Economists say no evidence that unemployment benefit disincentivises work

Federal government had claimed payment’s size causes some workers to refuse shifts

(AFP via Getty Images)

An enquiry into the labour market in Australia by a leading economist found “no evidence” to support the claim that the elevated coronavirus supplement is discouraging people from hunting for jobs.  

Economist Jeff Borland reached the conclusion in the report that he presented to a Senate inquiry which is looking at a government bill to extend the JobSeeker temporary coronavirus supplement to March but at a lower rate of $150 (£82) a fortnight.

The cut to $150 (£82) a fortnight from January is the second cut to the coronavirus supplement, which originally doubled the JobSeeker supplement with an extra $550 (£302) a fortnight in March before being slashed to $250 (£137) a fortnight in September.

However, the report by Professor Borland refutes the concerns raised by Coalition backbench MPs which believes that JobSeeker payment’s size has caused some workers to refuse shifts. It also contradicts the anecdotal evidence from employers that the unemployed are turning down work.  

Professor Borland said there had always been some employers reporting difficulty recruiting, which was the nature of the labour market, he said, while citing employment department data from before the pandemic showing some 45 per cent of employers complained of difficulty filling vacancies despite 20 applicants on average for each job.

“To think the Covid-19 supplement was having a major disincentive effect, you would want to be looking at Australia-wide systematic evidence that showed up in the aggregate data,” he said.

“That’s what I’ve been looking at and I don’t see effects there.”

He told the Senate community affairs legislation committee: “I don’t see any evidence that the Covid-19 supplement has been a substantial or really any type of major disincentive for people to move into work from unemployment.”  

In November, Australia’s prime minister, Scott Morrison, said the country’s safety net could “potentially” act as an impediment to employment “as we hear from so many employers around the country who are seeking people to go into jobs”.

In June, The Guardian reported that claims the business owners were struggling to recruit staff because of a lack of applications were based on just a handful of responses from among 2,324 surveyed employers.

The claims of Prof Borland were also backed by social policy expert, Professor Peter Whiteford. Comparing Australia with the other developed economies, he pointed out that the unemployment payments were much lower than working incomes.  

“There’s a very large gap between what people receive on payments and what they would receive in paid work,” Prof Whiteford said.