Comments on: Is Australian social protection ready for the great recession?

By: Club Troppo » Why unemployment benefits need to be increased

Club Troppo » Why unemployment benefits need to be increased — Fri, 10 Dec 2010 00:07:21 +0000

[...] One of the more surprising newspaper stories of recent times was Peter Martin’s article of November 15 on OECD takes aim at Labor policies which quoted the OECD Economic Survey of Australia as saying that Australia’s unemployment benefits are too low. Along with a number of other people I couldn’t recall the OECD ever previously saying that any country’s unemployment benefits were too low – and I worked there for eight years. The OECD stated: “The low level of …Newstart Allowance has raised concerns about its adequacy. Unlike most OECD countries, Australia provides a flat (non-earnings related) means-tested allowance to meet social risks such as unemployment, which may be paid for an unlimited period. … The resulting net replacement rate is below the OECD average for the initial stage of unemployment.” In fact, for a single person at the average wage losing their job, Australian benefits are about the lowest in the OECD. [...]

By: Why unemployment benefits need to be increased | Inside Story

Why unemployment benefits need to be increased | Inside Story — Wed, 08 Dec 2010 23:08:16 +0000

[...] According to the OECD, the current level of the Newstart Allowance has “raised concerns about its adequacy” as an income support payment. “Unlike most OECD countries,” says the report, “Australia provides a flat (non-earnings related) means-tested allowance to meet social risks such as unemployment, which may be paid for an unlimited period… The resulting net replacement rate is below the OECD average for the initial stage of unemployment.” In fact, for a single person at the average wage losing their job, Australian benefits are about the lowest in the OECD. [...]

By: Club Troppo » The stimulus and the costs of unemployment

Club Troppo » The stimulus and the costs of unemployment — Fri, 20 Aug 2010 01:53:14 +0000

[...] the benefit side, these costs are actually comparatively low because as Bruce Bradbury pointed out last year unemployment benefit replacement rates in Australia are lower than short-term [...]

By: derrida derider

derrida derider — Tue, 17 Mar 2009 00:06:57 +0000

I think that’s simple commonsense, Bruce. I’ve always held that what are good income support policies and labour market programs in one labour market can be quite disastrous in another – and labour markets vary with the business cycle.

In my experience the requisite change in policy approaches does eventually happen because the political focus changes – the unemployed, for example, tend to be treated much more sympathetically if there are significant numbers of articulate middle class voters among them. But this only occurs with a long lag and so is often pro-cyclical.

By: Bruce W Bradbury

Bruce W Bradbury — Mon, 16 Mar 2009 07:10:13 +0000

Patrick and BBB. As Fred points out, a temporary increase in benefits should not have a significant impact on labour supply – because labour supply only matters once the economy starts to improve again.

More generally, the trade-off between equity and labour supply considerations will vary over the economic cycle. I think we need an income support system that is more responsive to these variations. Support for the unemployed generally should be increased when jobs are few. Also, there is a case for insurance-like policies to cushion the impact of job loss.

It is not so much that “the recession will be so serious that there will be _no_ jobs to go to”, but rather that there will be many fewer jobs available – and so it won’t matter so much if a few people decide to not search too hard for work.

By: Fred Argy

Fred Argy — Mon, 16 Mar 2009 01:13:37 +0000

Bruce, you have surely met the standard objections to an increase in Newstart payments by specifying that the increase might be “temporary”.

I have often argued for a temporary increase in Newstart, and then reverse it after the economy recovers. That deals with the macro-problem – yet it will not affect rigidity in the labour market or discourage people from getting a job or aggravate the population as it ages. The labour market will be less rigid when manpower is in greater demand in the recovery phase.

By: Butterfield, Bloomfield & Bishop

Butterfield, Bloomfield & Bishop — Sun, 15 Mar 2009 22:27:59 +0000

Thanks but no thanks.
your suggestion causes rigidity in the labour market ( check out the NAIRU’s for countries that have this and that countries that do not.
Moreover countries with these policies face enormous costs as the population ages.

By: Patrick

Patrick — Sun, 15 Mar 2009 17:59:22 +0000

Hi Bruce. I’m one of the (much) less informed commenters here, so apologies in advance if the following questions are stupid:

a) isn’t the effect you describe at least in part deliberate? Because it encourages people to actually go and get a job?

b) doesn’t the effect you describe suggest, consequently, that we should recover more quickly and ‘cheaply’ (in cost to the government) than countries whose social insurance encourages laid-off pickle-barrel sealers to hang around and wait for pickle-barrel sealing to take off again rather than to simply think: shit, I need some cash, what can I do’? Or do you think that the recession will be so serious that there just won’t be any jobs to go to?

That said, your (final) suggested solution sounds fairly sensible and a certainly more so than a lot of the expenditures currently enacted to a similar end.