Jobmatcher Real Unemployment Insurance

JobMatcher Real unemployment insurance

Blueprint Institute Contents

5 Summary

6 Our one-size-fits-all unemployment benefit fits nobody well

10 JobMatcher

11 Real unemployment insurance

12 Real insurance premiums

13 Real benefits

15 What about JobSeeker?

Blueprint Institute 2 About Blueprint Acknowledgements Institute This work was originally inspired by a figure designed by Matt Cowgill at the Grattan Insti- Every great vision starts with a blueprint. We tute (see Figure 1), which visualised how out of help move ideas to action. Blueprint Institute step Australia’s unemployment benefit is relative exists to inspire reform by presenting bold ideas, to the step-down systems that are ubiquitous honest conversations, and evidence-based among other wealthy countries. Thanks to the research. We offer fresh thinking to help leaders various experts who have been consulted on take a step back from the day-to-day and see the development of this work, and for the excel- the bigger picture. We design blueprints for lent research assistance provided by Matthew practical action as a step towards creating a Elias. more resilient and prosperous Australia. Images courtesy of UnSplash. Blueprint Institute was established in the era of COVID-19, in which Australians have witnessed how tired ideologies have been eclipsed by a Attribution sense of urgency, pragmatism, and bipartisan- This report may be cited as: Barrett, T., Beal, E., ship. The challenges our nation faces go beyond D’Hotman, D., Hamilton, S., Hawcroft, A., Steinert, partisan politics. We have a once-in-a-gener- J. (2021) JobMatcher: Real unemployment insur- ation opportunity to rethink and recast Austra- ance. Blueprint Institute. lia to be more balanced, prosperous, resilient, and sustainable.

For more information on the institute please visit our website—blueprintinstitute.org.au.

February 2021 About the authors Tom Barrett Steven Hamilton, PhD Researcher Chief Economist Tom is currently undertaking his Honours in Politics at Steven is an Assistant Professor of Economics at The the University of Sydney, having recently completed his George Washington University in Washington, DC. Bachelor of International and Global Studies, majoring Steven authored a major small business support in Political Economy and Government & Internation- policy proposal in the US for the Brookings Institution, al Relations. He has studied Populism, Authoritarian- and has provided extensive commentary in the US ism, and International Relations at the Freie Univer- and Australia on wage and small business supports sitat Berlin and Wissenschaftszentrum Berlin (WZB) during the COVID-19 crisis. Steven has published overseas, and has previous experience working with opinion pieces in the Washington Post, the Austra- community social justice organisations. lian Financial Review, and The Age, among others, and has provided economic commentary to the New Emma Beal York Times, the Wall Street Journal, the LA Times, Time Magazine, Newsweek, The Atlantic, Slate, The Hill, the Researcher Sydney Morning Herald, and The Australian, among Emma has a Bachelor of Advanced Finance and others. Steven is a former economist at the Australian Economics (First Class Honours) from the University of Treasury, where he worked on the federal budget and Queensland. As part of her Honours, she investigated the Garnaut Climate Change Review Update. Steven the commercial viability of large-scale battery energy holds a PhD and MA in economics from the University arbitrage within the Australian market. Throughout her of Michigan, and a Bachelor of Economics with First studies, she completed an exchange with Harvard Class Honours and Bachelor of Business Management University, and was awarded one of six internation- from the University of Queensland. al Women in Business Scholarships by Zonta Club for demonstrating outstanding potential within the Aurora Hawcroft field. With experience in private equity and consulting, Emma has previously worked for the Queensland Researcher Investment Company’s Global Infrastructure team and Aurora is one of the first students to graduate from within Deloitte’s Energy Financial Advisory team. the Dual Degree between the Paris Institute of Polit- ical Studies (SciencesPo) and the University of Sydney. Daniel D’Hotman She finished cum laude from her Bachelor of Arts at SciencesPo Reims campus and achieved Dean’s list, Director of Research & Operations Academic Merit, and Political Economy faculty awards Daniel is a Rhodes Scholar and medical doctor current- throughout her Bachelor of Economics at the Univer- ly completing his PhD at the University of Oxford. With sity of Sydney. With a passion for innovation policy a strong interest in business and innovation, Daniel was and management, she recently worked as a Research awarded one of two undergraduate scholarships in the Intern at the United States Studies Centre’s Innovation Asia-Pacific by the Boston Consulting Group, under- and Entrepreneurship program and simultaneously taking health systems and private equity projects in founded her own music marketing business. She will Sweden. Daniel has published a variety of academic pursue postgraduate studies overseas in the field of papers, with one of these articles selected amongst the innovation in the latter half of this year. ‘Best in Philosophy’ collection for 2019 by Oxford Univer- sity Press. His work in the media has been featured in The Josh Steinert Spectator, The Sydney Morning Herald, The Sun Herald, Herald Sun, Brisbane Times, The Critic, The Mandarin, Researcher Government News, and The Conversation. Josh recently graduated from the University of Oxford with a degree in Politics, Philosophy, and Econom- ics (PPE). There he specialised in Political Theory and Ethics, with a particular focus on the limits of tradi- tional social contract theory. He is currently studying an MSc in Resource Economics at the Bartlett School, part of University College London. His current focus is upon risk management in natural resource projects. His work has appeared in numerous publications including The Conversation and The Mandarin, among others.

Blueprint Institute 4 Summary

Australia doesn’t have true unemploy- Australia should introduce real unem- ment insurance. Not really. Instead what ployment insurance, called ‘JobMatcher’, we have is a fairly meagre form of per- which would: manent welfare—not too high to prevent recipients from accepting whatever work • top up the existing benefit to 70% they can get, but not high enough to of the individual’s former wage for the ensure a dignified standard of living. With first six months; its universal, flat, and very low rate, our • be capped at $35,000 and limited one-size-fits-all unemployment benefit to a cumulative six months every two fits nobody well. By lumping together the years; and short- and long-term unemployed into one system, the Government is left ham- • be fully funded by a 1% JobMatcher strung—forced into a trade-off between Premium administered like the living standards and work incentives. Medicare Levy.

But there’s a better way. Almost every By paying into the system, people earn the other rich, advanced country—Canada, right to access it when they fall on hard South Korea, Israel, you name it—does times. Because an unemployment spell it differently. They all offer a high initial can happen to any of us, everyone who rate—usually a portion of the former contributes also benefits. wage—that steps down at some point to JobMatcher would offer substantial a lower level. The high initial rate helps benefits to recipients, employers, taxpay- people weather the temporary income ers, and the economy, including: shock, and provides them ample opportunity to search for the job that’s right for • getting people off the dole faster; them and for their employer. • getting workers back into better jobs; It’s hard to believe that today Austra- lians receive very little protection from • smoothing the temporary income income risk due to unemployment. A shock; and significant portion of people live pay- • serving as an automatic stabiliser. check-to-paycheck. And for many, the only source of debt finance is a high-in- In the debate about the unemployment terest credit card. The private market benefit, the only thing anyone ever talks for unemployment insurance is virtually about is the rate. While the rate for the non-existent, with super funds refusing long-term unemployed should rise, we’re to cover it and only a small handful much further out of step with the rest of of insurers offering it under restric- the world when it comes to our short- tive terms and at high prices. It’s hard term benefit. The Government recognised to imagine a stronger case for govern- as much by supplementing JobSeeker ment intervention. during the crisis—but only for a limited time. Job losses don’t only occur during recessions—the risk is ever-present. A real unemployment insurance system should be one of the few good things we take with us beyond the crisis.

Blueprint Institute 5 Our one-size-fits-all unemployment benefit fits nobody well ustralia has a single system, called Job- As it stands, JobSeeker isn’t a true form of unem- Seeker (formerly Newstart), to support ployment insurance, though we rely on it to serve A all unemployed people. During normal as one. With its open-ended structure and low times, it provides a flat payment of $565.70 per rate, which differs neither across people nor time, fortnight (for single people aged 22–66 without JobSeeker is really a fairly meagre form of per- children), which is just 38% of the full-time manent welfare geared towards the long-term minimum wage and 17% of the full-time average unemployed. By being forced to be all things to wage. The payment remains at that rate indefi- all people, JobSeeker fails to fully satisfy anyone. nitely, provided the recipient fulfils a set of mutual All OECD countries, other than the UK, Ireland, obligations, and satisfies income and assets and New Zealand, provide unemployment tests. The Government also provides supplemen- benefits that step down, offering a high but tary rent assistance of up to $139.60 per fortnight. time-limited initial payment that reverts to a Around a million Australians receive unem- lower rate at a later date (see Figure 1). But even ployment benefits each year. Australia’s flat, the UK and Ireland have an initial period (26 and one-size-fits-all JobSeeker benefit attempts 39 weeks, respectively) partly funded by prior to service two distinct groups. The first is those social security contributions. During this period, who experience short stints of unemployment the recipient isn’t subject to assets or partner lasting less than a year—half of people who’ve income tests, which means the system func- ever been unemployed. The second is the long- tions more like true unemployment insurance. term unemployed. The current system serves In Ireland, the initial payment is based on prior neither group particularly well. income, later reverting to a flat rate.

Australia Finland Slovenia Israel 75%

50%

25%

Sweden Austria Denmark France 75%

50%

25%

Japan Iceland Norway Luxembourg 75%

50%

25%

Netherlands New Zealand Korea Germany 75%

50%

25%

Unemployment benefit as a % of average wage of average as a % benefit Unemployment USA Belgium Czech Republic Canada 75%

50%

25%

UK Italy Spain Switzerland 75%

50%

25%

0 0 12 24 36 0 12 24 36 0 12 24 36 0 12 24 36

Months of unemployment

Figure 1 Unemployment support relative to the average wage among OECD countries Source Designed by Matt Cowgill at the Grattan Institute; OECD; Blueprint Institute analysis

Blueprint Institute 7 100 0

90 5 80

70 10

60 15

20 40

30 generosity in benefit 25 Unemployment benefit benefit Unemployment as a % of average wage average a % of as 20 30 10 Australia’s rank among OECD countries countries among OECD rank Australia’s

0 35 Australia OECD average 06 12 18 24 30 36 42 48 54 60 Length of unemployment (months)

Figure 2 Unemployment benefit replacement rate Figure 3 Australia’s rank among OECD countries, in terms of the after two months of unemployment unemployment benefit as a percentage of the average wage, by length of unemployment Source OECD OECD Note Includes social assistance and housing benefit. Source Note This replicates the relative support nations provide to unemployed people; Australia is joint lowest in short-term benefits, before arriving at the middle- of-the-pack for long-term support.

All of these systems recognise there is a differ- Figure 3 shows how Australia’s unemployment ence between short- and long-term unemploy- benefit ranks relative to 33 other OECD coun- ment. The initial high rate, typically related to tries depending on how long the unemploy- the recipients’ prior income, cushions the tem- ment spell lasts. While Australia’s flat rate falls porary income shock. Time limiting the payment well below the poverty line, it is in fact right in provides workers the opportunity to find new the middle of advanced countries globally in employment and discourages them from tran- terms of long-term unemployment compen- sitioning to long-term unemployment. sation. While we could (and should) offer more generous compensation to the long-term By providing the same payment to all recipi- unemployed, it is plain that we are most out of ents regardless of their fixed financial commit- step in terms of how we compensate the short- ments, JobSeeker fails to adequately cushion term unemployed. the temporary income shock caused by unemployment. And by providing that same payment The Government has already acknowledged indefinitely, any attempt to raise the rate to this problem, at least implicitly. In the first three better fill this income gap runs into a trade-off months of the pandemic, the number of Job- against the desire to prevent long-term unem- Seeker recipients doubled to nearly 1.5 million. ployment. The Government is hamstrung by this Recognising this surge in short-term unemploy- flat payment structure. ment, the Government nearly doubled the base rate of JobSeeker, but only for a limited time— As a result, at just 27% of the average wage, initially for six months, then for a further six at Australia’s short-term unemployed receive the lower rates. lowest unemployment benefit among OECD countries—and less than half the OECD average For anyone who entered their unemployment (see Figure 2). In Canada, a close peer to Austra- spell during the pandemic, Australia’s unem- lia in many ways, the initial payment is 62% of the ployment benefit system has operated just like average wage, falling to 23% after nine months. the step-down systems seen in almost all of our Canadians pay an insurance premium of around peer countries. But jobs aren’t only lost during 1.6% of earnings to fund these benefits. In South pandemics. Job losses occur constantly for Korea, the initial payment is 57% of average myriad reasons beyond a person’s control. The wages, before falling to 21% after eight months. need for insurance against the risk of job loss In Israel, the initial payment is 64% of average is always present. A step-down unemployment wages, falling to 16% after eight months. Step- insurance system is needed now and in the downs are ubiquitous in Europe too. future, just as it was needed a year ago.

Blueprint Institute 8 Step-down systems require rules to prevent overuse

To discourage gaming of step-down systems, the regional unemployment rate, and ranges many countries implement more stringent eli- from 420 to 1,400 hours. In 29 of 33 OECD coun- gibility criteria to access the initially higher tries, a certain value in insurance contributions benefit payment than those required to access or paid work is required for an unemployed JobSeeker in Australia. In Germany, a worker worker to be eligible for these initial, generous must have paid a certain number of contribu- unemployment benefits. tions over the two years preceding unemploy- Some countries require a sufficient time gap ment to claim support. This is mirrored in the between the current benefit claim and previous UK, where National Insurance contributions are claims. For example, in Iceland, after three years required in order to be eligible to claim Job- on unemployment benefits, two years must seeker’s Allowance. elapse before an individual is entitled to further In other countries, a certain quantity of work support. In almost all jurisdictions, unemploy- must have been performed—in Canada, for ment must be involuntary. And, similar to Aus- example, recipients must have worked the tralia’s mutual obligations, job seekers must required number of insurable hours in the last complete set tasks to show they are looking for year. The required number of hours depends on suitable work. JobMatcher

Blueprint Institute 10 Real unemployment insurance

he Government should introduce a JobMatcher would only be available for newly system of true unemployment insurance— unemployed people from the point at which the Twe call it JobMatcher. JobMatcher would policy is enacted (e.g., from 1 July, 2021). Job- overlay the existing JobSeeker scheme, topping Matcher recipients would need to continue to up the existing payment to 70% of a recipient’s meet the mutual obligations that apply to Job- former wage for six months (see Figure 4). This Seeker. replacement rate and duration are similar to The length of time people receive JobMatcher those in peer nations such as Canada, Israel, will vary according to the pattern of unemploy- and The Netherlands. The payment would be ment duration in the population, with a fixed taxable, as with JobSeeker. After six months of cap of six months. This will, of course, depend unemployment, the recipient could continue on on the effectiveness of the scheme in reducing the lower JobSeeker payment. long-term unemployment. But it also affects the Payments would be capped at $2,692.30 per program’s cost. At any given time since 1991, an fortnight—equivalent to 70% of a $100,000 average of 21% of unemployed Australians have annual salary. This means that the 90% of been without work for less than a month, 24% for working Australians who earn up to $100,000 one to three months, 16% for three to six months, a year would receive the full 70% of their prior and 39% for more than six months. wage. Higher-income earners can be expected Recurrent unemployment is a common occur- to more easily rely on liquid assets to cushion rence within the Australian working population. the temporary income shock of unemployment. JobMatcher would have the added benefit of To prevent overuse, JobMatcher would be better worker-firm matches that would nat- limited to those who have not claimed Job- urally lower the re-entry rate into unemploy- Matcher, JobSeeker, or Youth Allowance for ment. Banking the savings from the program’s more than an accumulated total of six months structure, the JobSeeker payments replaced by in the previous two years. The payment would JobMatcher, and the tax receipts generated by also be independent of spousal income—there this additional income, our estimates place the would be no spousal income test for JobMatch- JobMatcher scheme at an incremental annual er, and the JobMatcher component would not cost of around $9 billion. be counted towards a spouse’s income test.

90 Current Proposed 80

of average wage average of 30

20 Unemployment benefit as a % benefit Unemployment

0 0 6 12 18 24

Length of unemployment (months)

Figure 4 Step-down support under the JobMatcher scheme Source Blueprint Institute analysis

Blueprint Institute 11 Real insurance premiums

JobMatcher is real unemployment insurance, so scheme benefits the very lowest income earners it should be funded by real insurance premiums. and costs the very highest income earners. These are called JobMatcher Premiums, to be This approach is budget neutral, funded by administered in the same way as the Medicare higher receipts. Alternatively, receipts could Levy. By paying into the system, people earn the be held constant and the scheme funded by right to access it when they fall on hard times. greater debt issuance. This could be achieved Because an unemployment spell can happen simply by adjusting down the income tax scales to any of us, everyone who contributes also by 1% in the Medicare Levy income range. Or the benefits. This is critical to the scheme securing cost of the scheme to taxpayers could be offset broad, lasting community support. by cancelling the 1pp increase in the Superan- In order to fund the $9 billion cost of the Job- nuation Guarantee due to occur over the next Matcher scheme, the JobMatcher Premium 18 months, which can otherwise be expected to would need to be set at around 1% of income, lower wages by 0.8pp. with all income below $22,801 exempt (see JobMatcher will drive productivity and growth. Figure 5). This is similar to the 1.58% premium set in A body of evidence suggests that a step-down Canada to fund their similarly generous unem- in unemployment benefits would shorten unemployment insurance system. Given that benefits ployment spells and boost wages—decreas- are proportional to income, and provided that ing JobSeeker spending and increasing tax the likelihood of becoming unemployed is the revenues. While impossible to precisely quantify, same for all income levels, the scheme is actu- these effects will undoubtedly work to partly arially fair for the vast majority of taxpayers. offset the budgetary impact of JobMatcher, However, because of the payment cap and and could be substantial in the long run. the phase-in range for the premium, on net the

3,000 Annual JobMatcher Premium Fortnightly JobMatcher payment

2,500

2,000

1,500 Dollars

1,000

500

0 0 20,000 40,000 60,000 80,000 100,000 Annual taxable income ($)

Figure 5 JobMatcher Premium and payments at different income levels Source Blueprint Institute analysis Note The phase-in uses the same range as the Medicare Levy, beginning at $22,801 and finishing at $28,501.

Blueprint Institute 12 Real benefits JobMatcher gets people JobMatcher gets workers off the dole faster back into better jobs The relatively generous but time-limited nature Getting the right worker into the right job of JobMatcher incentivises job searching benefits both workers and firms. Preserving and reduces the risk of welfare dependency. these valuable worker-firm matches was in fact Increased support in a step-down system of one of the motivations for the Government’s unemployment insurance does not harm job $101 billion JobKeeper wage subsidy scheme search motivation, nor does it decrease the introduced during the crisis. When supported likelihood of leaving unemployment for a new by higher unemployment benefit payments, job. In fact, higher, time-limited unemployment workers are more likely to find a full-time, fixed- insurance incentivises active job searching. This term, and/or permanent contract job that lasts is especially true for those who would otherwise longer and pays higher wages. In the US, this drop out of the labour force altogether, as it effect was shown to be particularly significant provides a financial safety net to explore other for individuals with low savings. options. Consumption commitments hinder effective job Providing a generous initial payment not only search behaviour, forcing newly unemployed gives workers the freedom to find a better match, people to be overly risk-averse and to accept but also a hard deadline. The time-limited safer jobs when their skills could be utilised more nature of JobMatcher leverages a behavioural productively elsewhere. The liquidity effect of concept termed loss aversion: people feel more higher unemployment benefits allows workers to pain in losing something than they do joy in search for longer, so they can find more reward- gaining it. The impact of this effect was shown ing jobs better suited to their skills; in turn, this in France, where job search effort increased by generates positive knock-on effects in the labour 51% in the year prior to a decline in support (from market, boosting economic efficiency. 68% of the average wage to 35%). Firms benefit from this too. Better job-match Frontloading unemployment benefits has also quality leads to increased profitability, as it been found to speed up re-employment. In has wide-ranging benefits for productivity and Hungary, reform of a flat payment to a step- innovation. Insufficient unemployment support down system meant recipients received a also has costs. Low job-match quality cor- raised level of support for the first 90 days, after relates with high staff turnover, absenteeism, which support was halved. This reduced unem- and weakened labour market performance. ployment duration by two weeks, and increased re-employment wages by 1.4%. In a similar vein, JobMatcher smooths the Spanish Government passed reforms fol- the temporary income shock lowing the Global Financial Crisis (GFC) to speed up re-employment. At the start of unem- A massive 43% of Australian households spend ployment, Spanish workers receive a benefit all of their household income (or more) each equal to 70% of their average unemployment month. With such a high proportion of Austra- contributions over the previous six months. Prior lians living paycheck-to-paycheck, an unantic- to the GFC, this was reduced to 60% after 180 ipated income shock has the potential to dev- days. But from 2012 onwards, support was cut astate a large number of people. And imperfect to 50%. This reform increased the likelihood of a capital markets mean many people are only worker finding a job by 41%. able to incur a limited amount of debt at very high interest rates.

Blueprint Institute 13 Moreover, the problems of moral hazard and JobMatcher is an adverse selection in private insurance markets are automatic stabiliser significant, making actuarially fair income insur- Unemployment insurance stabilises aggregate ance uneconomic for large segments of the pop- demand by smoothing fluctuations in dispos- ulation. While superannuation funds offer income able income during economic shocks. Countries insurance for disability, they don’t offer it for redun- with more generous unemployment insurance dancy. There are in fact just four redundancy are less reliant on discretionary fiscal stimulus insurance plans available on the market—their measures during a crisis. During the GFC, terms are very restrictive, and their premiums very unemployment benefits alone absorbed19% of expensive. For all intents and purposes, the private the economic shock in Europe, compared to just market for unemployment insurance has failed. 7% in the US—whereas the stabilising effect of Without access to insurance, savings, or bor- income taxes was similar in both regions. rowing, households must respond to an income Providing a greater proportion of a worker’s shock by decreasing their consumption. Were income in the initial period of unemployment that consumption shock to be spread evenly would be a much more aggressive automatic across the household budget, it would be stabiliser than the current JobSeeker design. costly enough. But in reality, households have Australia could wait until the next crisis to imple- large, inflexible consumption commitments— ment unemployment insurance. But rushed making up over 50% of the household budget implementation leads to imperfect program on average—which means the consumption design. And reactionary changes to benefit reduction must be concentrated among the systems—or the creation of new benefits—take few items over which the household has some time to implement and deliver. control. This raises the experienced impact of the income shock even further. This was the case during Australia’s response to COVID-19. JobKeeper was announced on 30 For all recipients, JobSeeker does a very poor job March 2020, 19 days after the WHO declared of filling the income gap—for some much worse a global pandemic. But the first JobKeeper than for others. By tracking an individual’s former payments weren’t made until May. Integrating wage, JobMatcher would smooth the income a more generous JobMatcher payment into shock of a temporary unemployment spell. Indi- our benefit system now would better prepare viduals would have the financial security to pay Australia for future economic shocks, helping critical bills and ensure their needs are met. to minimise their negative impact on consumer This would reduce the economic damage and confidence, economic activity, and household psychosocial stress that results from short-term spending. These advantages are outlined in unemployment. JobMatcher would serve as a Figure 6. true safety net, preventing substantial harm.

Real benefits of a step-down system

GETS PEOPLE 2.

OFF THE DOLE 3. FASTER GETS WORKERS SMOOTHS THE 4. BACK INTO TEMPORARY IS AN AUTOMATIC Step-down BETTER JOBS INCOME SHOCK STABILISER unemployment support The liquidity effect of higher reduces the risk of A step-down system with Step-down unemployment insurance welfare dependency and a more generous initial unemployment support for six months allows incentivises job seekers payment will cushion stabilises aggregrate workers to search longer to find work by providing the economic damage demand by smoothing and find jobs better a hard deadline at which and psychological fluctuations in disposable suited to their skills. support will be reduced. stress of short-term income. unemployment.

Figure 6 The advantages of a step-down system of unemployment support

Blueprint Institute 14 What about JobSeeker?

Not all workers find a job in six months. Some take is that JobSeeker is indexed to prices, rather longer, and others may never find a job at all. than wages, so over time it hasn’t risen in line Indeed, the RBA classifies 1.25% of Australians as with living standards. As a result, the long-term long-term unemployed. Support for Australians unemployed are increasingly isolated and mar- experiencing long-term unemployment should ginalised, unable to take part in many of the be structured so that the incentives to work same activities as average Australians. are maintained and the burden on taxpayers The pension, on the other hand, is bench- is minimised. But the wider debate surround- marked to wages rather than prices—starting ing an increase to JobSeeker for the long-term at 25% of annualised male total average weekly unemployed should be one grounded in values, earnings (MTAWE) from the 1970s, followed not economics. by an increase to 27.7% in 2010—and has also Reasonable people can disagree on exactly increased with certain supplements over time. what the rate should be. But it’s hard to disagree This has allowed it to rise during periods of rapid with RBA Governor Philip Lowe, and a large economic (and wage) growth. As a result, the number of economists, who argue JobSeeker pension rate has grown in real terms to $944.30 should be increased. Indeed, the announce- per fortnight—40% higher than JobSeeker (see ment of the JobSeeker Coronavirus Supple- Figure 8). ments to support those affected by COVID-19 We believe the Government should do more shows that the Government understands Job- to help those experiencing long-term unem- Seeker is insufficient to meet basic needs. ployment. As a wealthy and prosperous liberal During normal times, JobSeeker provides only democracy, Australia can afford to provide around a third of the full-time minimum wage. generous support to those of us with the least. Australia ranks 19th out of 33 OECD coun- No Australian should be left behind; no one on tries in terms of its support for the long-term JobSeeker should be forced to choose between unemployed (see Figure 7). One reason for this basic necessities.

60 280 JobSeeker Pension 260 Average weekly wage 50 240

40 220

200 30 180 Index (1994 = 100) (1994 Index of average wage average of 20 160

140 Unemployment benefit as a % benefit Unemployment 10 120

0 AustraliaOECD average 100 1994 1998 2002 2006 2010 2014 2018

Figure 7 Unemployment benefit replacement rate after three Figure 8 The growth rate of the unemployment benefit and years of unemployment pension compared to the average wage (1994-2019) Source OECD Source Department of Social Services, Note The prevalence of housing and social assistance Australian Taxation Office benefits available to the unemployed in some countries, which supplement standard unemployment insurance, means that they have been included. This is in line with the OECD’s analysis.

Blueprint Institute 15 90 Current With that in mind, maintaining the current Proposed Coronavirus Supplement of $150 per fortnight 80 indefinitely is warranted. This would take the 70 total payment to $715.70 per fortnight. A one-off 60 increase helps to make up for inadequate 50 indexing in the past. At this level, the payment 40 would still be a little less than half the full-time wage average of 30 20 minimum wage. Additionally, going forward, as a % benefit Unemployment the payment should be indexed to wages 10

0 rather than prices in order to keep pace with 0 6 12 18 24 living standards. The combined effect of these Length of unemployment (months) changes and JobMatcher is shown in Figure 9. Figure 9 JobMatcher paired with an increase to the permanent It’s important to note that any increase to Job- rate of JobSeeker Seeker would reduce the cost (and premium) of Source Blueprint Institute analysis JobMatcher. Blueprint Institute