Unemployment Benefits
An article in Fairfax papers today asks several MPs’ view on raising unemployment benefits. Not surprisingly, it contains only a snippet of the conversation that I had with journalist Stephanie Peatling. So I thought it might be worth setting out my thoughts on the issue in more detail.
Unlike pensions, which are aimed at being ongoing for multiple years, unemployment benefits are designed to be a temporary payment. Nonetheless, I share the feeling of many of my colleagues that the current level of unemployment benefits are an extremely low amount to live on. If we doubled tax revenue, I’d raise unemployment benefits in a heartbeat. But tax revenue has actually fallen (from around 24% of GDP under Howard to 22% now). So anyone who proposes an expensive policy like significantly increasing unemployment benefits needs to identify which taxes they’d increase or which spending programs they’d cut. (And in the current parliament, how they’d get the change through both Houses.) For example, if you asked me ‘would you scrap an NDIS to raise unemployment benefits?’, I’d say no.
As an economist, I think about tradeoffs, which I’m starting to realise may be somewhat atypical in politics. Perhaps some people answer the question as ‘if the money was free and you didn’t have to lose any of your favourite programs, would you raise unemployment benefits?’. If that’s the question, count me in as a supporter too.
I’m also concerned about the social consequences of intergenerational poverty, since it does look like there may be adverse impacts of welfare dependence in families with children. This is something I’ve worried about quite a bit while since when I was an econ prof at ANU (see for example this paper, or this recent speech). So the JET scheme (which provides childcare to high-needs parents for 10 cents an hour) strikes me as important for the next generation. The ANU ‘Youth in Focus’ study has some valuable insights on the issues too (though the links to it are alas broken at present).
There are two furphys in this article which seem to be standard defences trotted out by progressive politicians:
(1) unemployment benefit is meant to be temporary. Well thats absolutely right, but that is not what it is for most of the people who are on it. 55% of people on Newstart have been on it for 12 months or more. 1/3 of people who are long term unemployed are mature aged. Many have worked, but been retrenched, or have attempted to reenter the workforce after years caring for family. Most of these people wish that unemployment benefits were temporary too, but they have not been able to find work, or find work that was sufficiently stable to keep them off benefit.
(2) We are worried about intergenerational poverty, and the best defence is getting a job. Yes, I agree, but the assumption seems to be that the best cure for joblessness is maintaining beneficiaries in poverty. The current inadequacy of Newstart/YA is a major cause of poverty and, as a direct consequence of Labor’s changes to sole parent pensions, even more children will live in poverty. If we are serious about these problems we need to find a way to ensure that we ensure that suitable work is available to citizens who want and need it (this includes people who have disabilities, older people, people with poor literacy/numeracy, young people – in short, those who have little chance of finding work at the moment), and, if we fail, to protect those citizens from the devastating consequences of poverty.
The be frank, the consequences of poverty visited on the unemployed and their children are far more serious than the problems faced by most of us who will receive compensation for the impact of the carbon tax, those who continue to receive concessional tax treatment on investment properties and the family home, or might suffer from the withdrawal of diesel fuel rebates. I find it hard to believe that a Government that prides itself on lifting the pension in its first years of office, doesnt have the wherewithal to identify a way of ensuring that people who are already suffering what Amartya Sen calls the ‘unfreedoms’ associated with unemployment do not suffer the other health, housing and human consequences associated with poverty.
Excellent (and unanswerable?) comment.
Mr. Leigh,
I am a member of the ALP in Queensland No. 31127.
I have voted Labor since Whitlam.
I am single and 60 years old and on Newstart since October 2011 since my fixed term contract with Queensland Health was not renewed. Many other contracts which I knew about were never renewed in the anticipation of a LNP electoral win.
I am also an Industrial Relations advocate and adviser.
My Bachelor of Arts degree includes economics.
Your response to the Fairfax Press article was disgraceful and a betrayal of Labor values.
You have no idea of the real world and economists, apart from Keynes, have never had.
You are obviously one of the “rational economists”, an oxymoron if ever there was one.
I will send representations to my local member for Griffith, Kevin Rudd, To the Prime Minister and to the Press.
I invite you to live on the Newstart allowance for 14 days and record everything of your expenditure.
You are so willing to increase middle class welfare and forget the 500,000 people on Newstart.
The aforementioned votes will throw the ALP out of government.
You clearly do not see the big picture not the small picture.
Do the Australia a favour and and resign but without giving Tony Abbot the grounds for an election.
Shame on you and others of you ilk.
Michael Long