Unemployment Benefits

An article in Fairfax papers today asks several MPs’ view on raising unemployment benefits. Not surprisingly, it contains only a snippet of the conversation that I had with journalist Stephanie Peatling. So I thought it might be worth setting out my thoughts on the issue in more detail.

Unlike pensions, which are aimed at being ongoing for multiple years, unemployment benefits are designed to be a temporary payment. Nonetheless, I share the feeling of many of my colleagues that the current level of unemployment benefits are an extremely low amount to live on. If we doubled tax revenue, I’d raise unemployment benefits in a heartbeat. But tax revenue has actually fallen (from around 24% of GDP under Howard to 22% now). So anyone who proposes an expensive policy like significantly increasing unemployment benefits needs to identify which taxes they’d increase or which spending programs they’d cut. (And in the current parliament, how they’d get the change through both Houses.) For example, if you asked me ‘would you scrap an NDIS to raise unemployment benefits?’, I’d say no.

As an economist, I think about tradeoffs, which I’m starting to realise may be somewhat atypical in politics. Perhaps some people answer the question as ‘if the money was free and you didn’t have to lose any of your favourite programs, would you raise unemployment benefits?’. If that’s the question, count me in as a supporter too.

I’m also concerned about the social consequences of intergenerational poverty, since it does look like there may be adverse impacts of welfare dependence in families with children. This is something I’ve worried about quite a bit while since when I was an econ prof at ANU (see for example this paper, or this recent speech). So the JET scheme (which provides childcare to high-needs parents for 10 cents an hour) strikes me as important for the next generation. The ANU ‘Youth in Focus’ study has some valuable insights on the issues too (though the links to it are alas broken at present).

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