OECD: Australia’s unemployment payments way too low

The OECD has released its 2021 Australian Economic Survey, which highlights that Australia’s unemployment payments are pitifully low and should be raised:

Recently, the working-age unemployment benefit was raised by AUD50 per fortnight. However, the benefit for a single person in the first month of unemployment in Australia, at just 29% of the average wage, is still very low by OECD standards (Figure 1.13)…

The income shock from falling into unemployment in Australia is much larger than in other countries and minimum income supports remain well below the relative poverty line. Indeed, one estimate suggests that 85% of recipients of unemployment benefits will be in poverty (Phillips 2021).

The low level of unemployment benefits partly reflects indexation of the benefit rate to consumer price inflation, rather than faster-growing average wages. The latter has been the basis for increases in other government payments, such as the Age Pension and disability support. Consequently, while unemployment benefits were above 90% of the Age Pension in 2000, the ratio had declined to 65% by 2020…

More generally, an adequate safety net for the unemployed is an important prerequisite for the successful implementation of new reforms that promote business dynamism (discussed further down). The government should further increase the generosity of unemployment benefits and consider indexing further increases to average wage growth. When considering such a reform, the fiscal impact as well as the potential effect on work incentives of particular cohorts should be taken into account.

JobSeeker recipients currently receive only $44 a day versus $61.50 a day for Aged Pension recipients – a gap that will widen over time given JobSeeker is only pegged to CPI:

JobSeeker vs Aged Pension

JobSeeker is only around 60% of the Aged Pension.

JobSeeker payments are also way below the poverty line:

JobSeeker vs poverty line

JobSeeker has, once again, fallen far below the poverty line.

For years Australian policy makers pretended to care about poverty. For a brief moment they successfully solved the problem when the government temporarily doubled JobSeeker via the Coronavirus Supplement, only to throw the unemployed under the bus once again.

Sadly, the federal government has no genuine interest in ‘solving’ poverty by permanently lifting JobSeeker to an adequate level and would rather funnel money to its business mates.

Unconventional Economist
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