The Sydney Morning Herald
September 5th, 2012
On this site last week the Centre for Independent Studies acknowledged that the payment may be too low but argued that not every unemployed person needs an increase.
So the search is on for those unemployed people who can live on $35 a day.
Some argue that people can live on the payment as long as they don’t have to rely on it for more than a year at a time. This reflects the original idea of unemployment benefits as a short-term support between jobs.
Restricting any increase to long-term recipients would not save much money because about two-thirds of the money spent on Newstart is already going to such people.
Newstart is no longer a short-term payment: the average time spent receiving the allowance is almost three-and-a-half years, an increase of six months over the past decade.
Another problem with this idea is that it’s not clear those relying on Newstart “short term” are better off. Most people have very little when they start receiving unemployment benefits. Fewer than one in five recipients own their homes or have a mortgage, so most have to rent and can’t use their home to borrow cheaply.
They can’t get the Newstart allowance if they have more than $3000 in the bank, if they have modest redundancy payments, or they have a partner on an average wage.
When people lose their job, they typically have financial commitments they have to reduce or pay off.
So moving from a full-time wage to Newstart is a crushing financial blow. A worker shifting from a full-time average wage to Newstart suffers a drop in income of more than 70 per cent – larger than in any other OECD country.
Another idea to limit the cost of increasing Newstart is that any rise should be limited to those currently searching for jobs, rather than in training or other activities.
There is a case for more help with the costs of job hunting: many unemployed people are required to look for 10 jobs a fortnight and they have to apply for jobs up to 90 minutes’ travel time away. This can’t be done effectively on $35 a day.
Most of those people receiving Newstart who aren’t searching for paid work are training for employment in courses approved by their employment service provider.
If they were denied an increase in payments it would discourage training. That’s not a smart thing to do when half of people on the payment have less than 12 years of schooling.
The other main reason some Newstart recipients aren’t searching for jobs right now is that they have an illness or disability that limits their ability to do so.
The number of people with disability on unemployment benefits is more than 100,000 and growing as a result of successive attempts to make it harder to claim the disability support pension.
It is hardly fair to deny people with illnesses or a disability an adequate basic income because they are unable to seek employment at present. In the past, governments paid them a pension that is now $133 a week higher than the Newstart allowance.
The truth is people on Newstart are actively seeking employment – or training for it – because of the rigorous activity requirements that apply. If someone misses a day of their training or work experience placement they lose a day’s payment.
People have to demonstrate to Centrelink and their employment service provider that they are looking for jobs or they will lose money.
The other argument we are now hearing against increasing Newstart is that many people also receive “supplementary payments” so they are not as badly off as they appear to be. That sits oddly with all of the research on financial hardship – for example, the fact that 50 per cent of people on Newstart would be unable to raise $500 in an emergency and 40 per cent could not afford to pay a utility bill in the previous 12 months.
When we take a closer look at supplementary payments such as rent assistance, family tax benefits, and the mobility allowance we find that they are only paid to people who have higher living costs they can’t avoid such as rent, taxi fares for people with physical disabilities, and children.
The supplements themselves go nowhere near covering these costs. For example, the maximum rate of rent assistance for singles is $60 a week and rent for a one-bedroom apartment in Sydney, Melbourne or Darwin is usually at least three times that.
To compound this hardship, rent assistance is reduced by a third when an unemployed person shares with another unemployed person.
To argue that supplements compensate for the inadequacy of the basic payment is like arguing that a travel allowance or overtime payment compensates for a low wage.
The basic rate of payment is $35 a day and people can’t live on it, whether or not they are renting or have children.
Australia spends less on social security payments than almost any other wealthy country. Over the years, policymakers have pared back the payments to the bare minimum (or less) and used income tests, asset tests, and activity tests to restrict them to people considered by the government of the day to be the “most deserving”.
Targeting on the basis of need is good public policy but many years of targeting on the basis of “deservingness” has yielded payments no one can live on and a system so complex no one can understand it.
Limiting an increase in allowance payments to those deemed most deserving would make matters worse. The search for the person who can live decently on $35 a day is fruitless, counterproductive and unbecoming of a wealthy country.