Judith Sloan surprised participants at the government’s Tax Forum in October when she suggested Newstart Allowance wasn’t adequate. She made the same claim in a piece for the Drum writing: "If we are to expect the unemployed to search for employment with confidence, there is no point pushing them into grinding poverty."
At less that $245 a week, it’s easy to see how spending months or years on Newstart might make it difficult to look for work. Even with Rent Assistance it’s hard to afford accommodation close to where jobs are far from easy to maintain a car. But Sloan seems to have something else in mind. She writes:
… there are messages in the patently inadequate allowance for the unemployed – you are not as deserving as those on other allowances, you are at fault, you should simply find a job. It is not at all clear that these messages are the best way to motivate and encourage the unemployed to gain employment.
If you remained unemployed after months of calling employers, sending out CVs and knocking on doors, what conclusion would you draw? Perhaps you’d decide that there was something wrong with you, something you couldn’t fix. And maybe you’d decide to apply for the Disability Support Pension so that you can stop making a nuisance of yourself with employers — after all, they always seem to want someone younger, fitter, more experienced or better looking. So perhaps the only way to prove that you’re not a dole bludger is to be certified as unemployable.
The classical economist Adam Smith argued that poverty led to shame, encouraging people to withdraw from social contact. Sloan seems to be suggesting something similar. She might have added that if the government’s approach Newstart acts as a signal that the unemployed are unwilling to work, that’s hardly the message they want to be sending to potential employers.
Sloan’s preferred approach seems to be a combination of greater labour market flexibility to create jobs, tough job search obligations and more stringent eligibility conditions for the disability pension to discourage withdrawal from the labour market, and a more adequate rate of Newstart Allowance.
I may not have this exactly right, so it would be interesting to hear Sloan elaborate on her argument for increases in Newstart.
Note: I’ve written about Adam Smith’s views on poverty here: What if Adam Smith was right about poverty?