Unemployment Payments

Abstract

The absence of public unemployment insurance and low payment rates under JobSeeker mean that most Australians who lose a job face large income losses in the year after being made redundant, compared with other countries. Australian unemployment benefits as a share of the average wage rank second lowest among 35 OECD countries for someone who has lost a job in the past two months. Large income losses can contribute to Australia’s low job mobility and poor skills matching. Combined with risk aversion, this can mean people are unwilling to move to a higher skilled but less secure job and those who lose a job can face a financial imperative to take the first job, rather than the best job. However, the cost, complexity and potential unintended consequences of unemployment insurance evident in other countries weaken the case for its introduction in Australia at present. Rather, policymakers should prioritise reforms that increase job mobility within the existing social welfare structure through a higher rate of payment for JobSeeker benefits and making long-service leave portable across employers.