Vital Signs: JobKeeper delivered what was needed to save the patient

Posted on October 17, 2021 by particularkev

Richard Holden, UNSWTo the critics, the Treasury has just marked “its own homework”.

It has produced a 60-page report entitled Insights from the first six months of JobKeeper.

And it finds the A$89 billion program it designed and delivered held up pretty well last year at the time Australia needed it most.

As with the Labor government’s economic rescue programs during the global financial crisis, there are critics claiming it was wasteful, this time from the Labor side of politics.

But they’ve exceedingly short memories.

In the first week of March 2020, Australia had 93 COVID-19 cases and three deaths.

The prime minister said he was “going to the footy” and “looking forward to it”, at a time when medical experts were calling for people to do no such thing and a quarter of Italy was locked down.

Italian tourists were coming in freely. We were sleepwalking into a calamity.

The way we were

On March 10 last year, I wrote that we needed to close our international border totally and immediately, and spend about $100 billion to support workers and business while we shut down the economy and got health measures in place.

On March 20 the borders were closed. Treasury forecast that if we had to lock down as hard as Italy or Spain our economy (GDP) would collapse by 24%.

That wouldn’t be a mere recession or even a depression. It would be economic and financial Armageddon. The government needed to plug an unimaginable hole quickly. And it did.

JobKeeper provided six months of financial support to businesses who expected their revenues to drop. At the time, that was almost every business in the country.

It was designed to be easy to understand, and to get money onto business and household balance sheets immediately.

Most importantly, it was designed to give recipients certainty in a time of calamitous uncertainty.

These are facts. They are undisputed.

What the critics say now

From the safety of the present day, critics point out that JobKeeper excluded certain industries and workers: short-term casuals and universities among them.

And they say $19.7 billion went to businesses whose revenues increased in the three months they received the payment.

It would have been better, they say, not to spend the money on businesses that turned out to have rising revenues, and it would have been good to include short-term casuals and universities.

JobKeeper should have included a “clawback” provision, they say.

They are right. It would have been better had it been designed in that way. But they are taking insufficient account of what things were like at the time.

What things were like then

The context for the development of JobKeeper was a once-in-a-century event, with a government in power whose entire political brand had been railing against “debt and deficits”.

Economists were concerned the government might do too little, or nothing at all.

There are the three things worth noting:

Treasury had to act incredibly quickly, in a matter of days. I like an academic seminar as much as the next person, but Treasury didn’t have the luxury of years of work, refinement and debate. It had to perform battlefield surgery.
A key reason so many businesses were able to increase revenues after JobKeeper began was that it was so effective. A smaller scheme, with more requirements and red tape, would have meant fewer workers and business would have got support, leaving the whole economy worse off.
The more carve-outs and exclusions from JobKeeper the less effective it was likely to be. Fine-tuning rules creates uncertainty. It provides scope for gaming (getting around the rules). If we want public programs to have force, they need to be simple.

The real choice in March 2020 was JobKeeper as it was or no JobKeeper at all.

We saved the patient

In early March 2020 the Australian economy was critically ill .

Doctors Josh Frydenberg (Treasurer) and Steven Kennedy (Treasury Secretary) saved the patient. That’s what matters.

Did they use ECG machines, blood bags, gauze and stitches? You bet.

Did it cost economic resources? Probably, although had the worst had happened even more resources might have been used.

Insurance can look wasteful after the fact, but that doesn’t make it unwise.

I am glad they erred on the side of too many stitches rather than too few.

They provided the only thing that can really help in times of extreme uncertainty, which is certainty.

Richard Holden, Professor of Economics, UNSW

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

Coronavirus Update: Australia

Posted on July 23, 2021 by particularkev

As Sydney’s lockdown continues, what support is available — and needed — for people losing income?

Posted on July 12, 2021 by particularkev

Peter Whiteford, Crawford School of Public Policy, Australian National University and Bruce Bradbury, UNSWGreater Sydney is in its third week of lockdown, with no clear end in sight. The situation calls for support both for businesses and households suffering severe income loss in the weeks ahead.

Greater Sydney makes up about one-fifth of the Australian population, so is a significant chunk of our economy and community.

It’s worth noting when the (now extinct) Coronavirus Supplement was announced on March 22 2020, there were 179 new cases per day for all of Australia. When the (also now extinct) JobKeeper Payment was announced a week later, there were 383 new cases per day.

There were 112 new cases announced in NSW alone on Monday.

A federal government responsibility

In June, Prime Minister Scott Morrison indicated business support was a state government responsibility. But income support for households is a federal government responsibility.

In 2020, the Morrison government showed great flexibility. JobKeeper supported employers to maintain part-wages for workers who would otherwise be stood down, and the Coronavirus Supplement gave additional support to those who lost their jobs.

Sign at Bondi Beach 'Stay at home orders for Greater Sydney'. — Sydney had been in lockdown since June 26.
Mick Tsikas/AAP

These programs went a long way towards addressing a weakness of Australia’s social security system — the lack of insurance against sudden income loss when workers are laid off (for whatever reason). Indeed, for a while, the Coronavirus Supplement also worked to address another major weakness, the below-poverty line income for the long-term unemployed.

JobKeeper and the Coronavirus Supplement ended earlier this year. Most recently, the federal government has built on existing schemes to assist people during natural disasters, to support those during lockdowns or quarantine.

The last few months in Melbourne and Sydney show the COVID crisis is far from finished. Morrison has flagged that further financial support is being considered by the government. Treasury is reportedly working on options.

There are currently two main forms of support.

The COVID-19 Disaster Payment

The first main support is the COVID-19 Disaster Payment. This kicks in once a lockdown has gone on for more than a week. For those losing under 20 hours work, the payment is $325 per week, and for those losing 20 hours or more of work, the payment is $500 per week.

There are several eligibility criteria: recipients must be unable to attend work and have lost income, they can’t have access to appropriate paid leave and they can’t be receiving an income support payment, a state pandemic payment or the Pandemic Leave Disaster Payment for the same period.

Last week, Morrison announced the liquid assets limit of $10,000 would be waived from the third week of a lockdown.

Pandemic leave payment

The second key support is the Pandemic Leave Disaster Payment, where an appropriate local health authority has told people to self-isolate or quarantine, or for those who need to care for someone with COVID-19. This includes Australian residents and those with a working visa.

The payment is $1,500 for each 14-day period someone needs to self-isolate or quarantine. A new claim must be made each 14-day period and Services Australia has set up accelerated application processes.

As with the COVID disaster payment, those with any income from paid work or other leave entitlements, or on income support payments, are not eligible.

How adequate are these measures?

Whether support is adequate depends on the spread of the virus and its economic impact in coming weeks. But there are already gaps in support.

It is confusing to have two payments at different levels, with people required to quarantine receiving greater support than those locked down, even when financial losses may be similar.

A woman crosses a deserted street in the Sydney CBD. — The Delta variant has turned the Sydney CBD into a ghost town.
Mick Tsikas/AAP

The Pandemic Leave Disaster Payment is comparable to JobKeeper, but the Covid-19 Disaster Payment is considerably less (although higher than JobSeeker Payment for the unemployed).

As we have already noted, both payments have significant exclusions. With the COVID-19 payment, apart from being unavailable for the first week, people must submit a new claim for each additional week of lockdown.

What about those already on welfare?

While the government increased the base rate of JobSeeker Payment earlier this year, Australia still has the second lowest “replacement rate” (relative to wages) for the unemployed in all OECD countries.

Another significant gap is most of the current help cannot go to people already receiving income support, although many of them may lose income in lockdown.

Welfare recipients who have to go into isolation or quarantine can access a one-off crisis payment (equal to a week’s pay at the maximum basic rate of their payment), but this is only available twice in a six month period.

According to Australian government data, in May, nearly one in four people receiving Youth Allowance (Other) and more than 20% of those receiving JobSeeker had part-time earnings, which is crucial to help people paying rent and bills. If they lose earnings, their benefits will increase, but by less than half the earnings lost.

Business support

We keep hearing reports about how small business is suffering badly.

Small businesses have many fixed costs — most notably rent — that will not be supported. More generally, so far, most of the costs of the lockdowns have been borne by either employees, employers in locked down industries, or government.

But a wider sharing of the costs via rent and interest moratoriums for affected businesses and households should be considered. This requires co-ordinated action by the state and federal governments.

Importantly, state governments are looking at their own measures. Last week, Victoria announced it would trial up to five days of sick or carer’s leave, at minimum wage rates, to workers in high-risk industries, including aged care, cleaners, supermarket workers, hospitality workers and security guards. However, this will not start until early 2022.

NSW has been pushing the federal government to jointly devise a new scheme to save jobs. An announcement is expected imminently.

Whatever this is, governments need to be realistic about what businesses and households are facing. The longer lockdown lasts, the more people will need longer-term solutions to costs they can’t get away from, like mortages, rents and basic living expenses.

Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University and Bruce Bradbury, Associate Professor, Social Policy Research Centre, UNSW

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

JobKeeper and JobMaker have left too many young people on the dole queue

Posted on April 9, 2021 by particularkev

Kathryn Daley, RMIT University; Belinda Johnson, RMIT University, and Patrick O’Keeffe, RMIT UniversityOf the more than 870,000 Australians who lost their jobs in the first few months of the COVID-19 crisis, 332,200 – or 38% – were young Australians aged 15-24.

By June 2020, as the overall unemployment rate hit 7.4%, the youth unemployment rate spiked to 16.4%, with a further 19.7% underemployed (working fewer hours than they wanted).

As of February the overall unemployment rate had fallen to 5.8%, compared with 5.1% in February 2020. The youth unemployment rate meanwhile was 12.9%, compared with 11.5% the year before, and a further 16% were underemployed.

Prime Minister Scott Morrison has enthused about there now being “more jobs in the Australian economy than there were before the pandemic”. But that’s true only for those 25 and older: 77,600 more are employed than before the crisis. For those aged 24 and under, 74,100 fewer have jobs.

So clearly the pandemic has hit younger workers the hardest. The reasons for disproportionate impact aren’t complicated. Young people are more likely to work in casual jobs – the first to be excised in hard economic times – and in those sectors most affected by border closures, lockdowns and other measures – retail, hospitality, tourism.

Yet the federal government’s policy responses, injecting billions of dollars into the economy to support businesses and employment, have compounded this impact through deliberate yet flawed policy design.

JobKeeper has kept proportionally fewer young people in jobs. Changes allowing withdrawal of superannuation will hurt them more in the longer term. And JobMaker, the program designed specifically to encourage employment of younger workers, has proven a monumental flop.

Shut out of JobKeeper

The centrepiece of the federal government’s support measures was the A$100 billion JobKeeper program, initially paying a subsidy of $750 a week before tapering and finally being axed at the end of March.

The Reserve Bank of Australia estimates JobKeeper payments kept at least 700,000 workers off the dole queue. But to qualify, employees had to have been working for their employer for a minimum of 12 months.

This disproportionately excluded younger workers – being more likely to be recent workforce entrants, to switch jobs more than older workers, and to be in employed in casual or other forms of insecure work.

To illustrate, Australian Bureau of Statistics data from August 2019 shows young people comprised 17% of the workforce yet accounted for 46% of all short-term casual employees.

Of those employed casually, 26.4% of young people had been with their employer for less than 12 months, compared to 6.5% of those aged 25 and over. So one in four young people employed casually were not eligible for JobKeeper, compared with only one in 16 of their older counterparts.

Drawing down superannuation

JobKeeper’s design thus pushed proportionally more younger workers on to the dole queue. It also likely contributed to more of them dipping into their superannuation savings under the provisions announced by the federal government in March 2020.

Those provisions allowed Australians affected by the economic crisis to withdraw up to $20,000 from their superannuation accounts (in two rounds of $10,000 each – one last financial year, another this financial year).

The Industry Super Australia estimated about 395,000 people under 35 completely drained their super accounts.

This emptying of accounts is not surprising given the average superannuation balance by age 30 is about $28,000 for men and $23,700 for women.

But it means many will have considerably less super to retire on. The long-term cost of a 25 year-old withdrawing $20,000 is more than $100,000, compared with about $37,000 for a 50-year-old, according to estimates by financial comparison site Canstar.

Spend now, lose later

There’s also evidence the design of the super-access scheme has allowed unnecessary withdrawals. While those taking out money have had to declare they need the money to pay for essential items (such as rent or bills), there has been no scrutiny of this prior to approval.

Indeed, according to credit-scoring company Illion about two-thirds of the funds withdrawn this financial year was spent on discretionary items such as clothing, furniture, restaurants and alcohol.

As former prime minister Paul Keating has put it, the government has relied on individuals “ratting their own savings” to buttress its own stimulus spending.

More work needed

The one program meant to specifically address youth unemployment, the JobMaker Hiring Credit, has so far proven a failure. Its aim is to incentivise employers to hire job seekers aged 16 to35 with a weekly $200 subsidy, creating 450,000 jobs over two years. But in late March, Treasury officials revealed it had so far led to just 609 hires.

All unemployment is costly for individuals, families and the wider community. But high and long-term youth unemployment can have particularly dire consequences that reverberate for decades. It creates the risk of “scarring”, suppressing an individual’s job and income prospects over their entire life. That ultimately requires the government picking up the tab.

Youth unemployment was already a significant issue prior to the COVID crisis. Now, with younger people hit hardest by the pandemic’s economic impacts, it’s imperative to ensure an entire generation is not permanently disadvantaged.

Kathryn Daley, Senior Lecturer & Program Manager – Youth Work and Youth Studies. School of Global, Urban and Social Studies, RMIT University, RMIT University; Belinda Johnson, Lecturer and Program Manager, Social Science (Psychology), School of Global, Urban and Social Studies, RMIT University, RMIT University, and Patrick O’Keeffe, Lecturer, Bachelor of Youth Work and Youth Studies, RMIT University

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

What happens when you free unemployed Australians from ‘mutual obligations’ and boost their benefits? We just found out

Posted on March 29, 2021 by particularkev

Elise Klein, Australian National University; Kay Cook, Swinburne University of Technology, and Susan Maury, Monash UniversityDuring COVID-19 the government ran what turned out to be a giant real-world experiment into what happens when you boost someone’s unemployment benefits and free them of the “mutual obligation” to apply for jobs.

On April 27 2020 the government as good as doubled the $565.70 per fortnight JobSeeker payment, lifting it by $550 per fortnight for what turned out to be six months. In September the boost dropped to $250 per fortnight, and in December to $150 per fortnight.

Next Thursday the boost vanishes, although the base rate of JobSeeker will climb by a less-than substantial $50 a fortnight, leaving recipients $100 a fortnight worse off than they have been, $500 per fortnight worse off than back when JobSeeker doubled and back well below the poverty line.

From Thursday April 1 they will also be subject to much more demanding work tests, having to show they have applied for a minimum of 15 jobs a month, climbing to 20 jobs a month from July 1.

On top of that the government has announced

a return to compulsory face-to-face meetings with Jobactive providers
work-for-the-dole after six months of unemployment
a dob-in line for employers to report jobseekers who seem not to be genuine
increased auditing of job applications to ensure they are legitimate

They are the sort of “mutual obligations” that were scrapped while JobSeeker was doubled.

Yet the government’s natural experiment where they doubled benefits and freed recipients of “mutual obligations” provides us with an opportunity to examine how a more generous approach affected recipients and whether, as the government says, a tougher approach is needed in order to compel people to work.

During last year’s more generous approach, we conducted an online survey of JobSeeker recipients and found that (contrary to what appears to be the government’s expectation), it was helping get people into work.

Freed of “mutual obligations”, many were able to devote time to reengaging with the workforce.

As one respondent said,

I was able to focus on getting myself back into the workforce. Yes, mutual obligation activities PREVENT people from being able to start a new business or re-enter the workforce as an employee

And the extra income freed recipients to do things that would advance their employment prospects; either through study, through properly looking for work, or buying the tools needed to get work.

One said

I could buy things that helped me with employment — equipment for online work, a bicycle for travel, a proper phone”

An Australia Institute review of unemployment payments and work incentives in 33 OECD countries found something similar — that higher payments correlate to lower unemployment.

Another respondent said the suspended mutual obligation requirements made it easier to care for an elderly parent during pandemic and their recovery from major surgery.

Another said she had been able to focus on her health needs and her children.

People on social security are often accused of being dependent on welfare, but it’s often the economy and society that are dependent on their unpaid labour.

Yet (except for during the worst of the pandemic) these people have been denied a safety net that ensures their survival.

Fewer obligations meant parents were better able to care for children.
Shutterstock

The inadequacy of payments goes to a major and enduring flaw in the Australian social security system — its inability to recognise all of the productive activities people undertake, including unpaid care largely undertaken by women.

The decisions the government took during 2020 made a major difference to the lives of people outside the formal workforce.

They enabled them to turn their attention away from day-to-day survival towards envisioning and realising a more financially and emotionally sustainable future for themselves and their dependants.

The flow-on benefits, to all of us, ought to be substantial.

The government ought to be very interested.

If it was, it would examine the findings further, but they don’t seem to be on its radar.

Elise Klein, Senior Lecturer, Australian National University; Kay Cook, Senior Lecturer, Justice and Legal Studies Department, Swinburne University of Technology, and Susan Maury, PhD candidate in Psychology, Monash University

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

The $50 boost to JobSeeker will take Australia’s payment from the lowest in the OECD to the second-lowest after Greece

Posted on February 27, 2021 by particularkev

Peter Whiteford, Crawford School of Public Policy, Australian National University and Bruce Bradbury, UNSW

Fifty dollars sounds like a lot. But the increase in the JobSeeker unemployment benefit announced by Prime Minister Morrison on Tuesday is $50 per fortnight, which is just $25 per week. It will replace the temporary Coronavirus Supplement of $75 per week, which is itself well down on the $275 per week it began at in March last year.

It’s hard to see the increase as anything other than a cut, especially when coupled with another change which will allow recipients to earn other income of only $75 per week before JobSeeker gets cut. That’s down from the present $150 per week.

As the prime minister said, it’s better than it would have been if things returned to the level we had before special coronavirus provisions. At that time, recipients could earn only $53 per week before having their payment reduced.

But it’s not particularly generous. The Age and Sydney Morning Herald are quoting senior government sources as saying the $50 per fortnight increase in the rate was the lowest figure the party believed would be palatable to the public.

Morrison justified the increase of $50 per fortnight – rather than $150 (which would have kept what’s left of the coronavirus boost in place) or $100 or any other figure – by saying it will bring the payment to

41.2% of the national minimum wage, which puts us back in the realm of where we had been previously

Taking account of taxes paid and superannuation received by minimum wage workers gives a slightly higher replacement rate of 42.3%. That takes it back to roughly where it was at the end of the Howard government in 2007.

However, there’s no readily apparent reason why that should be a benchmark.

During the life of the Howard government the level of the single payment fell from around 50% of the minimum wage to 42%, meaning what’s proposed will return it to its lowest point relative to other benefits under Howard.

JobSeeker and age pension as a proportion of the minimum wage 1990-2021

Notes: Rates for single adult shown relative to net income when receiving a full-time minimum wage (deducting tax and Medicare levy, and adding employer superannuation contribution). Any casual loading not included. Rates shown at first of each month. Any rent assistance not included. Poverty line is half of median equivalised household income for non self-employed workers. Rates include coronavirus supplement and energy supplement, future rates are estimates.

Morrison also said the increase was the largest permanent increase in the unemployment benefit since 1986. It’s an increase of 9.7%.

During the Hawke and Keating administrations, the payment increased 23% in real terms. During the Whitlam administration it increased 50%. This means that while what’s offered is substantial by the standards of recent decades, it’s less so in the longer run.

But what about the supplements?

Morrison also argued in his press conference JobSeeker is more adequate than the base rate would suggest because

on top of that, if they’re receiving Commonwealth Rent Assistance, that payment would increase to $760.40; and on top of that, the average value of stand-alone supplements, the energy supplement and so on, is an additional $13.03. So the suggestion that anyone who was on JobSeeker is simply on that payment alone and there aren’t additional supports that are provided is not correct.

It’s true all people on income support receive the energy supplement (included in the figure above). But for a single person on JobSeeker, the supplement is only $8.80 per fortnight or less than 65 cents a day.

Many people do indeed get rent assistance, but after paying rent they become worse off rather than better off.

That’s because to get the maximum rate of rent assistance for a single person of $140 per fortnight (9% of the minimum wage), that person has to be paying around $310 per fortnight in rent. If that person is paying more, they get no extra help. The maximum is also lower for people in shared accommodation.

Private sector renters are amongst the worst off recipients of income support.

Other supplements such as the remote area allowance are indeed available, but are of no help to people who do not live in remote areas and may be inadequate to cover the higher costs involved. Supplements for help with language and literacy are only paid to people in special educational programmes.

Producing an average that includes supplementary payments most people don’t receive is inherently misleading.

How Australia compares

Net replacement rates measure the proportion of previous in-work income that is maintained after several months of unemployment. They are the benchmark used by the the prime minister to compare benefits to the minimum wage.

Using two months in unemployment as the measuring point (and using the most recently published 2019 rankings) before the pandemic, Australia’s replacement rate was the lowest in the OECD — even after rental assistance was added in.

Unemployment benefit, share of previous income after two months

Net replacement rates in unemployment including rent assistance, 2019 or latest available data.
OECD.Stat

When the maximum rate of Coronavirus Supplement was briefly in force in 2020, Australia moved to around the OECD average.

The new rate from April 2021 will move Australia from the lowest to the second lowest, ahead of Greece only.

Unemployment benefit, share of previous income, after Australian increase

Net replacement rates in unemployment including rent assistance after two months, 2019 or latest available data.
OECD.Stat

It should be acknowledged Australia’s system is based on different principles to many other OECD countries in which workers and their employers make contributions to and withdrawals from unemployment insurance.

But the difference in philosophy does not change the brutal reality that when Australian workers lose their job, their incomes fall more than in almost any other high income country.

Even after what the government has trumpeted as a historic increase, there will be few developed countries where people will be as worse off after losing work. Any permanent increase is welcome, but there is a long way to go.

Peter Whiteford, Professor, Crawford School of Public Policy, Australian National University and Bruce Bradbury, Associate Professor, Social Policy Research Centre, UNSW

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

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

Posted on November 30, 2020 by particularkev

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.

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.

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.

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.

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

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.

JobSeeker supplement extended to end-March, at lower rate

Posted on November 12, 2020 by particularkev

Michelle Grattan, University of Canberra

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.”

Michelle Grattan, Professorial Fellow, University of Canberra

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

Cutting JobSeeker payments will cause crippling rental stress in our cities

Posted on October 6, 2020 by particularkev

Simone Casey, RMIT University and Liss Ralston, Swinburne University of Technology

As soon as the COVID-19 pandemic caused businesses to shut down, state governments acted to avoid evictions by introducing moratoriums, and the federal government introduced the Coronavirus Supplement of A$550 on top of the fortnightly JobSeeker payment. These measures were intended to enable 1.6 million Australians to ride out the pandemic-related business shutdowns.

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.)

Before COVID, private rentals in nearly all capital cities were already unaffordable for unemployed and low-income renters even in typical share households. What makes the scenario worse than before COVID are the sheer numbers affected. Many of these people may have had incomes prior to the shock that enabled them to maintain higher rents.

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.

Impacts of Coronavirus Supplement withdrawal on three household types. (Median rents calculated from Real Estate Institute of Australia June 2020 data. Income calculated to include Commonwealth Rent Assistance (CRA) and lone-parent income includes Parenting Payment Single with Family Tax Benefit.)

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.

Impacts of Coronavirus Supplement withdrawal on major rental household types. (Median rents calculated from Real Estate Institute of Australia June 2020 data. Income calculated to include Commonwealth Rent Assistance (CRA) and lone-parent income includes Parenting Payment Single with Family Tax Benefit.)

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.

Map of JobSeeker increases indicating pandemic impacts on employment across Melbourne.

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.

Simone Casey, Research Associate, Future Social Service Institute, RMIT University and Liss Ralston, Adjunct associate, Swinburne University of Technology

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

Meet the Liveable Income Guarantee: a budget-ready proposal that would prevent unemployment benefits falling off a cliff

Posted on October 1, 2020 by particularkev

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

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.

JobSeeker is set to return to the unliveable rates of the former Newstart after the end of December.

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

Dollars per fortnight, single.
Source: Ben Phillips ANU, DSS

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.

John Quiggin, Professor, School of Economics, The University of Queensland; Elise Klein, Senior Lecturer, 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.

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Tag Archives: welfare

Vital Signs: JobKeeper delivered what was needed to save the patient

The way we were

What the critics say now

What things were like then

We saved the patient

Coronavirus Update: Australia

As Sydney’s lockdown continues, what support is available — and needed — for people losing income?

A federal government responsibility

The COVID-19 Disaster Payment

Pandemic leave payment

How adequate are these measures?

What about those already on welfare?

Business support

JobKeeper and JobMaker have left too many young people on the dole queue

Shut out of JobKeeper

Drawing down superannuation

More work needed

What happens when you free unemployed Australians from ‘mutual obligations’ and boost their benefits? We just found out

The $50 boost to JobSeeker will take Australia’s payment from the lowest in the OECD to the second-lowest after Greece

But what about the supplements?

How Australia compares

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

A scant incentive to shirk

Wages determine living standards

JobSeeker supplement extended to end-March, at lower rate

Cutting JobSeeker payments will cause crippling rental stress in our cities

COVID impacts have hit low-income households hardest

What about household savings?

Meet the Liveable Income Guarantee: a budget-ready proposal that would prevent unemployment benefits falling off a cliff

Take the age pension..

…extend it to others

Do it for the price of tax cuts…

Ready us for the future

Sharing my thoughts with the world from a Particular Baptist perspective

The way we were

What the critics say now

What things were like then

We saved the patient

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A federal government responsibility

The COVID-19 Disaster Payment

Pandemic leave payment

How adequate are these measures?

What about those already on welfare?

Business support

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Shut out of JobKeeper

Drawing down superannuation

More work needed

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But what about the supplements?

How Australia compares

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A scant incentive to shirk

Wages determine living standards

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COVID impacts have hit low-income households hardest

What about household savings?

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Take the age pension..

…extend it to others

Do it for the price of tax cuts…

Ready us for the future

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