Earlier this week it was reported in the mainstream press that the Morrison Government was considering an unemployment insurance scheme in lieu of permanently lifting JobSeeker.
Under such a scheme, anyone made unemployed would be paid a fixed percentage of their income (e.g. 70%) for a set amount of time (e.g. three months) while they search and hopefully gain another job. However, the amount received would be capped, to prevent very high income earners from being paid too much.
After this set timeframe, the unemployment payment would revert back to its poverty level of $40 a day.
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Such schemes are used across a variety of developed nations around the world, including the United States, Canada and Germany.
Proponents of an unemployment insurance scheme, such as the Blueprint Institute, highlights two key benefits over simply lifting JobSeeker:
It provides greater financial support to those made freshly unemployed; and
It would increase incentive to find another job before the scheme expires.
Blueprint estimates that an unemployment insurance scheme would cost the federal budget around $9 billion a year, which could be funded via a 1% levy on workers or by abandoning the scheduled increase in the superannuation guarantee.
My view is that while the proposed unemployment insurance scheme is a definite improvement on letting JobSeeker revert back to $40 a day – the lowest level in the developed world – it does nothing to help the long-term unemployed.
The long-term unemployed are among Australia’s most vulnerable people. Welfare payments should in principle be needs-based and targeted at those that are most in need. So by missing this cohort, unemployment insurance fails the needs-based test.
For this reason, I firmly believe that JobSeeker should instead be lifted to the Aged Pension level of $61.50 a day:
There is no justifiable reason why pensioners should receive more welfare support than the unemployed, especially given most pensioners own their homes and are ‘asset rich’.
Having a single welfare payment at the Aged Pension level would simplify Australia’s welfare system, while also providing an adequate safety net for all Australians.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
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