Ideas@TheCentre
No need for universal dole increase
The Business Council of Australia has joined the likes of ACOSS and the Greens in calling for an increase to the $245 a week Newstart Allowance payment saying it presents a barrier to employment and has the potential to entrench poverty.
This follows on from unlikely advocates in Judith Sloan and Ian Harper, who have both said the dole is too low compared to the $378 per week Disability Support Pension, or the $606.40 per week minimum wage.
Advocates of increasing the Newstart Allowance have suggested that an additional $50 per week for each of Newstart’s 530,000 recipients would mitigate some of the barriers to employment that have been attributed to the relatively low rate of Newstart.
An increase would cost around $1.5 billion every year and will be on top of the $7.8 billion to be spent on Newstart payments this year alone.
Despite the exceptional additional cost to the taxpayer, there is a possibility that increasing the dole would result in a lot of taxpayers’ money reaching people who do not need it.
For example, around one-third of Newstart recipients exit the payment within three months – and over 70% within 12 months (see p. 111). The dole appears to serve its purpose as a temporary payment for people looking for work, and an increase in Newstart would simply result in a windfall gain for many who would only be on Newstart for a short time anyway.
For the remainder – the long-term unemployed, people with disability who do not qualify for the DSP, and other highly disadvantaged job seekers – the case for increasing their dole payments is stronger.
Nearly 330,000 Australians have received Newstart for at least a year. Only 126,000 of them are actively looking for work, and another 20,000 are incapacitated. A financial supplement of $50 per week targeting these two groups would cost around $380 million every year – a fraction of the cost increase in the base rate of the dole for everyone.
With this distinction in mind, a targeted financial supplement for Newstart aimed at the long-term unemployed who are looking for work would be cheaper and more appropriate than a broad increase in the base rate of Newstart for everyone. This would address many of the issues facing Australia’s unemployed without undermining the role of Newstart as a short-term temporary payment for Australians between jobs.
Andrew Baker is a Policy Analyst at The Centre for Independent Studies.
