Does the figure $503.71 mean anything to you? That’s how much a single person needs to live above the poverty line in Australia, according to the latest estimate. A typical full-time worker earns three times that amount (nearly $1500 per week) but there’s one group with incomes way below it – the unemployed. Many people are surprised to hear the Newstart Allowance is just $255.25 a week for a single person – about half the poverty line benchmark. Even when rent assistance is added, Australia’s unemployment benefit is 38 per cent below the poverty line.
The story gets even more troubling when Australia’s dole payment is put alongside comparable countries that are members of the Organisation for Economics Cooperation and Development. A new research paper by Alan Morris from the University of Technology, Sydney, and Shaun Wilson from Macquarie University used OECD data to compare Australia’s dole payment against those paid in other wealthy nations. We did poorly for single unemployed people. The net replacement rate for the Newstart payment for a single person is equivalent to just 28 per cent of the average wage. That compares with an average of 47 per cent in major English-speaking nations – Canada, Ireland, New Zealand, United Kingdom and the United States – at the initial phase of unemployment.
In a grouping of seven major European nations including Germany, France, Italy, Switzerland, The Netherlands, Austria and Belgium, the average net replacement rate for unemployment benefits for a single person in the initial stage of joblessness is 64 per cent of the average wage, or 36 percentage points higher than in Australia. Even in the most economically advanced nations in East Asia – Korea and Japan – do better than us. They have an average net replacement rate of 50 per cent in the first year of unemployment.
Australia’s Newstart was comparable to benefits provided in the Southern European nations of Greece, Spain and Portugal, which have all be rocked by the global financial crisis and sovereign debt problems. So we’ve got southern European generosity even though Australia is richer than those nations and escaped the financial crisis relatively unscathed.
This month’s budget revealed Australia is set to get even meaner with its support for the unemployed. From the beginning of next year under-30s will have to wait six months before they qualify for Newstart. While these changes have been branded harsh by some, they are in keeping with public attitudes. The ANU poll on public priorities for government expenditure, published earlier this year, showed the proportion of voters who wanted unemployment benefits reduced (42 per cent) greatly outnumbered those who wanted an increase (23 per cent).
So is this tough love on the unemployed working? The most recent Herald/Lateral Economics wellbeing index report said long-term joblessness has increased from 0.9 per cent of the labour force in the December quarter 2011 to 1.2 per cent of the labour force in December 2013. The index calculated that the atrophy of work skills caused by long-term unemployment was a $500 million drag on Australia’s collective wellbeing in the December quarter alone. If long term unemployment had remained at the levels of the December quarter 2011 it would have prevented the atrophy of $3.4 billion skills over the last two years.
Morris and Wilson argue Australia’s current approach is counterproductive. Their study into the implications of life on Newstart found many recipients were so deprived they were ill-equipped to get work. Newstart’s very low rate was “scarring” the unemployed and making it more difficult for them to find a job.
“There is a very strong notion in Australia that if you give unemployed people too much money they will become bludgers,” said Morris. “This mythology really needs to be destroyed – our findings show people really want to work. There was no desire to stay at home.”
Rather than adding needlessly to public expenditure a more generous unemployment benefit would “add to participation, productivity and social inclusion”, say Morris and Wilson.
It's time Australia was more generous to those who can’t find work.