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

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.