Time to close the gap between JobSeeker and the pension

The Australian Council of Social Service (ACCOSS) has released interesting data showing the gaping gulf that has opened up between those Australians receiving JobSeeker and those receiving the Aged Pension:

The pension payment rate in Australia has long been linked to average weekly earnings and, more recently, a combination of earnings and price indices. Consequently, the pension grew steadily in real terms over the first two decades of the century (Figure 2).

However, this increase was not sufficient to keep up with the growth in median income in the first years of the 21st Century (Figure 3).

Partly as a result of this divergence, but also because of a growing understanding of the relative disadvantage faced by single pensioners, the Australian government introduced a major increase in the single rate of pension in 2009 (and a small increase for partnered pensioners). This increase meant that the relative values of the single and age pension are now the same as the equivalence scale that we have used for the measurement of equivalent household income (the couple combined payment is now close to 1.5 times the single rate).

The net impact of all these changes is that partnered pensioners have almost kept up with the growth in community income over the period since 2000 (real growth of 38% vs median growth of 45%), while single pensioners have experienced a larger increase of 52 per cent in real terms. Both these payments are now very close to the ‘before-housing’ poverty line of half median income…

The story for people reliant upon unemployment payments (Newstart Allowance and then JobSeeker Payment) is very different. These payments had not increased in real terms since the 1990s and were far below the half median income threshold by the start of 2020 (Figure 4 and Figure 6). This was, and remains, especially the case for single unemployed people…

During 2020 most people receiving workforce age income support payments were eligible for the Coronavirus Supplement, which effectively doubled the JobSeeker Payment rate and lifted their incomes well above the half median threshold. However, the Coronavirus Supplement was cut by more than half in September 2020, and removed by April 2021, and replaced with a small increase in the base payment rate.

The $25pw base rate increase delivered on 1 April 2021 by the Federal Government means that JobSeeker Payment has increased by 12% in real terms from July 2000 to June 2021 (which also includes the Energy Supplement introduced in 2013). Prior to this, the last time the payment was lifted above CPI was in 1994 when it rose by just $2.95pw.

The OECD’s latest Australian Economic Survey highlighted that Australia’s unemployment payments are the lowest in the world and argued that they should be raised:

Australian 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 whereas the Aged Pension is indexed to earnings:

JobSeeker vs Aged Pension

JobSeeker payments are also way below the poverty line:

JobSeeker vs poverty line

The Morrison Government temporarily solved the problem of poverty when it doubled JobSeeker via the Coronavirus Supplement. But when it removed this supplement at the beginning of this year, it once again threw the unemployed under the bus and ensured that poverty would return.

Rather than temporary measures like coronavirus supplements and COVID disaster payments, the federal government should permanently lift JobSeeker to the Aged Pension level. Doing so would remove the income shock from falling into unemployment.

The unemployed typically live hand-to-mouth and are more likely to spend every additional dollar that they receive. This means that almost every extra dollar of income would be spent in the economy, helping to lift growth. This compares to other stimulus measures, such as tax cuts, which are more likely to be saved.

Unconventional Economist
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