week acknowledged the decision to close businesses had left “maybe a million people unemployed overnight”. That million, on top of 700,000 already unemployed, would take the jobless rate above 12%.

In truth, much like the trajectory of the coronavirus, no estimates can be relied upon at this stage, other than to say unemployment levels will be very high. Along with pensioners and other welfare recipients, this means government financial support will be crucial for a significant proportion of households.

How it might work

The advantage of a universal basic income scheme, especially now, is that it is simple and easily understandable.

This is how it might work in Australia.

It would be run through the Australian Taxation Office, not Centrelink. A direct payment would be made fortnightly into the bank account of all adult Australian citizens and permanent residents over 18 years and no longer at school.

That’s it.

The money would be taxable income, so the tax office would recoup a significant portion from higher earners. For now, it could exclude those over 65 years for whom long-standing pension and retirement systems exist and which we may not want to meddle with at this time.

Ballpark estimates

Australia’s United Workers Union (representing workers in hospitality, health, aged care, supermarket supply, cleaning and other exposed sectors) has advocated a universal basic income equivalent to the minium wage – A$740 a week.

But I’m going to make some ballpark calculations based on an emergency universal basic income payment of A$550 a fortnight.

This is equal to the bonus the Australian government is giving job seekers during the crisis (double their usual payment).

To extend this to 7.65 million eligible Australians would cost about A$55 billion over six months. The government would recoup a portion of this, though, through income tax and being able to suspend some (but not all) existing welfare payments.

That compares with almost A$84 billion – about 3.5% of GDP – in spending already announced by the Australian government. About A$24 billion of this is for payments to welfare recipients, with the lion’s share directed to business and industry.




Read more:
Scalable without limit: how the government plans to get coronavirus support into our hands quickly


At a time of economic crisis unprecedented in our lifetimes, an innovative approach like a universal basic income could be an essential, simple, confidence-boosting and popular response.The Conversation

Jeremy Baskin, Fellow, Melbourne School of Government and Melbourne Law School, University of Melbourne

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

It’s Newstart pay rise day. You’re in line for 24 cents, which is peanuts



The extra 24 cents per day can buy an extra 36 peanuts per day, more if you buy in bulk.
Shutterstock

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

Newstart recipients and other Australians on benefits get their half-yearly pay rise today (and also on March 20). This one is vanishingly small.

Announced very quietly by Social Services Minister Anne Ruston earlier this week, it amounts to just A$3.30 per fortnight for someone on the Newstart unemployment benefit.

That’s $1.65 per week, less than 24 cents per day.

It’s enough to buy about 36 peanuts – or more if you buy them in bulk.

More galling still for Australians on Newstart, age and disability pensions will increase by twice as much – $6.80 per fortnight, an increase the government was keener to highlight in its press release than the increase in Newstart.

It is hard to comprehend how it could have come to this. Back in 1997 Newstart and the pension were about the same in dollar terms. Each was probably somewhat less than a single person needed to live on.

How did it come to this?

Then the Howard government effectively froze Newstart, forevermore increasing it only in line with inflation (which back then was typically 2.5% per year) while using a formula that lifted pensions in line with wage growth or inflation, whichever was the bigger (back then wages were growing by more than 3% per year).

The difference wasn’t big, but over the past two decades it has compounded. Prime Minister Kevin Rudd helped it along in 2009 by a one-off $64 per fortnight increase in the single pension, unmatched by an increase in Newstart.



Source: Ben Phillips ANU, DSS

It means that from today the single pension will be $850.40 per fortnight, while the single Newstart payment will be $559 – a mere two-thirds of the pension.

And it’ll get worse.

Because inflation is low, and each low increase is off what is now a much lower base than the pension, Newstart increases are small while pension increases are twice as big.




Read more:
FactCheck: do 99% of Newstart recipients also receive other benefits?


If prices and wages continue to grow at the rates they have over the past decade (2.1% per year for prices, 2.7% for wages) by 2070 Newstart will be just half of the pension. By the end of the century it’ll be just two fifths of the pension.



Ben Phillips, Peter Martin ANU, DSS, ABS

If it can’t continue, it won’t

Herbert Stein was an economic advisor to US presidents Nixon and Ford. These days he is best remembered among economists for Stein’s Law, which says pithily:

If something cannot go on forever, it will stop.

It’s a warning against the dangers of extrapolations of the kind I have just done, and also a guide to the future. A Newstart rate of just two fifths of the pension, way below everyone else’s standard of living, would be intolerable.

The formula will change well before it gets that bad. It’ll have to.

John Howard himself said so last year:

I was in favour of freezing when it happened, but I think it has probably gone on too long.

The question is how it will change. Labor promised a review and an increase during the last election.

The Coalition is holding firm, although it can’t if it continues to remain in office.

A decade ago the Organisation for Economic Co-operation and Development warned that Newstart was low enough to raise “issues about its effectiveness in providing sufficient support for those experiencing a job loss, or enabling someone to look for a suitable job”.

The budget surplus will help

The Australian Council of Social Service wants the government to lift Newstart by $150 per fortnight to $709, still well short of the pension, and afterwards to lift it in line with the pension and wages, so that it never falls further behind.

It wants the same for Youth Allowance, Austudy, Abstudy, Sickness Allowance, Special Benefit, Widow Allowance and Crisis Payment, which all move in line with Newstart.

The hit to the budget would be $3.3 billion per year, small enough to be funded by projected surpluses.




Read more:
Are most people on the Newstart unemployment benefit for a short or long time?


And it would get smaller. Deloitte Access Economics says that after some years about $1.5 billion per year would return to the budget in extra tax as Newstart recipients and the other beneficiaries spent what they were given and boosted economic growth.

They’d have to.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.