A new start for Newstart? – Peter Gill & Michael O’Neil

Accountants have been known to say: ‘The maths don’t lie.’ If that’s the case then the calls by a range of commentators, including within the business sector, for an increase in the unemployment ‘benefit’, Newstart, have merit.

So what story do the numbers tell?

Newstart has not been increased in real terms since 1994. Adjusted only for inflation, Newstart has increased from $148 a week for a single person in 1994 to $278 a week now. In nearly a quarter of a century, Newstart has virtually flatlined.

According to the Australian Council of Social Service (ACOSS) Newstart now lags the pension – which has, since 1997, been linked to average male weekly earnings – by $174 a week. And, at $278 a week Newstart is a long way short of the weekly housing, food, transport, healthcare and utilities bill ACOSS estimates to be $433 a week.

At this point it’s hard to argue the math adds up. But it does for the members of the Federal Parliament, the people who make the decisions about how much the unemployed should receive as an allowance on which to live.

The ABC recently put together a very informative graph which tracks MP’s salaries against average male wages. Since 1994 MP’s salaries have soared from $133,981 a year to just over $207,000 a year, just shy of $4,000 a week. And these are base pay rates which don’t include travel allowances and other perks. An MP’s travel allowance for a single night in Canberra at $288 exceeds the weekly income of someone on Newstart!

By comparison, the ABC’s graph also shows an increase in average male annual earnings from $58,032 in 1994 to $74,450, or $1,431 a week in 2018.

So, why has Newstart languished while other payments like the pension have risen, albeit relatively slowly? Perhaps decision-makers in both major parties in Canberra have been spooked by the popular but misplaced perception that the unemployed are largely young people having a top time at the beach on taxpayers’ money while everyone else is hard at work.

ACOSS says this view, promoted by the tabloid press, doesn’t fit the reality. Instead, ACOSS and national employment services body, Jobs Australia, revealed in their joint report, Faces of Unemployment, in September that 43% of long-term Newstart and Youth Allowance recipients are over the age of 45 years with a further 38% aged between 25 and 44 years.

And the requirements to receive benefits are no cakewalk.

Newstart recipients must actively seek work and are required to contact 20 potential employers per month. The Federal Government also increased its ‘mutual obligations’ provisions in the 2017-18 Budget to require job seekers aged 30 to 49 years to spend 50 hours per fortnight (up from 30 hours previously) undertaking Work for the Dole, voluntary work, paid work or training. The new requirement brings the mutual obligations into line with those of job seekers below 30 years of age.

A number of evaluations have questioned the effectiveness of the Work for the Dole scheme. In its Faces of Unemployment report, ACOSS and Jobs Australia say evidence from the Federal Department of Jobs and Small Business indicates that Work for the Dole only increases a job seeker’s chances of employment by two percentage points on average. By contrast, wage subsidies from the government increase the chances of leaving income support 12 months after a job placement by an average of 14 percentage points.

Are misplaced perceptions and ideology driving social welfare policy? Because the numbers appear to make a sound case for significantly increasing allowances like Newstart after nearly a quarter of a century of inertia.

The Poverty in Australia 2018 report, published last month by ACOSS and the University of NSW – and referenced in an earlier SACES Economic Policy Forum article – reported that 55% of Newstart recipients live below the poverty line.

The Senate Community Affairs References Committee in its report, A hand up not a hand out: Renewing the fight against poverty, said:

“Poverty and inequality in Australia today represent a fundamental test of our national resolve and values. If we are serious as a community about our claim to be a fair society – indeed the land of the fair go – then concerted action is required.”

And that was 14 years ago!

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