To make jobseeker fit for purpose, its temporary rise should be permanent.

Extract from The Guardian

Grogonomics

Australian economy

Greg Jericho

The base rate doesn’t do enough to keep job hunters out of poverty, or to support the economy

@GrogsGamut

Tue 14 Jul 2020 03.30 AEST Last modified on Tue 14 Jul 2020 03.33 AEST

‘With unemployment set to remain high for many months, it is clearly time to change the jobseeker rate.’ Photograph: William West/AFP via Getty Images

As the impact of the virus continues, it becomes more clear that the base jobseeker payment is disgracefully low. A new survey by Anglicare shows just how desperate was life for those existing on the payment before the virus, and with unemployment set to remain high for many months it is clearly time to change the rate.
The common word members of the government use when referring to measures designed to assist those on low and middle incomes during the Covid-19 crisis is “temporary”.
On Monday the treasurer, Josh Frydenberg, suggested the next round of jobkeeper and jobseeker payments would “be targeted, it will be temporary, it will be designed based on existing systems and it will also be demand driven”.
Temporary – unlike the bringing forward of tax cuts, which significantly assists those on higher incomes more than on low to middle incomes.
The harsh truth about the government’s decision to effectively double the jobseeker rate from a base of $565.70 a fortnight to $1,115 for a single person, as soon as Covid-19 smashed employment, is that were the rate actually at a decent level such a special bonus would not have been needed.

Unemployment benefits need to do two things. First, they need to allow people to support themselves while looking for work. Secondly, they should act as automatic stabilisers during recessions – to keep money flowing across the economy.
Not only was it clear that the base rate of $565.70 a fortnight did not achieve either of these aims, it was also clear politically that having such a large number of people experiencing life below the poverty line was death for the government:

As it is the jobseeker payment, even when including the extra $550, only just gets a person above the poverty line.
The Australian Council of Social Services estimates that the current poverty line for a single adult is $457 per week – meaning the pre-Covid-19 level of jobseeker was nearly 40% below the poverty line.
It is thus not surprising to find that the latest survey of Anglicare’s clients found that across Australia some 58% of those who reach out to Anglicare are unemployed:

The survey found that 46% of those turning to Anglicare were doing so for help to get basic essentials, such as food or medicine, and that a third did so to manage a low income, such as dealing with a sudden large bill.

Even more stark is that 44% had been using Anglicare services for more than a year.
This last aspect is perhaps not surprising given the problem of living in poverty while unemployed has been a longstanding situation.
A rough guide for estimating poverty is an amount that is half the per capita household disposable income.
According to the Melbourne Institute, last year the weekly per capita household disposable income was $847.61. This would put half that amount at $423.80 – well above the jobseeker base rate.
But while back in 1991 the base unemployment benefit was just 5% below that measure of poverty; now it is 35% below:

Clearly this is a massive societal issue.

That the large gap between the poverty line and unemployment benefits occurred during the mining boom and as the Australian government produced a surplus does not reflect well on what we give attention and praise to in terms of “economic management”.

But it is also a major economic issue.
The latest figures from the ABS, released on Monday, show that there is very little improvement in the number of people with work, and if anything there has been a recent slight fall:

This accords with the weekly payroll data (the latest survey is out on Tuesday), which shows that the number of jobs is around 6.5% below what it was prior to the virus:

Given the outbreak in Melbourne and the subsequent lockdown, and the concerns about the situation in Sydney, any hope for a strong improvement in the next month is rather fanciful.
The government will clearly need to extend the bonus payments for those on jobseeker, but beyond the current crisis, it is clear that the base rate of the payment needs to be raised.
It currently is not fit for purpose – it doesn’t allow people to survive out of poverty while looking for work, and it doesn’t do enough to support the economy when a recession hits.

A temporary rise needs to become permanent.