Two recent reports based on e61 Institute research have unveiled critical insights into the JobSeeker payment system, making it clear that it is time to consider new ways to financially support Australians that are out of work. The research shows that the system excludes people that don’t need the payment. But the research also suggests that, for those that receive the JobSeeker payment, the payment is generally not enough to prevent a sharp drop in spending. Single Australians appear to be particularly affected.
According to Income Support Gaps: When JobSeekers don’t seek jobs, there are clear gaps in the income support system: one-third of recipients are unemployed, while only one-quarter of the unemployed receive the payment. These disparities are mostly by design, with the Australian safety net targeting those with insufficient means to see themselves through a period without work.
A complementary piece of research, Does JobSeeker target those who need it?, outlines the consequences of these disparities. On average, families reduce their consumption by 7.5% following job loss. However, for those who do receive the benefit, we observe a more significant consumption drop of 10%. This indicates that those that lose their jobs have to cut back spending following job loss, and those that receive the JobSeeker Payment find themselves having to cut back even further.
Digging into the details, one demographic appears to be particularly disadvantaged by the current system – single people. Their consumption drops by 15% when they lose their jobs. A sharp drop in consumption suggests that single Australians are forced to make difficult choices following job loss, such as cutting back on necessities or taking up the first job available even if it doesn’t match their skills.
This indicates a pressing need for a review of the eligibility criteria and potential improvements to better serve this population.
The sharp drop in consumption for workers hit by job loss implies that they need access to money in the short-term. Potential solutions include increasing the payment rate, allowing individuals to access their superannuation, or extending the HECS system to young people who have lost their jobs. The choice of policy depends on who we believe should bear the burden of job loss: people who have kept their jobs, or the people that have lost their jobs.
By addressing these issues, the government can ensure that the JobSeeker payment system better serves the needs of Australian workers, providing financial stability and time to recover following job loss.
About the Research Notes
The Research Note, Income Support Gaps: When JobSeekers don’t seek Jobs, identifies new facts about those who receive the JobSeeker payment and those who are unemployed using detailed analysis of individual-level data.
The Research Note, Does JobSeeker target those who need it?, evaluates the consumption response of those who lose their job and either do or don’t receive the JobSeeker payment. The insights from this exercise allow us to investigate the effectiveness of benefit eligibility criteria and whether the JobSeeker payment is sufficient.