JobSeeker overhaul could see introduction of unemployment insurance

A proposed insurance scheme under consideration by the Morrison government would see people who lose their jobs receive up to 70% of their former income for a short period.

Under the plan – which would bring Australia into line with almost every other wealthy nation – those unable to find work within six months would then revert to the current $40-per-day JobSeeker payment, according to a report by The Sydney Morning Herald. Supporters of the unemployment insurance scheme say it would be a financial incentive for people to find new jobs.

The government is set to overhaul the JobSeeker program when the current COVID-19 supplement of $150 per fortnight expires March 31. Ministers, facing pressure from unions, economists, social services and business groups and the Reserve Bank, have signalled that the program will not revert to its pre-pandemic level of $565 per fortnight. However, there’s still debate on the new rate and if it will be part of a broader overhaul of all welfare payments, the Herald reported. More than 1.5 million people are expected to be impacted by the end of the COVID supplement.

Insurance schemes that reduce benefits over time tend to get people back to work faster – and with higher wages – than flat-rate systems, according to research by the Blueprint Institute. Of 40 OECD nations tracked by the institute, Australia has the lowest unemployment benefit as a proportion of average wage in the developed world for people unemployed for two months.

However, the country is about average in terms of long-term support, as other nations cut assistance for those out of work for at least six months.

Under Blueprint’s proposal, unemployed Australians would receive a government payment of up to 70% of their former wage for six months. The taxable entitlement would be capped at $35,000, and a recipient could claim only a cumulative six months’ worth of payments every two years.

Blueprint chief economist Steven Hamilton said the way the government gradually reduced the COVID-19 supplement was similar to a step-down unemployment insurance program.

“Australia needs to start thinking smarter about our welfare system,” Hamilton told the Herald. “The reductive focus of the public discussion solely on the headline rate, JobSeeker, ignores the fact that there is a better way to reform welfare that can benefit everyone – recipients, employers, taxpayers and the economy more broadly.”

Blueprint said the government was “hamstrung” in the debate to increase the base rate of JobSeeker, because the program wouldn’t encourage the long-term unemployed to re-enter the jobs market, and provide only moderate relief to those who are temporarily unemployed.

The institute projected that the insurance scheme would cost $9 billion per year, and suggested it could be funded through a 1% levy on workers, or by dropping the next increases in the superannuation guarantee levy.

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