Race to the rate
The government, which effectively doubled the $565.70 a fortnight payment during the depths of the coronavirus pandemic with its COVID supplement, had been signalling it would increase the base rate that flows to more than 1.3 million Australians since last year.
For weeks a core group of ministers – including Finance Minister Simon Birmingham, Social Services Minister Anne Ruston, Treasurer Josh Frydenberg and Prime Minister Scott Morrison – worked on the size of the change.
Reform options such as a major simplification of the nation’s network of welfare payments were considered but discarded in part due to the cost of an overhaul. Treasury also looked at systems overseas where people would get a much higher level of support immediately after losing work but see it drop sharply after a few months.
With the current $150-a-fortnight COVID supplement due to end on March 31, the timetable for change was rapidly narrowing for the government ahead of this week’s decision and a single number instead became the major focus.
When that single number was announced, the response from those on JobSeeker and those pressing for change was one of anger and sadness. Caryn Ryan was among them.
“Nobody in Australia should have to be making choices between medication, bills and food. A lot of people are doing that now. We’re supposed to be the lucky country,” she says.
Announcing the policy, which will cost the budget $9 billion over the next 3½ years, Morrison likened the move to a contract between taxpayers and those who will receive the increased payment.
He noted the increase took the unemployment benefit back to about 41.2 per cent of the minimum wage – where it was towards the end of the Howard government’s term in office. It is currently 37.5 per cent.
Privately, the increase was seen by the Morrison government as the bare minimum that could be offered.
When the proposal was put to the Coalition partyroom on Tuesday morning, there were several MPs worried about any increase at all in the dole. A series of MPs noted reports from their electorates of local businesses unable to find workers, warning the COVID supplement was so generous that people were turning away paid employment.
Minister for Employment, Skills, Small and Family Business Michaelia Cash, Families and Social Services Minister Anne Ruston and Prime Minister Scott Morrison announce a permanent rise to JobSeeker.Credit:Alex Ellinghausen
It was an issue touched upon by Senator Ruston when the increase was announced, saying the government did not want people “disincentivised to work”.
“As the economy is recovering, as the jobs market is improving, we need to make sure that we have got the right incentives for people to go back to work,” she said.
The Australian Industry Group’s chief executive, Innes Willox, said the increase was “on balance” a sensible measure, noting that there had been a noticeable increase in regional employers complaining the supplement was effectively turning people off work.
“Some employers are concerned that the increase in the base rate will act as a disincentive for some people to look for work,” he said. “Over the period when the COVID supplement has been paid, we have seen a rise in the number of employers expressing frustration at not being able to fill positions – even with unemployment at high levels.”
While increasing JobSeeker the government is also tightening some mutual obligation requirements for those on the payment. Even more contentiously, it is introducing a phone line so employers can report any person turning down “suitable work”.
That sparked fierce criticism from those who fear it could be used by employers to coerce vulnerable people into a job for fear of losing their JobSeeker payment.
Even business groups were lukewarm to the idea, with both the Australian Chamber of Commerce and Industry and the Council of Small Business Organisations Australia saying it was unlikely to be used by employers.
Doubts on the dole
One of the nation’s most respected labour market economists, the University of Melbourne’s Jeff Borland, believes JobSeeker could be increased by $125 a week without having a negative impact on unemployment.
Professor Borland, whose research helped inform the government’s JobMaker program, said such an increase would still leave an unemployed worker on 54 per cent of the minimum wage. Ninety-nine of every 100 full-time jobs would have a better pay rate.
He said there were real risks the government’s failure to deliver a sizeable increase in JobSeeker could lead to an actual increase in unemployment.
“If you give people money so they can get new clothes or cover the transport costs to get to work or even attend a job interview, you can make a strong argument that you are increasing the chance of reducing the number of people on support,” he says.
Borland says if there was this huge group of people unwilling to work because of the COVID supplement, then that would have been obvious in the jobs market through 2020.
Between February and May, there was an 876,000 drop in the number of people holding down a job, the largest collapse in employment on record.
Since May, there has been an 814,000 increase in people with a job, the largest and fastest increase on record. That covers the period when the original $550-a-fortnight COVID supplement was introduced.
His research shows the flow of unemployed people into work has been virtually unchanged through the pandemic compared to the period between 2017 and 2019.
“So where’s the disincentive caused by the higher JobSeeker? There isn’t any. You’ve had the largest increase in employment ever and it happened while the unemployment benefit was $550 higher than normal,” Borland says.
The business complaints about the COVID supplement causing worker shortages, he notes, have largely come out of two sectors – agriculture and hospitality.
“These are both areas that have historically relied on migrants, international students or other types of visa holders,” he said. “These people aren’t in the country. The business model that so many of these employers have relied upon just isn’t there any more.”
An Australian Bureau of Statistics survey released on Friday tends to support his view.
It found 8 per cent of businesses had increased their number of staff in February, largely in line with December (11 per cent) and January (10 per cent).
But it is skewed towards medium-sized firms, with 26 per cent of these lifting staff numbers in February. Among small businesses, it was just 7 per cent.
Cliff Fraser is on JobSeeker and says the $25-a-week increase won’t even cover a tank of petrol.
Cliff Fraser, 61, from the western Victoria town of Skipton, lost his job driving trucks interstate when he had a heart attack. He says the increase in the base rate is “an insult”.
“It’s going to do nothing – it’s not even a full tank of fuel,” Fraser says. He found it particularly frustrating that the modest increase in the base rate was accompanied by a change in the income people can earn before their benefits are reduced.
During the pandemic, a person could earn up to $300 a fortnight and still receive the base JobSeeker payment. This will now be $150 a fortnight, an increase on pre-pandemic levels but still half the current level.
“I work two hours a day, I clean a primary school, and to be honest it’s barely worth doing now,” Fraser says.
“I get paid $24.30 an hour and after the cost of running the car, because it’s a 60-kilometre round trip, it works out I am getting about $7.30 an hour after expenses … When they bring in this reduction, lowering the threshold, I worked it out that I am probably working for an equivalent of $3.60 an hour.”
He says the coronavirus supplement helped his household get on top of overdue bills and debts, such as electricity and phone accounts, but retaining the $150 supplement should’ve been the “minimum” the government provided.
The government has effectively told Parliament the $50-a-fortnight increase is a take-it-or-leave-it proposition.
But the Senate will hold its own inquiry.
It was driven by the Australian Greens, with WA Senator Rachel Siewert – who has pressed for a higher unemployment benefit for years – arguing the government’s proposal was “shocking cruelty” that would also do little for the economy.
Among those pushing for change is the Australian Council of Social Services, whose chief executive officer Cassandra Goldie is frustrated the government has missed an opportunity to “genuinely” have the back of people.
“We are urging the Parliament to improve this heartless legislation that condemns millions, including hundreds of thousands of children, to poverty, and deliver a permanent and adequate increase to these lifeline payments,” she said.
One issue is the tighter mutual obligation requirements, including the employer phone line and increased auditing of job applications by those on JobSeeker.
The government, after extensive consultation with more than 1400 people and organisations, started the process for a new employment services system in 2019. One of its key elements was a move to allow more “flexibility and diversity” around the activities job seekers are expected to carry out in return for financial support.
An employer phoneline and increased auditing did not feature as part of that system.
Goldie says in return for a $3.57-a-day increase in JobSeeker, the government was flying in the face of its own policy.
“What the government has announced is exactly the opposite of what its own expert panel recommended,” she says.
“The expert panel recommended that to fix mutual obligations we needed to build trust, be user-friendly and to take a human, personal approach to the individual circumstances of someone affected by unemployment by designing a plan that increases your chances of getting into employment.”
New headwind as supplement end looms
While JobSeeker’s base rate will increase $50 a fortnight, those on the payment will still feel the sting of an income fall when the $150-a-fortnight COVID supplement disappears at the start of April.
The Grattan Institute’s Brendan Coates says the overall reduction in financial support for those on JobSeeker could be a fresh economic headwind.
“JobSeeker is one of the best forms of fiscal stimulus there is: unemployed people are likely to spend all or at least most of what they receive,” he says.
“Cutting unemployment benefits by $50 a week will take about $5 billion out of the economy in the coming year. That’s likely to push the unemployment rate 0.1 to 0.15 per cent higher than if the current $75-a-week supplement were kept. And that means up to 40,000 fewer jobs,” he adds.
Coates also notes that by international standards even the increase in JobSeeker still means Australia is stingy when it comes to supporting those out of work.
Before this week’s increase, Australia’s unemployment benefit as a proportion of a country’s average wage after a month out of work ranked equal bottom of the world’s 34 richest nations. It sat alongside Greece, where the jobless rate is 16.7 per cent.
The $50-a-fortnight increase takes Australia to 33 on the list.
For those on the dole, including Karen Perkins from Sydney’s Ashfield, it takes them back almost to square one.
Karen Perkins was dismayed to find out the base rate will only increase by $25 a week.Credit:Dominic Lorrimer
Perkins says she has struggled on the unemployment payments to cover necessary items to get a job, including replacing her almost decade-old computer, which she has now managed to do due to the supplement.
“I’ve been able to get my long-overdue dental work done. I’ve been able to have the dignity of getting haircuts, which I would usually only get once a year … and take better care of myself,” she says.
She is infuriated by suggestions she would prefer to be on benefits than to have a job and says she has gone to great lengths to find employment.
Now trying to work out her budget for April when the supplement ends, she is worried about how to make ends meet.
“It breaks my heart. It’s scary,” she says. “I feel defeated and unheard. The government just doesn’t get it.”
Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.
Jennifer Duke is an economics correspondent for The Sydney Morning Herald and The Age, based at Parliament House in Canberra.