When Scott Morrison introduced the "coronavirus supplement" that temporarily added $275 a week to the dole’s $40 a day, he explained this was to help those who’d be losing their jobs "through no fault of their own". But it wasn’t long before he was finding fault.
"We are getting a lot of anecdotal feedback from small businesses, even large businesses, where some of them are finding it hard to get people to come and take the shifts because they’re on these higher levels of payment," Morrison told 2GB radio.
"What we have to be worried about now is that we can’t allow the JobSeeker payment to become an impediment to people going out and doing work."
These views would explain his decision to slash the supplement to $125 a week after September, and continue it only to December. What happens after that is still to be decided. But recipients will be required to prove they’ve looked for at least one job a week and will have their dole suspended if they refuse to take a job offer considered suitable.
Of course, it wouldn’t have escaped Morrison’s notice that this "treat ’em mean to keep 'em keen" approach would also help with his worries about the ballooning budget deficit.
I can’t say I’m surprised to hear small business people saying that, despite all the talk of high unemployment, they can’t get people to take the jobs they need to fill. I've heard that in all the previous recessions I’ve worked through.
And, indeed, the practice of denigrating the jobless goes back at least as far as the Great Depression of the 1930s. Then, there were newspaper reports of huge dole frauds that threatened to cripple the system and of a lazy, chicken-eating family living in luxury on the dole.
There’s just one problem with all this. There’s no hard evidence to support these anecdotes, and growing evidence that paying decent rates of unemployment benefit doesn’t discourage people from taking jobs.
These anecdotes don’t fit with a survey of employers conducted by the federal Department of Employment in June, which found just 6 per cent of employers said they were having difficulty recruiting due to a lack of applicants.
The trouble with anecdotes is that they’re anecdotal. The people telling you the stories never give particulars of why they had no takers. Were the vacancies well advertised? Were they paying below the legal award wage or wanting to pay in cash under the table? Were they wanting people to work overtime or at weekends without getting penalty rates? Was the job dangerous or especially unattractive – split shifts, for example.
In recent years, many casual jobs paying less than the law requires have been accepted by overseas students and others on temporary visas. Since the coronavirus hit, many of these people, being denied unemployment benefits or the JobKeeper wage subsidy, have been told to go back home, and have done so. Is that the problem?
In my experience, small business people can see their own perspective very clearly, but other people’s not so much. Many people who seek part-time work do so because they have other commitments that the work must be fitted around – full-time studies, for example, or young children. Maybe that extra shift Morrison refers to would have required people to pay more for childcare.
Then there’s the special circumstances of the virus. It’s likely many single parents have given up casual or part-time work to stay home with their kids when schools are closed. Some older people would have stopped working for fear of catching the disease.
I’ve met many business people (big and small, so to speak) who fall for the economists’ occupational hazard of assuming that, because money is a powerful motivator when it comes to work, money is the only motivation.
They can’t imagine that anyone would want to work rather than sit around at home because they like working, because they like being busy, like seeing their workmates, feel that healthy people should work, or even just to avoid the stigma many unkind people attach to being unemployed.
Many people have the attitude that anyone who really wants a job can find one. But while ever the number of unemployed exceeds the number of vacant jobs, this is a “fallacy of composition” – what may be true for the individual isn’t true for everyone.
Between February and May, the number of people on the JobSeeker payment (formerly Newstart) and the youth allowance rose by more than 90 per cent to 1.8 million whereas, according to the Australian Bureau of Statistics’ quarterly survey, the number of vacant jobs fell by 43 per cent to 129,000.
So there are about 14 jobseekers for every vacancy. Which means that, no matter how punishingly low you set the unemployment benefit – say, $40 a day – you can’t incentivise people to take jobs that don’t exist.
Even when the coronavirus supplement had almost doubled the dole to $550 a week, that’s just 73 per cent of the national minimum full-time wage of $754 a week. This percentage is one measure of what economists call the “wage replacement ratio”.
It’s also the most “conservative” measure - that is, likely to overstate the problem – since most full-timers would earn more than the minimum wage. In any case, the planned $150 cut in the supplement to just $125 a week will reduce the replacement ratio to just 53 per cent.
Not much of a disincentive to take a job there, I’d have thought. But this great fear of temporarily increased unemployment benefits being a great disincentive to work is a big issue in the United States and an argument Republicans have used to refuse to renew the supplement.
But as Catherine Rampell has written in the Washington Post, no fewer than five different academic studies have concluded the same thing: the Americans’ supplement does not appear to have adversely affected jobs growth.
